Odd-Lot orders are retail?

Odd-Lot orders are retail?

In the first minute of trading on August 24, 2015, 50% of all trades were Odd-Lots (under 100 shares). In the last minute of trading 32% of all trades were Odd-Lots. Throughout the day 22% of all trades were Odd-Lots. The defenders of the current market structure are quick to claim that Odd-Lot orders are retail. So let’s look at the data a little closer.

  • 6% of the 15,456,225 Odd-Lot trades were for only 1 share.
  • 27% of the Odd-Lot trades were for only 10 shares or less.
  • 50% of the Odd-Lot trades were for only 30 shares or less.
  • 75% of the Odd-Lot trades were for only 56 shares or less.

One share? Over 900 thousand trades for 1 share? With the median price for the 1 share trades at $57.74, the price would have to rise by almost 25% just to get back the retail commission you paid going in and then back out of the trade. I do not believe the retail investors that are buying a $57 stock are that stupid.

So why are there so many Odd-Lot orders? Simple, Odd-Lot orders are exempt from Reg. NMS. Just look at your executions the next time you put in an order for 100 shares. You will find that many times the fills come back as Odd-Lots. Someone between you and the market is trading against your order and can give you a price 1, 2 or 3+ cents away from the NBBO (National Best Bid or Offer).

Do you still believe these Odd-Lot orders are retail?

Peter Berdeklis

Chief Technology Officer

8y

Odd lot orders are often used as sniffing orders. In fast markets and dark markets, the best way to determine the true quote is by trading against it and seeing your fill, a process that completes far faster than even the direct quote feeds of any exchange can update. The cheapest way to do that is with 1 share. Of course these aren't retail trades, but it doesn't indicate whether the algo's were buying or selling, or selling ahead of the oncoming storm. If you get a fill below the reported best bid, you can be sure that the offer is going lower in the next few milliseconds, giving you a chance to sweep out other orders on slower exchanges.

Randy New

Senior Director of Infrastructure at Trading Technologies (Abel Noser Solutions)

8y

I am not sure they even care about make or take. I have seen a hundred shares go out and 94 shares + 6 shares come back and the 94 shares was 4 cents away from the NBBO. But it is exempt from Reg. NMS.

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Vidis Vaiciunas

Chair at Talka Credit Union Ltd

8y

It would be interesting to break down the execution on a make/take and take/make market basis. I agree with you on the number of fills I see against my "retail-size" orders.

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