Retail Limit Orders
Publication Date
12-3-2024
Abstract
Using a large sample of orders from 19 active U.S. retail brokers, we analyze retail traders’ use of marketable and limit orders, brokers’ order handling practices, and execution quality. Limit orders play a significant role in retail trading, accounting for 25.5% of orders and 29.2% of submitted shares. They incur lower trading costs than marketable orders; a result robust to controls for differences across stocks, order placement times, order sizes, trade direction and brokerages. Retail limit orders are often placed behind the best quotes, stay open longer, and achieve higher fill rates than previously reported in market-level statistics. Overall, limit orders provide retail traders with an attractive way to earn compensation for supplying liquidity in the current market structure.
Document Type
Article
Keywords
Retail trading, Limit orders
Disciplines
Finance
DOI
10.2139/ssrn.4964266
Source
SMU Cox: Finance (Topic)
Language
English
