5 Responses to “August 24, 2023”

1. xalier says:

   August 25, 2023 at 11:49 am

   This isn’t related to August 24th but it is about TSX trading rules (as I have been told by my broker) as it applies to thinly traded preferred shares on the TSX. A quick search using a few strings like “thinly”, “tsx rules” didn’t seem to match anything relevant in the prefblog history. Hopefully this is an acceptable topic for prefblog comments.

   It appears the rules for trading on the TSX prioritize market orders over limit orders at the same bid price. This means that a limit order that has been in place for a few days can be beat by a market order at the same bid price. From my perspective, If these indeed are the TSX trading rules I think they should be changed. I think to get ahead of a limit order, the market order should need beat the bid price of the limit order. I am wondering if I am alone in thinking like this.

   The following happened to me the other day that made me look into this with my broker. I had a 1000 share limit buy order on a preferred share that had a order duration of a week. On day 1 the order filled 500 shares at the bid price of $24.91. The order was carried forward into day 2 with no changes to the order which should have meant that this order was first in the order queue at the $24.91 bid price. Before open, someone else entered a sell order for 500 shares at $24.91 that showed up in the level 2 data. This looked like a great match for my buy order. However at open, the first trade of the day was a trade of 100 shares at $24.91 to another investment dealer. My buy order partially filled with 400 shares leaving my order with 100 shares still to be filled. I was told by my Brokerage that since the 100 share trade was not within the same dealer that it was likely a market trade. My broker told me that the TSX trading rules prioritize market bids over limit order bids.

2. DR says:

   August 25, 2023 at 12:10 pm

   xalier,

   if it was in the pre-opening sequence, no way you could possibly know whether the other order that took priority was a limit or market order. all you need to know in that situation is that the other order took priority to yours as it either:
   – was indeed a market order or had a higher limit than your did
   – at times i believe even if the order possessed the same limit as yours and indeed yours would therefore possess time based priority, it is possible that if it was the same dealer on buy/sell that dealer matching might have prioritized the other order. although not 100% sure on that.

   the opening sequence will always prioritize orders with higher limits even if the opening sequence price is your limit price.

3. jiHymas says:

   August 25, 2023 at 1:49 pm

   For the priority of fills, see Rule 4-701 in the Toronto Stock Exchange Rule Book.

   I think to get ahead of a limit order, the market order should need beat the bid price of the limit order.

   That would imply that in the situation you described, there would be two opening prices; one for your limit order and a different one for the market order. That would seem to go against the objective of setting a single Opening Price.

4. xalier says:

   August 26, 2023 at 12:13 am

   DR – thanks for your comments.

   James – thanks for providing the link to the TSX Rule Book. That Rule Book is quite the rabbit hole:)

   At risk of saying the obvious, after reading pieces of the Rule Book it is clear that the TSX has special trading rules on market open. Rule 4-701(4) does say that market, better priced limit and MBF orders are guaranteed to be filled at market open. Only trades of limit orders at the opening price are filled according to time priority at market open.

   It was re-assuring to see that the Rule Book also says in Rule 4-801 that with some exceptions, order time priority for a given price is maintained post opening.

5. DR says:

   August 26, 2023 at 8:42 am

   xalier,

   keep in mind that by definition a market order has an infinitely higher limit price than your limit order and takes priority to all limit orders, thus otherwise referred to as must be filled for purposes of opening sequence.

   word of advice, NEVER EVER use market orders unless wildly liquid security as if on an illiquid pref, your dealer could carve you for $1 or more in many instance when the book is thin