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Imagine a stock with a high spread with only 1 buyer and 1 seller. If the stock is $1, and the seller ask is $1.10, and I am the buyer. And assume I do not know the book for the stock.

If put in a limit buy order for $1.20 to fill my order quickly. Will I pay $1.10 or will I pay $1.20? Or something in the middle. Is this depending on the broker? Will my broker fill it at $1.10 first and try to fill any other asks below $1.20 in order?

I've also noticed that you can apply algos to your order. What is the algo called which will execute orders from lowest ask to highest in order. Or is this not an algo but just the way brokers do it anyways.

Thanks.

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  • In my experience, incoming orders get price improvement to the current ask. You should pay $1.10.
    – prl
    Mar 1, 2021 at 0:25
  • Similar: money.stackexchange.com/questions/46217/…
    – base64
    Mar 1, 2021 at 4:40
  • Always one small pp couch potato dude who downvotes. I hope you made a difference in the world.
    – Maciek
    Mar 15, 2021 at 3:59

1 Answer 1

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In the U.S., NBBO requires that brokers execute customer orders at the best available bid and ask prices.

If the bid is $1.00 and the ask is $1.10 and you place a limit order to buy at $1.20, your fill will depend on the size of your order and the size available below $1.20.

If you are attempting to buy fewer shares than offered at $1.10, you get a complete fill at $1.10

If you are attempting to buy more shares than offered at $1.10, you get those $1.10 shares and if no new sell orders come in at $1,10, you will get more shares at a higher price if they are available below $1.20. If not, you get some shares but you end up with a partial fill.

Size matters.

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