Was trade execution illegal or just unethical?

[Huron678]

I'm no expert but I was under the impression a limit order becomes a market order once the limit price is reached.

A stock I owned closed the afternoon at 0.75. I placed an after-hours limit order at .65 (probably should have been a stop limit order). There was no movement in the stock price after hours or in the morning until the stock opened at 9:45am at 0.75 the same price where it had closed the afternoon before.
However, my limit order executed at 8am for 0.65 more than 10% below where it was trading. Broker claims they have the wiggle room with a limit order to get away with that. I agree it should have been a stop-limit order instead but to trade it 10% below seems unconscionable, unethical and possibly illegal. I wish I had some recourse.

Thoughts on this?

 

[hajimow]

Quote from Huron678:

I'm no expert but I was under the impression a limit order becomes a market order once the limit price is reached.

A stock I owned closed the afternoon at 0.75. I placed an after-hours limit order at .65 (probably should have been a stop limit order). There was no movement in the stock price after hours or in the morning until the stock opened at 9:45am at 0.75 the same price where it had closed the afternoon before.
However, my limit order executed at 8am for 0.65 more than 10% below where it was trading. Broker claims they have the wiggle room with a limit order to get away with that. I agree it should have been a stop-limit order instead but to trade it 10% below seems unconscionable, unethical and possibly illegal. I wish I had some recourse.

Thoughts on this?

Your first statement is not true. A limit order never becomes a market order. It only gets executed at the limit price when the price reaches there.
1- who is your broker?
2- when did you put your order? AH the day before or the morning that got executed?
3- There is no stop limit AH.
4- The broker's statement that they have wiggle room does not make sense.
5- Was it only your order that got executed before 9:30? any more trades at that price?

 

[hajimow]

This might also help you

http://tradingsim.com/blog/after-hours-trading/

 

[Surdo]

1)What stock, and I will look @ the quotes/T&S?
2)What date was it executed?
3)I assume it is a sell, since you did not specify?
4)Who is your broker/what platform are you using?

 

[stinkyfelix]

Quote from Huron678:

I'm no expert but I was under the impression a limit order becomes a market order once the limit price is reached.

Sounds like you placed a stop loss order.

The spread was probably a little wider that morning and your order price was hit and then executed as a market order.

 

[Bob111]

legal. unethical? there is no such word in this business.
the bots literally scan every single price level in search of shares. i would not be surprised if info about your order was sold to someone or bots made series of odd lot transactions to trigger your stop. this is my reason, to keep my stops on MY side. not broker or anyone else. and all my stops are off before or after regular session

 

[pikerforlife]

could the OP simply have mistakenly placed a limit order to sell at .65 in the AH (rather than a stop)? basically giving the shares away to whoever noticed first and matched the order pre-market.

irony would be, if such a (mistaken) limit order at .65 to sell was placed during the regular trading hours with the stock at .75, it *would* have crossed, and basically become a marketable order, hitting the bid.

there are no market orders after hours, i think the OP just gave his shares away with a wrongly placed limit order to sell his shares below the market, being after hours only added salt to the wound. recall, he said it wasn't even a stop, rather, "it should have been." indeed, it should have. lesson learned?

raise your hands guys if you've *never* mistakenly placed an order and let it fly in your whole trading life,... didn't think so. we've all had that "oh shit!" at least once, "did i hit BUY? i meant SELL!", "i bought 1000?! not 100, oops!" ......... "that was a limit order, not a *stop* limit order, no wonder it filled right away!"


-peace

 

[Surdo]

True story, a zillion years ago, bought 100K CPQ and should have bought 100K CD on an institutional desk. We used to call CD "Compact Disc", the trader heard Compaq.....ooops. Wound up owing the customer a print in CD and made money on the CPQ error.

I did not discover the error until he gave me reports on the first lot and it was off by $35! The customer thought it was funny and was reasonable on what I owed him. My trader beat the piss out of me for 30 minutes until we were whole.

Neither of these tickers still exist, I am a young dinosaur!
We all make mistakes.

 

[Huron678]

Quote from hajimow:

Your first statement is not true. A limit order never becomes a market order. It only gets executed at the limit price when the price reaches there.
1- who is your broker?
2- when did you put your order? AH the day before or the morning that got executed?
3- There is no stop limit AH.
4- The broker's statement that they have wiggle room does not make sense.
5- Was it only your order that got executed before 9:30? any more trades at that price?

On 5/3, CBRX closed at 0.73. I placed a limit order with Ameritrade after hours to sell CBRX if and when it dropped to 0.65. My order went through for 0.65 at 8am the next morning. I am unaware of other orders executing at that time. CBRX then opened at 9:40 at 0.75 where it had closed the day before.

Ameritrade replied "Your limit order was executed immediately because the then-current market price was better than your limit price. If the Limit price is better than the current market price the order may seek immediate execution. Market makers may reject, at their own discretion, any limit order with a price placed considerably better than the current market price as an out-of-range order.
You may have intended to place a Stop Market or Stop Limit order. For + Extended Hours orders, stops are not able to be placed. Only unconditional limit orders are accepted."

 

[hajimow]

Quote from Huron678:

On 5/3, CBRX closed at 0.73. I placed a limit order with Ameritrade after hours to sell CBRX if and when it dropped to 0.65. My order went through for 0.65 at 8am the next morning. I am unaware of other orders executing at that time. CBRX then opened at 9:40 at 0.75 where it had closed the day before.

Ameritrade replied "Your limit order was executed immediately because the then-current market price was better than your limit price. If the Limit price is better than the current market price the order may seek immediate execution. Market makers may reject, at their own discretion, any limit order with a price placed considerably better than the current market price as an out-of-range order.
You may have intended to place a Stop Market or Stop Limit order. For + Extended Hours orders, stops are not able to be placed. Only unconditional limit orders are accepted."

Based on the new info that you provided, nothing illegal has happened and your broker did the right thing.