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Table 3: Performance of Limit Orders Versus Market Orders
Stock Days*

in Spread Classes 1/8, 3/8, and 1/2; Price Range $20 to $30

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/3437302/37302t1.htm


Modified:10/25/96