Jimbo, et al: Are you guys running into stuff like this? Better be careful!
K
From TSC TA Forum (Gary B. Smith) 11/21 and 11/29:
Gary,
What are the rules for getting market orders filled? On the morning of Nov. 13, 1998, my wife placed a market order to buy 700 shares of Dell (DELL:Nasdaq) through our online broker. We received an order confirmation at 9:36 a.m. The order was not filled until 9:52 a.m. at 66 1/8, 1 1/3 points higher than expected, after 10,320,000 shares had traded.
I have contacted the broker and was given an explanation that at the time the order was received the market was locked at 64 3/4 X 64 3/4, then crossed at 64 13/16 X 64 3/4, so the order was sent to the market maker instead of the autoexecution system. I have contacted another broker and was told this should not have happened.
The broker claims this is a good fill. What is the correct answer?
Don W. Smith
Don,
I have to agree with the other broker: Sounds like you got screwed. By the looks of your email, your order was in a good 15 minutes before it was executed. Therefore, at worst, you should have been filled at say 65. I'd go back and ask your broker for a time and sales. If they remain uncooperative, then I'd take my business elsewhere.
Gary,
Concerning Don's Dell trade, I also placed a market order that morning and was filled at 64 3/4. (Fidelity)
Great column,
Nim McConnell
Thanks, Nim. Not sure if that will make Don feel better or worse!
Hi, Gary, big fan.
Enjoy your honesty and candor.
Question: You place a buy or sell order on a Nasdaq stock. One or all of the following occur after you place the order: The price is hit numerous times, some of the trades are large blocks (25,000 shares, which I assume are institutions), a few trades are executed at a slightly lower price than your strike, the order was placed an hour or more before the price is hit but in all these cases your order is not executed.
I've called my broker (Brown & Co.) on this several times and am told there are different market makers on Nasdaq, which I know, and there is nothing they can do. I've had them call the market maker, but this never does any good. What can you do if it appears you are not getting good executions when the tape indicates institutions are traded before you, trades take place at prices lower than your strike price, and or you have had your order in for a long period of time? As I understand the rules none of this should not happen. Would a new broker help?
David Veenstra
Gary,
Your response to Don W. Smith in your Saturday column was of particular interest to me because I have a similar situation with other wrinkles that I would greatly appreciate your opinion on.
At the close of trading on 11-18, I held 1,500 shares of Netscape at an average price of $31.58/share. Given all the positive news surrounding Netscape, it appeared most likely that at the market opening on 11-19 the price of NSCP would rise dramatically from its 11-18 close of $39.25.
My plan was to place a pre-opening market order for 3,000 shares, and sell part or all of my entire position as the expected rise in price occurred. In order to be near the top of the list, I place that order with my broker (Schwab) at 20:20:00 the evening of 11-18, with the intention of possibly canceling or changing the order if the pre-opening price had already risen to what I felt was an unacceptable level.
On the morning of 11-19, the last pre-opening price I saw was $40.50, and I decided that was acceptable, and let the 3,000 market order stand.
Immediately upon the market opening, the market in NSCP crossed, and I sat blindly not knowing what was happening with my order while the price of NSCP rocketed upward. About a minute after 09:46:00 I received confirmation of the order being filled in its entirety at that time for $43.75, which I would not have bought the stock at if I had had any way of knowing where the price was or the ability to cancel/change the order.
Things got rapidly uglier, and to shorten the gory story, I stampeded and sold at a sizable loss.
I've discussed the situation with Schwab, and have been informed that their MM firm (Mayer & Schwitzer) does not participate in crossed markets, and that the order was executed after the market became orderly, therefore the fill was a good one.
I admittedly am not an experienced trader/investor, but I'm having a bit of a problem understanding how their MM can chose not to participate in the trading of a stock that others are actively/heavily trading in. If they do have that option, then why can't I also chose not to participate and cancel/change the market order? It appears that the investor is on the skinny end of this particular stick. Additionally, the market opened for NSCP at $40.75, a price which was totally acceptable to me even if I had gotten late notification of the trade.
I'm not done talking with Schwab about this matter, which is why I'm seeking the expert opinions of others such as yourself. Perhaps I can convince them to at least honor the opening price if I'm able to state my case with a bit more knowledge than I currently have. I greatly enjoy your column, and feel that TSC has been the best source of accurate information thus far in my blossoming investing career. Thanks ... and keep up the good stuff.
Gary R. Graefe
Gary and David, both of you have similar issues on opening fills, and I ask that you read Alan Farley's comments in the Saturday Technical Forum. From your emails and others, I fear this is a growing problem.
In specific response to your concerns, it has always been my understanding that if you have a market order placed before the open, then you should at least get the opening ask. However, and it's a big "however," different brokers have different rules and guidelines, and I'm reasonably certain what they're saying is accurate, and no matter how much you complain, they will be unwilling to back down.
So, it now becomes a matter of fighting with your broker rather than just executing a trading plan. Fortunately, I've been through this situation, and I can tell you what I did: I switched brokers. Now, I apologize if this comes off as an advertisement for (never mind!) but I honestly don't have a better example. In the rare cases it looks like my fill is bad, the head trader there is on the phone, instantly complaining, rectifying or ensuring either my fill is fixed or the explanation is reasonable. I am completely out of the loop, while he argues for me, not against me. This alone saves me a lot of headaches and often a good deal of money.
So, my overall observation is that fills and trading are getting treacherous. And therefore, the benefit of having a solid relationship with a broker who will represent your case -- whether it be someone at (never mind!), or Merrill, or wherever -- is becoming clearer and clearer. It's something to think about. |
