# How to estimate the average cost-per-share of a not-very-liquid ETF purchased with a market order?

I'm a Canadian resident and a few months ago I bought a US-listed Vanguard ETF of European stocks (VGK). There was a Canadian-listed version of this ETF (VE), but I chose the US-listed one because the fees were lower (9 base points vs. 22 base points).

This was not a wise decision, because it makes me pay 15% US withholding tax on the dividends (on top of the European withholding taxes). Because of this, I would like to sell the VGK to buy some VE and get rid of the US withholding taxes. The problem is that VE is far less liquid than VGK:

If I sold 300 shares of VGK it would earn me \$16,056 (53.52*300). This works because there is demand for 542 shares at the bid price and I'm only selling 300 shares.

But if I wanted to use these \$16,000 (for simplicity assume US\$ 1 = Can\$ 1) to buy VE, how am I to figure out the average cost-per-share I would be paying? I am requesting more than 550 shares of VE, but only 11 are available at the current ask price of \$28.20. If I put a market order, there's no guarantee that I won't be paying something ridiculous like \$30 or \$40 per share (instead of \$28.20 or slightly higher). But if I place a limit order say at \$28.50, I could end up paying 10\$ in transaction fees to buy only the 11 shares that are offered at the \$28.20 ask price, which is a waste of money (and time).

Is there no way of knowing what the average cost-per-share will be if I buy \$16,000 of VE with a market order?

• 1. The 15% US withholding tax is something you can get back, right? I guess you are talking about the bother of getting it back, not losing the full amount. 2. "I could end up paying 10\$ in transaction fees to buy only the 11 shares" -- even if the quantity at the ask (lowest current sell order) were small (like 11 instead of 1100), there are very likely other sell orders above that, or there will be. The market maker and other arbitrageurs will notice if you give them a chance to sell at \$28.50 (>1% above fair value). They won't let it go to waste. Commented Mar 30, 2019 at 1:10
• Withholding is not a tax. It's a prepayment in case you end up owing taxes. You'll have to file a tax return, and count the withholding as payment against the tax that you owe. If you owe less than was withheld you get the difference back. Commented Mar 30, 2019 at 14:03
• @nanoman I wanted to keep this simple in this post, so I didn’t explain this, but you are correct in that you can get back the last layer of withholding taxes, but only the last layer. So with VGK I pay 10-15% withholding taxes to Europe and 15% to the US. I can claim the latter BUT not the former in cash back from the Canadian government. If I use VE instead, I pay only one layer of withholding taxes (to Europe) and I can claim that layer back from the Canadian government. Commented Mar 31, 2019 at 0:06

On U.S. equity markets, volume size represents round lots. Your quote for VGE is:

\$53.52 x \$53.53 with a volume size of 542 x 134.

That means that there are 54,200 x 13,400 shares available at the market.

I assume that Canada follows the same convention. If so, that would mean that with VE having a volume size of 1 x 11 then 1,100 shares are available for sale at \$28.20 and there would be no problem transacting 569 shares. Check with your broker to verify this.

To control the fill, place an AON (All or None) limit order so that you do not get partial fills at unknown prices. If you were looking to buy more shares than the current ask size volume, you could look at Level II quotes and you would see where the next fill price would be (higher ask price). It could be a penny or only a few pennies higher and a limit order at that price would be highly likely to go through and there would be no surprises such as you fear ("something ridiculous like \$30 or \$40 per share").

• Oh good I thought the size were shares, not board lots. I checked and on the Toronto Stock Exchange, the size represents board lots too, which are of 100 shares (when the share price is above \$1). Commented Mar 29, 2019 at 19:08
• I's not relevant to your situation because the spreads are tight on both of your ETFs. My broker offers stock-stock combo orders (similar to option spreads where you buy one leg and sell the other). They are useful when the B/A spread is wider. In such a situation, you ask for a better price, perhaps the midpoint, and your order is placed for the lower amount of shares. If filled, you trade at the market for the balance of shares on the other side. Place a price alert on the issue where you are going to be executing more shares so that price doesn't run away from you --> Surprise! Commented Mar 29, 2019 at 19:19
• All of my brokers charge only one commission for a limit order than executes in multiple trades on the same day, which is an argument for waking up early (or placing the night before). Commented Mar 30, 2019 at 0:12
• That's true but it would not apply to doing a stock combo order at a better price where two separate orders are placed on the same stock/ETF (3 transactions). Commented Mar 30, 2019 at 13:32