Why MARKET order can be filled at a price worse than price quote?

T

Trader_Herry

1)
As to MARKET order, I can't understand why I can get a worse fill than the price quote in the market. For example, if there's queue for the following:
0.24 x 13 <-- Best Bid
...
0.25 x 10 <-- Best Ask
0.26 x 20
0.27 x 25

The market is NOT under serious volilatity.
I sent a buy market order of 10 lots. I expect it will always try to fill at the "Best Ask" available in the market.

However one says it's possible that I may get filled at, say 0.26 or 0.27. How come it is possible?

2)
I value speed of execution, but I'm NOT willing to pay more than the Best Ask currently available when my order is sent to the market. How can I ensure I am filled at ONLY the Best Ask?

3)
In IB TWS, it has a function called "Sweep-to-fill". I'm not sure what makes it different from a MARKET order. They should always try to fill the Best Ask first, then the 2nd Best, 3rd Best, and so on. I don't see there's any practical different between the two.

I must have mistaken something. I hope someone can come up and explain it to me, or provide me a link which explains how these orders work and proceed.

Thanks!
 
Its very possible someone else out there beat you to those shares by getting their market order in before yours. Make sure you look to see if that offer was executed. I can understand your frustrations if the fill you get is inferior and the offer remains in tact and unprinted.

Remember a market order is is just that....an order to fill you at the market price which can easily change .01 in the time it takes you to send the order. Slippage is a big part of this game
 
Quote from loufah:

With price quotes like .24, is this a bulletin board/pink sheet stock? As mentioned in http://elitetrader.com/vb/showthread.php?s=&postid=1013962 , quotes for these types of stocks are not firm. And a broker doesn't necessarily have access to all the market venues.
More...

No. It is just a fictitious example.

I don't trade bulletin board/pink sheet or penny stock. It looks to me they are an unfair and dirtier game.

I trade middle-sized or big-sized stocks or futures.
 
Quote from Steve Tvardek:

Its very possible someone else out there beat you to those shares by getting their market order in before yours. Make sure you look to see if that offer was executed. I can understand your frustrations if the fill you get is inferior and the offer remains in tact and unprinted.

Remember a market order is is just that....an order to fill you at the market price which can easily change .01 in the time it takes you to send the order. Slippage is a big part of this game
More...

I wonder if it's better to send a "marketable" limit order (ie for a buy, send at a price at or above best ask), and avoid market order at all costs. it appears market orders have sorts of weird things.

I would like to have fast exeuction, but not in a way where I get worse fills than the market quotes.

I understand if the quote might change when the order reaches the market. If the quote (best bid/ask) is changed, that's fine. But if the best ask is still at 0.25, but being filled at 0.26; that's just unacceptable.
 
For Nasdaq stocks, your order may have "traded through" the 10 lots at 0.25. When you send an order to your broker and leave it up to the broker to route it where he wants, your broker may end up routing it to the seller sitting at 0.26 rather than sending it to the seller at 0.25. Normally your broker should do whats in your best interest, and you should complain if he doesnt, but theres no guarantee hes gonna send it to the 0.25 seller. Directing your order to ARCA should prevent this from happening, coz ARCA will "sweep" the levels (0.25 then 0.26 then 0.27) one by one.

I recommend marketable limit orders, not because theres some "weird things" with market orders, but because it removes the possibility of getting "screwed"
 
Bad Market order fills are a function of liquidity, volatilty and your order size.

Case 1: Low volatility, High liquidity, below average to average order size = good fills.

Case 2: Med Volatility, Med Liquidity, avergae order size = average fill.

Case 3: High volatilty, Low liquidity, average to above average order size = bad fills.

To determine which case is present for any given security, you must be familiar with the security. Its average volume. Its average volatiliy. With that knowledge you will know pretty much what order to use and when.
 
Quote from ddunbar:

Bad Market order fills are a function of liquidity, volatilty and your order size.

Case 1: Low volatility, High liquidity, below average to average order size = good fills.
============================================

Case 2: Med Volatility, Med Liquidity, avergae order size = average fill.

Case 3: High volatilty, Low liquidity, average to above average order size = bad fills.

To determine which case is present for any given security, you must be familiar with the security. Its average volume. Its average volatiliy. With that knowledge you will know pretty much what order to use and when.
More...

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Helpful 3.

Mainly high/highest liquidity helps;
get better fills on ES than ER2, especially in short covering.

Med, low liquidity, your'e asking for below average , fills/market; like limit orders for entry, still miss a few , not many.

NYSE several million/plus average volume;
usually can get good fills reguardles ,if familiar with stock personality.
:cool:
 
Quote from ddunbar:

Bad Market order fills are a function of liquidity, volatilty and your order size.

Case 1: Low volatility, High liquidity, below average to average order size = good fills.

Case 2: Med Volatility, Med Liquidity, avergae order size = average fill.

Case 3: High volatilty, Low liquidity, average to above average order size = bad fills.

To determine which case is present for any given security, you must be familiar with the security. Its average volume. Its average volatiliy. With that knowledge you will know pretty much what order to use and when.
More...

If you wish to have speedy execution (but not at all costs) in the above 3 cases, what orders do you use - "marketable" limit order (ie for a buy, send at a price at or above best ask), or market order?
 
Say you want to buy a stock at $10 (current price quote), it may very well be that the broker can get the stock at $10 or lower then sell it to you at $10.10 or higher. The broker rips you off. You thought it was market fluctuate. This is how they make money other than commission.
 
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