Market Monkey Business? Today's Evidence.

[Culture]

I just completed some major rebalancing. One of the ETFs that I rebalanced was IWC, iShares Micro-Cap. IWC is thinly traded, average volume of only 143,000 shares. I have always had buyers remorse about this ETF, as the ER is too high, and the total assets and trading volume are too low. However, I believe it is best in its class, and I decided I wanted to slice and dice into microcaps.

At the time I submitted my sale of 246 shares, the bid price was 73.64. I submitted the sale with a limit of 73.50 (what was I thinking?). The sale executed at 73.5001, and the bid price afterwards was 73.57.

I am convinced, and will never be able to prove, that I just got ripped of at least $17.22. Not much, but repeated 10,000,000 times per day, this is serious money. I should have submitted with a limit of 73.60, and I suspect it would have sold at that price.

I am slowly moving out of any ETF with an average sales volume less than 1,000,000 shares. I currently have just two, IWC and SCZ. This is what I get for ignoring my IPS.

 

[Lakedog]

When you submit a limit sell order, the limit price is what you are offering to sell your shares for and rarely will you get a higher price. I use limit orders for stock and ETF trades and find that you can typically sell someplace between the bid/ask spread. I would never put a limit sell order below the current bid unless you really want to sell at the lower price.

 

[Culture]

When you submit a limit sell order, the limit price is what you are offering to sell your shares for and rarely will you get a higher price.

You are offering to sell your shares at the highest current asking price that is equal to or greater than your limit price. I am not disagreeing that you are correct in how it frequently does work, but that is not how it is supposed to work. The exchange is supposed to find the highest price available, not the lowest.

 

[Fermion]

Isn't this how a lot of discount brokers make their money? Yes, you get $4 trades, but they fill your limit orders from a local pool at the minimum bid and then sell the shares a fraction of a second later for closer to the ask. So you get a $4 trade, they get $17 extra, and everyone is sort of happy.

 

[Animorph]

I'll usually use a sell order with a limit of a few cents above the ask price and just wait until the price moves a bit, normal daily price variations. If I really want to sell, I might offer at the ask price or a penny below. I've never had to sell for less than the bid price, but if you wanted to dump 10,000 shares of IWC quickly you might have to go lower. 256 shares may take half an hour to sell off if things are slow, but it's not so much that you'd have to sell below the bid price.

I use wamvx and ryotx, which have done well.

 

[LOL!]

Which broker did you use? Your order may have never been submitted to a national market especially since it was not a "round-lot".

Instead, it probably got stuck at your broker and a human looked at it and thought "What an idiot, I will take that $17 for myself."

 

[FUEGO]

My guess is your order didn't get routed to the big exchanges perhaps due to being an odd lot (not an even multiple of 100 shares). I have noticed that the round lot orders take priority over my odd lot trades for a given bid or ask price.

But at Fidelity I never seem to have a problem getting a good execution price around the bid price for odd lot transactions (if I'm selling). I usually place a limit order at the bid price or maybe a few cents higher if I feel like waiting and watching. If I set the limit price way below the ask price, I wouldn't be too surprised to get the price I was asking I guess.

The odd lot trades placed at Fidelity are usually routed through "Fidelity Dynamic Liquidity Management" or FDLM which I understand routes trades to the most optimal exchanges.

 

[LOL!]

Fidelity uses dark pools, so orders may never end up on an exchange.

 

[sengsational]

I know very little about selling shares since most of what I've ever done has been end of day mutual fund pricing.

What I've done, though, figured out on my own, is I look at the last few days of pricing and see how much it moves around, and what the current spread is (ask - bid) (www.yahoo.com/r/sq). I usually go in with an order at the ask price (using Fidelity). Only once do I recall that it "ran away from me" and I never got the trade.