If a sell limit order for a very small volume was entered mistakenly at a very low price, would it get executed and would it affect the market price ?


The current market price for FOO is $500 USD, I mistakenly enter a sell limit order for $5 for a very small quantity, will it be executed or will it be cancelled by the exchange (in general, not exchange specific)?

If it is executed, will the market price reflect $5?


There is no effect.

Given that the last price is $500, there should be existing bid/ask orders creating a reasonable spread. For example, bid is $499 and ask is $501.

Any limit order to sell entered at price below $499 will be executed at $499.

In other words, even if you entered $5, it will be sold at $499. That is unless you are selling huge amount of outstanding shares.

This is called first-mover disadvantage.

  • 1
    Indeed, the exchange is required to execute sales against higher bids first.
    – Matthew
    Mar 30 '15 at 17:25
  • Thanks for the answer, can you point me to a resource that backs it up for further reading? Mar 30 '15 at 17:27
  • 2
    The order may even be cancelled as some exchange have a range from the current price where orders can be entered.
    – user9822
    Mar 30 '15 at 19:31
  • 1
    @AfterWorkGuinnes: The SEC has articles about these rules. See for example Best Execution Requirement.
    – Jean-Paul
    Jun 12 '15 at 12:13
  • 1
    To be honest this issue is both exchange specific and broker specific. An example is www1.nyse.com/pdfs/CEE_Policies_Email_Submission_Guidelines.pdf
    – base64
    Jun 12 '15 at 12:16

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.