Can brokers execute my OTC stock orders at inferior prices by "trading through"?
Can brokers execute my OTC stock orders at inferior prices by "trading through"?
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Flux · External communityPost link
External question — Personal Finance Stack Exchange
Author: Flux
Original post: https://money.stackexchange.com/questions/131451
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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I am aware that FINRA-registered broker-dealers have to follow
FINRA Rule 5310 (Best Execution and Interpositioning)
. But are OTC stocks (OTCQX, OTCQB, OTC Pink) subject to the
Order Protection Rule
that makes it absolutely mandatory for orders to be executed at the best possible price?
I am concerned that my OTC stock orders could be "traded through" the best bid or ask (i.e. executed at worse prices). I know that this doesn't happen with NYSE and NASDAQ stocks, whose trades have to respect the National Best Bid and Offer (NBBO), but is there any chance that this could this happen with OTC stocks?
Example: suppose there are no market participants apart from me and the market makers in Danone (OTCQX:
DANOY
), and that the market makers do not cancel their quotes. Level 2 quotes:
Suppose I placed a limit order to sell 100 shares at $12.75 (a silly price). Is my order guaranteed to execute at $12.89 or better? Do the regulations allow my broker to "trade-through" the best price ($12.89) and execute my order at an inferior price (e.g. $12.85 or $12.84)?
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Quoted from Forex.com.bd-Editorial External question — Personal Finance Stack Exchange Author: Flux Source score (net votes, not local likes): 1 Original post: https://money.stackexchange.com/questions/131451 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. I am aware that FINRA-registered broker-dealers have to follow FINRA Rule 5310 (Best Execution and Interpositioning) . But are OTC stocks (OTCQX, OTCQB, OTC Pink) subject to the Order Protection Rule that makes it absolutely mandatory for orders to be executed at the best possible price? I am concerned that my OTC stock orders could be "traded through" the best bid or ask (i.e. executed at worse prices). I know that this doesn't happen with NYSE and NASDAQ stocks, whose trades have to respect the National Best Bid and Offer (NBBO), but is there any chance that this could this happen with OTC stocks? Example: suppose there are no market participants apart from me and the market makers in Danone (OTCQX: DANOY ), and that the market makers do not cancel their quotes. Level 2 quotes: Suppose I placed a limit order to sell 100 shares at $12.75 (a silly price). Is my order guaranteed to execute at $12.89 or better? Do the regulations allow my broker to "trade-through" the best price ($12.89) and execute my order at an inferior price (e.g. $12.85 or $12.84)?
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