Online Brokers Do Some Penny-Pinching
Professional traders and those who work at institutions and hedge funds have long used sophisticated software tools to help them receive quality executions. Now one of those tools has gone mainstream.
Earlier this week, online brokerage firm Datek announced that customers could enter orders at one-tenth-of-a-cent increments. That's instead of the increments of a penny or more brokers typically allow.
price for XYZ stock is $10.37. You enter a limit order to buy XYZ for $10.371. That makes yours the best bid price at that moment, which puts you at the head of the line. The next person to send off a market order to sell XYZ shares will be selling those shares to you. That's because a market order always executes at the best available price -- which in this case happens to be your bid.
A Possible Boon to Daytraders
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