Odd Lot Trading Illegal?

Discussion in 'Trading' started by rolando87, Jun 14, 2011.

  1. Hey folks,

    I was told by a a guy who runs a prop firm I'm thinking about joining that trading odd lots almost exclusively is illegal with the SEC. I trade odd lots nearly every day on nasdaq/nyse stocks and never heard of such activity being illegal. By odd lots I mean less than 100 shares, simply because going 100 shares in some of these stocks is too volatile for me. I think i'm also classified as a PDT because I got 25,000 usd in my IB account. Does anyone know if this is true or is he referring to some old rule not in effect anymore?

    He also mentioned that trading the same stocks in more than 1 account is illegal as well. In this case I would go long a swing trade in 1 account and perhaps go long the same stock at the same price for a quick day trade in another day trading account. Is that also illegal?

    Thanks for any info.
  2. Bull (correct context)

    In the olden days, an odd lot differential was charged. That's gone.

    An advantage of odd lots is limit orders (liquid equities) are generally filled FIRST. Bundled by the ax to arrive at round lots and OFF their books. Basic merchandising and order flow.

    A disadvantage would be partial fills. However, upon entry, a partial fill is a good sign. Hard to buy. Conversely you don't want partials when you want out.

    My position sizes stem from a computation which virtually always arrives at odd lots.

    In the late 1990's there were some ETF's that insisted on round lots. I don't believe that's the case anymore.

    Classification as a pattern day trader would stem from more than one round trip in the same ticker within a week. The 25k threshold is only to persist as one. Of course, 4 to 1 leverage is definitely double-edged.
  3. jb514


    Odd lots do not get filled first. The orders that arrive first get filled first.
    SouthbeachCTA likes this.
  4. I wrote liquid stocks. I also wrote "generally". As such, the hell they don't.

    Odd lots wouldn't be reflected in time & sales nor Level II. At the other end of the spectrum block trades can be negotiated. Only appear on tape if BOTH parties want it. Part of the rig. IF they're on tape, the intent is an impression

    Where do you little dipshits come from???????????????? As soon as one disappears, another pops up. Like.......eh...........eh........toadstool.

  5. jb514


    Do you mean market orders? because the order at which limit orders are filled comes from when they are received.
  6. You're starting to annoy me.

    Limit orders are matched. This may or may not entail bundling.

    Market orders are out of inventory. Period. I'm not talking about ECN's or regional exchanges.
  7. Being long and short the same security is, however, shilling. I am not up on the law, but I think that is verboten.
  8. This morning, I sold 238 shares of IWM, and purchased 258 shares of EWZ. No big deal.

    Spiders & iShares ETFs, among others can be traded at any quantity. I've traded the tickers X, F, HMC, RIMM, etc, in all sorts of quantities. No big deal.

    Holders ETFs, such as BHH & OIH require trading in 100 share increments. I don't mess with Holders ETFs. They can shove their ETFs where the sun don't shine. [​IMG]
  9. Dustin


    Odd lots are illegal for prop firms but not retail accounts. This law was because people were taking advantage of auto execution of odd lots ahead of other orders. It was maybe 5-7 years ago.
  10. i don't think its illegal for prop firms to allow odd lots. but he's correct in that most day trading or prop firms only allow odd lots to exit postions. for instance lightspeed retail doesn't allow less than 100 share orders but ib allows odd lot opening orders. in the late 90's early 2000;s i exploited the crap out of odd lot orders to get auto execution . for instance sdli or jdsu were $100 plus stocks. so i'd bang in 99 shares 10-20 straight times and get instant fills.
    #10     Jun 14, 2011