Clearing


#1

I placed an order yesterday for 20 shares of a stock on Freetrade. I can see on the LSE website that my deal went through at 4:01pm at the price I got, but the order size was 24. I am sure this corresponds to my order deails. Does this mean my order was bundled with (4) other Freetrade purchases or could it have been bundled with orders from other vendors? Moreover if there were 124 buys yesterday and 100 sells via Freetrade, could some of these have been crossmatched off exchange leading to net 24 share purchase? Just curious as to how things work in terms of clearances.


(Alex Suss) #2

I assume Freetrade put orders in bulk, so they will collect all the order for X stock and execute them at the same time. Freetrade will put in a market order I assume and you pay the average of the price, depending on how deep down the order book you go. With very large orders, you will not get only the bid or ask price, since there may not be enough shares at the bid or ask to buy or sell.


(Adam) #3

@James101 we don’t internally cross customer orders and aggregated buy and sell orders are executed separately (there’s only stamp duty on buys).

@alexuss we’re in the process of adding more trading venues, but right now all customer orders go to the LSE’s retail market maker network (ie not the exchange order book). You can read more from the LSE here.

We don’t execute a trade for a customer unless the quote/price we get from the LSE market makers is as good or better than the spread you see on the order book.


(Alex Suss) #4

Any reason why you haven’t applied for Direct Market Access?


(Adam) #5

Where we send orders is down to our best execution policy and getting the best result for our customers.

For ‘retail size’ orders, eg 1 share of Barclays (£1.59) you would have a hard time filling that on the LSE order book. There is the concept of ‘normal market size’ for DMA where market makers are obliged to quote for that size of order+ (ie bigger than typical retail size).

The only UK stockbrokers I’m aware of that offer DMA on the LSE are IG, Interactive Brokers and iDealing. Some also paste their product on top of Interactive Brokers which I understand causes issues for low value/volume (retail) size trades. Maybe why IB has a £10k minimum portfolio size?

We did a blog post on this which you might find interesting: https://blog.freetrade.io/how-do-freetrades-orders-execute-5db0d35a8ea2


(Alex Suss) #6

But surely the order book is the absolute final place where limit orders are set. Theoretically 1 share of barclays could be listed on the order book at 1.59 on the buy side. If 10 shares of barclays were listed at 1.59 on the buy side, 1 share could be bought at 1.59, leaving 9 shares on the order book on the buy side.

I think you mean to say large volumes may not be filled at a certain price?


#7

I have been erroneously charged stamp duty in the past on AIM stocks and foreign incorporated entities, by established online brokers (£50m+ businesses). One site even paid me my dividend (late) in GBP rather than EUR (not complaining). I trust Freetrade will not be making such schoolboy errors.