You place a Buy Limit Order at the Bid (Or Sell Limit Order at the Ask). In some cases it's just a penny holding up the order. At the brokers discretion why don't they fill the order and take it out of the commission? IMO ....... A guaranteed smaller commission is better than no commission if the order isn't filled. I assume brokers can not do this.
Can't tell if this is a serious question. The loss from the transaction would be much greater than what they would make on commissions.
TD Ameritrade $9.99 per trade. Bid/Ask spread $0.05. 20 share order. Why let a few pennies x 20 shares hold up a $9.99 commission? Take the $0.60 from the commission and fill the order (at the brokers discretion).
You assume the broker owns shares of all stocks, that's a risk for them on its own. Now if they sell to you at limit and the price moves up, they can be out a lot of money.
If my understanding of the rules is correct, such a fill would be in violation of the broker's fiduciary duty of best execution. At the very least, the broker would have to acknowledge the inherent conflict of interest and its possible repercussions.
OK ..... Thanks for the replies. I brought his up because I just opened up a 2nd trading account with TD and they charge $9.99 per order. My first two trades were 10 shares and 15 shares - about $500.00 each trade. The bid/ask spread was 1 or 2 cents I placed Limit Orders at the bid. To my amazement the orders sat there unfilled until the stock moved down the penny or so. The 2nd order sat unfilled for over an hour. TD could have lost a $9.99 commission if the orders expired unfilled. So my thinking is why don't they (TD) knock $0.10 off the commission and apply it to the stock - 1 cent per share?
Do you realize how many accounts they have or how many trades customers doing? Do you think anyone is even watching your trade? Do you think they even care if you get in? They know there are going to be other trades that do eventually get in, do you think you can go to a Walmart manager and ask to take off nickel cheaper to buy a bag of nuts to get you to buy them?
Obviously it would be some sort of auto-fill that wouldn't require human intervention. Absolutely they care - The banks and brokers are relying more and more on commissions. Commissions is a big money generator. IMO ...... To let a $9.99 commission slip away over 15 cents is ridiculous.
If I owned that brokerage, I would not do it any other way either, you have set points otherwise where is the limit? It obvious to me if you paying $9.99, you are paying too much, and they know you are paying too much, so they are not going to bend.