TheMotorcycleBoy wrote:Mel and I did trying setting "trade plans" on our iWeb amount but we were lead to believe that once your stock hits the price it is merely queued to be acted on (sold/bought) and we wondered whether the trade is actually guaranteed at the price when hit.....or whether if the asset price has detrimentally altered between the time of queueing and acting on the trade, and if in the some eventualities the trade does not then proceed.
I'd be fairly certain that if a limit trade triggers, but the trade is no longer possible at the limit price you set or better by the time that your order would be acted on, it will fail rather than be acted on. But only fairly certain, not absolutely certain, because a broker's systems
could be designed in a fairly 'obvious' way that would lead to it still being acted on at the worse-than-limit price, as you've outlined.
The reason that I'm fairly certain about it is that I think that a broker whose systems worked that way would have failed to obey its client's instructions: if the client has said "Buy at 180p or less" and the broker has responded by buying at 181p for whatever reason, they're in a distinctly dubious legal position that would probably have to be resolved by saying that the purchase hadn't been done on any client's instructions, therefore was on a broker's own account and they'd have to keep the shares (with risks that a broker generally won't want) or sell them (probably at a loss), and in addition have to pay the client compensation for the general inconvenience / opportunity cost. That could in principle be got around with a suitably-explicit description of the service they were offering, but it would have to be made very clear - and my guess is that if a broker did offer that, the FCA would rule that it was unsuitable for offering to 'retail' clients.
What I'm nothing like as certain about is what would happen to the order afterwards if an order triggered, went on to the queue to be acted on, then failed to be acted on because the price had moved back to the wrong side of the limit. The two obvious possibilities are that it disappears completely or gets put back on to the "waiting for the limit price to be achieved" queue. The second is obviously more client-friendly, as the first means that the limit order can just vanish from the client's pending orders as a result of a 'spike' in the share price unless the client is paying close attention (and of course, one of the standard reasons for using limit orders is so as
not to have to pay close attention). But the first is easily achievable - it just requires the broker to enter a 'fill or kill' type order into the Stock Exchange's systems when the limit price is hit - and I've certainly encountered it in the past. IIRC, the orders concerned were for smallcaps and failed because I wanted more shares than were available at the market price rather than because the market price had moved against me before execution was attempted, but the outcome was a "your limit order has triggered and failed to execute" email and the order vanishing from the broker's systems. (By the way, this is around 10 years or more ago, and a year or two later the broker concerned decided to exit the execution-only online broker business. As far as I can tell, they're now in administration after a number of name changes. So while I can say that brokers' systems might work that way, and one broker's did in the past, I can't tell you whether any broker's systems do work that way right now.)
However, if you want certainty about how your broker's systems work in that particular case, why not ask them directly? They're the ones in a position to give you a definitive answer... It might take more than one go to get past the initial stock answers, but it should be possible with a bit of persistence.
One other point to make is that unless one is buying particularly illiquid smallcaps or particularly large numbers of shares, we're probably talking about electronic queues for execution here, not ones involving human traders. I.e. the sequence of events "price moves to right side of limit, order queued for execution, price moves to wrong side of limit, order comes up for execution" typically has to all play out within a second or two for the situation you're envisaging to happen. Which doesn't make it impossible - share prices can change very rapidly - but does make it less likely...
TheMotorcycleBoy wrote:However as a counter argument I do get share grants from my US employer, which are lodged to the broker ETrade over at Stateside, and whenever I set a sell price I do see this get acted on in time with the market. But I'm probably somewhat more chilled out with my employee share grants....since I always just view it as free money most of the time.
Yes, I remember that feeling! :
-)
But note that US brokers are under a different regulatory regime than UK ones - so don't assume that the same rules apply - and that even UK brokers' systems differ from each other in some respects (*). "Different" only means what it says, not necessarily "better" or "worse", of course, so I'm not giving that as an argument either way about how your (presumably UK) normal broker behaves, just saying that your ETrade experience
isn't an argument either way about it.
(*) E.g. I use four different UK brokers, all online execution-only. They all have limit order systems, but as far as I can make out, three of them look out for limits triggering on a strictly-electronic-only check: they trigger when the official bid/offer prices indicate that the price is achievable. The fourth has shown clear evidence of doing something more sophisticated - e.g. on a smallcap purchase where I've set a limit price of 125p, I've had it trigger and be executed at a price of maybe 124p when the official bid/offer prices haven't varied from 120p/130p. That could in principle be due to a very short-duration spike down to maybe 115p/123p - so short-duration that it hasn't shown up in what I can see - but it's pretty unlikely for an infrequently-traded smallcap, and things like that happen reasonably frequently when I try for them (which I do occasionally, though by no means systematically).
Gengulphus
