Retail limit ordersOpen Access

Abstract

Using a large sample of orders from nineteen active US retail brokers, we analyze retail traders’ use of marketable and limit orders, brokers’ order handling practices, and order execution quality. Limit orders play a significant role in retail trading, accounting for 25.5 percent of orders and 30 percent of submitted shares. They incur lower trading costs than marketable orders: a result robust to controls for differences across stocks, order placement time, order size, trade direction, and brokerages. Retail limit orders are often placed behind the best quotes, stay open longer, and have higher fill rates than previously reported in market-level statistics. Overall, limit orders help retail traders reduce trading costs by being patient and supplying liquidity in the current market structure.