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Table 3: Performance of Limit Orders Versus Market Orders
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| Spread Class = 1/8 (309 Stock-Days) | ||||||
| Limit Order Increment** |
Probability of Execution |
Value of Execution |
Probability of Non- Execution |
Cost of Non- Execution |
Expected Dollar Value of Limit Order |
As Percentage of Price |
| 0 | 100.0% | $0.000 | 0.0% | N/A | $0.000 | 0.00% |
| 1/8 | 73.3% | $0.125 | 26.7% | ($0.346) | ($0.001) | -0.01% |
| 1/4 | 51.6% | $0.250 | 48.4% | ($0.317) | ($0.024) | -0.11% |
| 3/8 | 39.3% | $0.375 | 60.7% | ($0.276) | ($0.020) | -0.09% |
| 1/2 | 30.1% | $0.500 | 69.9% | ($0.235) | ($0.014) | -0.06% |
| 5/8 | 23.1% | $0.625 | 76.9% | ($0.201) | ($0.010) | -0.05% |
| 3/4 | 17.8% | $0.750 | 82.2% | ($0.180) | ($0.014) | -0.07% |
| 7/8 | 15.2% | $0.875 | 84.8% | ($0.162) | ($0.004) | -0.03% |
| 1 | 12.0% | $1.000 | 88.0% | ($0.142) | ($0.005) | -0.03% |
| Spread Class = 3/8 and 1/2 (1,965 Stock-Days) | ||||||
| 0 | 100.0% | $0.000 | 0.0% | N/A | $0.000 | 0.00% |
| 1/8 | 97.6% | $0.125 | 2.4% | ($1.030) | $0.097 | 0.40% |
| 1/4 | 88.5% | $0.250 | 11.5% | ($0.745) | $0.136 | 0.55% |
| 3/8 | 78.9% | $0.375 | 21.1% | ($0.539) | $0.182 | 0.74% |
| 1/2 | 46.9% | $0.500 | 53.1% | ($0.393) | $0.026 | 0.11% |
| 5/8 | 43.4% | $0.625 | 56.6% | ($0.382) | $0.055 | 0.22% |
| 3/4 | 29.2% | $0.750 | 70.8% | ($0.321) | ($0.008) | -0.03% |
| 7/8 | 27.4% | $0.875 | 72.6% | ($0.306) | $0.018 | 0.07% |
| 1 | 20.4% | $1.000 | 79.6% | ($0.256) | $0.000 | 0.00% |
Notes:* Stock-days equals number of stocks in a category times number of days in sample (16 Thursdays in 1996). Stock is excluded for a trading day if it had less than 20 trades that day.
**Buy orders placed at the opening ask minus the increment, sell orders at the opening bid plus the increment. Value of zero indicates market order.
http://www.sec.gov/rules/other/3437302/37302t3.htm
| Home | Previous Page | Modified:10/25/1996 |