Retail Limit Orders

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.

Keywords: Retail trading, Limit orders

Suggested Citation: Suggested Citation

Anand, Amber and Samadi, Mehrdad and Sokobin, Jonathan and Venkataraman, Kumar, Retail Limit Orders (December 03, 2024). SMU Cox School of Business Research Paper No. 24-11, Available at SSRN: https://ssrn.com/abstract=4964266 or http://dx.doi.org/10.2139/ssrn.4964266