Market with Leftover as Limit orders

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Imported from previous forum

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Hello,

Hope all is well. Wanted to inquire about “Market with Leftover as Limit orders”. Below is my understanding of such order type…

An order initially matched as market but whose leftover (i.e. any remaining resting quantity) for a partially filled order is converted to a limit order at the execution price (i.e. last market price) obtained by the initial partial fill.
–If there is no order on the opposing side, the Market-to-Limit order will be cancelled immediately.
–In comparison to a Market order, the Market-to-Limit order only executes at the best price level and therefore does not trade through the book.

Questions

  1. It is safe to say that a “Market with leftover as limit” is less of a priced order, but rather a conditional order? That is, most certainly sounds like some kind of conditional order type - execute what you can as a market order, then convert the rest to a limit order, executing it at the last market price of the initial partial fill. Else, cancel immediately.
  2. Does this order type always execute as an IOC at the market? I assume no.

I would gladly appreciate the help.

Thanks,

Dwayne

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FIX typically does not define all details of an order type and leaves that up to the specific Rules of Engagament. That avoids having many valid values which do not differ much. Your interpretation is hence only one of many possible ways to offer “Market with Leftover as Limit”. I believe some markets will not cancel the remainder but store it in the book even if there is no order on the opposing side. Which markets are you aware of that execute it as an IOC? OrdType and TimeInForce could be used together to express the two flavors.

Regards,
Hanno.

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The Toronto Futures Exchange used to operate in this manner but I don’t think it was a specific order type, more a market rule. It was a few years back but my recollection was that this was to protect the person placing the order. Take a worked example - I place an order on the exchange to sell 30 contracts at market, market is 100/101. I take all of the buy orders on the other side of the book which amount to 20 contracts. So I am a seller at market for 10 contracts. What’s to stop someone coming in and placing an order to buy at 1c per contract (minimum price requirements may exist, but let’s ignore them for the moment)?

The point is that by converting a market order when there is no depth to limit (at last executed price) the exchange is “protecting” an investor who may not understand that if the depth is not there to fill their order then they can get screwed over.

The problem is that the unsolicited amendment by the exchange may not always be processed by the broker and sent to the buy-side. Which then means that if depth is restored to both sides of the book and the market starts executing again it’s entirely possible that the remaining 10 contracts do not execute as the limit price is not reached again. Which makes the buy-side trader look like a bit of a plum!

I don’t have the TMX documentation to hand, but when I looked at this a few years back, it was included in their market rules documents.

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For what it is worth, there is a value for “market with leftover as limit” in the OrdType(40) field, enum value “K”. This was added in FIX 4.3. It is described as “market order then unexecuted quantity becomes limit order at last price”.