I've got an interesting situation. A few weeks ago I found this company trading on the TSX Venture at about $6 with a rather decent market cap however, the daily volume on the stock was fluctuating between 20k-200k+ which tends to be the sort of market I like to play in.
It became interesting when I pulled up the level-2 quote on the stock and I noticed the company had almost no liquidity -- That is, there was only 3-4 buy-limits on the whole entire CLOB at any given time and that the bid-ask spread was in excess of 10%.
The kicker of course was that the buy limits were only 1-2k shares each meaning that if I placed a buy-limit really low and somebody submitted a market sell-order for even 6-7k shares I would get filled. So of course I submitted a buy limit for 500,000 shares @ $0.01 through RBC and the order got routed onto the TSXV and sat there for a few days among the other 3-4 orders.
A few days later, as the market opened the bid-ask on the stock was $0.01-$6 because there was literally no buyers left (seriously, if you look on the historic bid-ask on a Bloomberg terminal, it shows my order as the ask @ $0.01 for like 30 minutes this one morning and a few other times, it was nuts) meaning that if any market sell-orders were submitted I'd get them at $0.01! However, 20-30 minutes into the trading day more order started to surface thus shrinking the bid-ask spread.
A few days after that I pulled the order because the CLOB started getting stacked with buy-limits and I didn't feel there was a point keeping my bid at $0.01, so I pulled it and looked for another stock to trade. A few days ago the market started repeating this process whereby the CLOB became empty, and in fact even now there's only 3 orders on the buy-side. So I decided to submit another buy-order, except this time RBC rejected my order and wouldn't let me place it. So I called RBC and was told "the price is too far from the market price", however I was allowed to submit that exact same order only a week prior. In fact the registered trader I talked to said that he couldn't submit the order because it could be considered "market manipulation" or a "false order in which I didn't intend to transact".
I argued that I was providing liquidity and that the markets are supposed to be free and that on other stocks I see people with sell-limits on blue-chip stock up at like 1000% above the current price, and even bids down at $0.01 on a lot of other various companies. I also argued that the order was accepted a few weeks prior and told him to go check the historic bid-ask on it to prove that it got accepted last time. All of which was to no avail and an incredible tick-off.
Needless to say, the reason for having such a deep buy-limit was simply because if there's even one large market-sell order or a half-decent sized stop-loss and it get's triggered as the stock goes down, it could blow through the few buy-limits on the exchange and actually fill me. In fact if you look at what happened recently on Ethereum (which was traded on an exchange with the same rules as the TSXV) the premise for my low bid is exactly that.
Now I'm well aware the chances of a deep-fill happening are incredibly low, but it only needs to happen once for me to make my money. I guess the question is... does my broker have the right to reject my orders? And if so, why did they allow it last time?