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Yesterday I placed a limit buy order for 3 shares of ITIC (NASDAQ) @ $122.05. About 5-10 minutes later, a trade went through - 100 shares @ $122.00, while my order was untouched. How is that possible? My broker is IB and I have market data subscription so the prices I've seen should have been live. I used the "SMART" routing. At the time of the trade, I could see the top bid being $122.05.

I've gone over IB's execution policy and I'm still not sure what happened: https://www.interactivebrokers.com/en/index.php?f=995

Could it be that the limit order @ $122.00 specified a "fill-or-kill" execution and the only way for the seller to sell 100 shares at best price was for IB to ignore my tiny order and go straight for the big one? Or maybe executing a 97@122 + 3@122.05 trade is somehow worse for the seller than a 100@122.00, when fees are included?

I also found this similar question: TD Webbroker.ca did not execute my limit sell order even though my stock went .02 over limit

The top answer relates to orders being routed to different exchanges (NYSE vs NYSE Arca). Could something similar happen with NASDAQ stocks?


EDIT: I might have found the answer - 3 shares is considered an "odd lot" and is not included in NBBO: https://www.nasdaq.com/articles/what-happens-in-an-odd-lot-world-2019-06-20

I'm still interested in opinions whether this is really the reason for my order being jumped over.

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Order Protection

The order protection rules state that market participants should not trade through the NBBO - the national best bid or offer as disseminated by the market data feed. If they don't follow this rule, it is called a "trade through" and the market participant can be fined if they do it as a regular pattern or practice.

However the market data feed is not required to show bids smaller than 1-lot - 100 shares.

So, although your order posted wherever IB routed your order to, that venue did not publish your bid to the NBBO because the size of 3 shares was smaller than 1-lot.

As a result, the seller sold shares at $122.00 because they did not know there was a bid at $122.05. However, if they had sent the order to the same venue as where your order had posted, your order would have got filled along the way.

FOK

If the order for 122 was an FOK order (a "contingent order") it likely would not have been published to the NBBO either, and if it went to the same venue as your order, it likely would have executed your order and the rest would come back unexecuted (because the remaining 97 shares would not be enough to fill the 100 with the FOK contingency).

Different Exchanges - Listing versus Trading

NASDAQ and NYSE are the dominant exchanges for stock listings (where a company has its initial public offering). This is quite easy to see in that most stocks with 1-3 character tickers such as 'A' and 'IBM' are listed on NYSE, while stocks with 4 character names such as 'AAPL' are listed on NASDAQ.

However since the early 2000s, it has been possible to trade stocks on an exchange that is different from the one where the stock was listed. The only exception is that today, NYSE still generally only trades NYSE listed stocks. Stocks can also trade on "ECN"s though many of those have since become exchanges (like Arca which is now NYSE Arca, and INET which is now part of the NASDAQ exchange). As a result, your order could have been routed to any number of venues.

On IB, when the order is routed, it does indicate which venue the order is presently posted.

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Odd lots are not posted as part of NBBO bid/ask data and therefore they often take longer to execute.

ITIC briefly traded down to $122 twice, late in the day. 100 shares traded and price immediately rose. That's a liquidity issue. The fill at $122.00 was a fill at NBBO. You were not filled because you were not part of NBBO.

In terms of price and volume, you'd have to check Time & Sales to get a clear idea of what actually transpired.

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  • Thanks, I appreciate the answer but the NBBO explanation is the only one that makes sense to me. Yes, it's an illiquid stock with a very wide spread but I'm not sure why that would be relevant. What does it mean that there weren't enough shares to fill me? If my order was part of NBBO, I'm always in front of the $122.00 bidder and if a trade goes through at $122.00, of course I should be filled. – Amati May 2 at 17:35

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