Imported from previous forum
Could someone enlighten me as to the difference between a ‘Limit’ and a ‘Limit or Better’ order type.
[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> Could someone enlighten me as to the difference between a ‘Limit’ and a ‘Limit or Better’ order type.
I believe "Or Better" is a NYSE-specific qualification on limit orders. The 1999 CMS spec states: "Seeks Limit Price or better; also overrides Error Filter parameters"
Unless you’re routing orders to NYSE or another exchange that supports it, you probably can safely ignore it.
[ original email was from Francesc Prats - fprats@meff.com ]
> > Could someone enlighten me as to the difference between a ‘Limit’ and a ‘Limit or Better’ order type.
>
> I believe “Or Better” is a NYSE-specific qualification on limit orders. The 1999 CMS spec states: “Seeks Limit Price or better; also overrides Error Filter parameters”
>
> Unless you’re routing orders to NYSE or another exchange that supports it, you probably can safely ignore it.
>
>
In the glossary FIX 4.3 documentation states:
“Limit: An order to buy a security at or ABOVE a stated price, or to sell a
security at or BELOW a stated price”.
“Limit or Better: Indicates an order to buy a security at the indicated
limit proce or lower, or to sell a security at the indicated limit price or
higher”.
The definition of a limit order as far as I know is, precisely, the FIX "Limit or Better
Order" definition, because, if I’m right, the FIX “Limit Order” definition
has the words ABOVE and BELOW swapped.
[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> In the glossary FIX 4.3 documentation states:
> "Limit: An order to buy a security at or ABOVE a stated price, or to sell a
> security at or BELOW a stated price".
> "Limit or Better: Indicates an order to buy a security at the indicated
> limit proce or lower, or to sell a security at the indicated limit price or
> higher".
>
The FIX 4.3 glossary definition is definitely wrong. You’re buying at or below, and selling at or above, in both cases.
[ original email was from Oren Miller - omiller@thoughtworks.com ]
> Could someone enlighten me as to the difference between a ‘Limit’ and a ‘Limit or Better’ order type.
>
This is something that I have been wondering for quite some time. The only place I found with a side by side comparison was at REDIBooks site at http://www.redibook.com/release_notes.asp. This was posted in 1999.
Limit Orders
This functionality remains the same. A buy limit order entered above the NBBO will simultaneously bid all the market makers up to and including the limit price. Similarly, a sell limit order entered below the NBBO will simultaneously offer every market maker down to and including the limit price. It will over hit the MM at the limit price entered for any remaining shares. Short sale limit orders will adhere to the short sale rule and be marked up 1/16 on a down bid, following the bid as it moves down, until it reaches the limit price. If the MM/ECN does not respond within the allotted time, it will go to the next available MM/ECN, or it will lock the market if it is at the limit price entered. Any unexecuted shares will be posted to the Level 2 quote at the limit price entered. It is possible to receive executions outside the NBBO, but never outside the limit price entered.
Limit-or-better Orders
This new logic will follow the movement of the bid or offer until the limit price is reached. This insures limit price protection. A limit-or-better buy order will bid each market maker/ECN at the best offer, and continue to do so, incrementally, until the limit price is reached. It will then post any unexecuted shares to the Level 2 quote at the limit price entered. A limit-or-better sell order will offer each market maker/ECN at the best bid, and continue to do so, incrementally, until the limit price is reached. Any unexecuted shares will be posted to the Level 2 quote at the limit price entered. A limit-or-better sell short order will adhere to the short sale rule, and mark the price up 1/16 on a down bid. It will follow as the bid moves down, stopping at the limit price entered. If a MM/ECN does not respond in the allotted time once the limit price is reached, it will lock the market at that price. It is possible to receive executions outside the NBBO, but never outside the limit price entered.
Later in 2001 they posted at http://www.redi.com/news.html that Limit logic was changed to what was previously known as Limit or Better. Yay.