No limit on the spread? [Debunked, see official answer]

This is in follow up to a thread I started the other day, whereby a trade executed at 9% higher than the LSE price at the time, so I lost roughly that amount immediately. Customer services have told me that was the best market offer at the time from the market makers, so they executed it and it’s pretty much my tough luck.

So, there are no limits on this. If, for example, a share is trading at ~£10 and you make a blind investment of £1000, you expect to get roughly 100 shares, taking into account the spread and fluctuations. But if it was a low-trading stock and someone had placed a single share for sale at £1000, freetrade would execute it without any checks, and then tell you you’re committed.

Something is really wrong there, unless I’m missing something. What are other people’s thoughts?

I assume this is exacerbated by it being an incredibly volatile time of purchase?

It might be, in fact it surely is, but that does not change that you are investing blindly and allowing a market maker to determine what price you pay.

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With their own platform, limit orders must be coming

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That is always the case if you order 'best price’on a platform. Normally, all securities on freetrade are liquid enough to get consistent prices, this week was just an anomaly in general. Not different for other brokers. That’s what limit orders are for essentially.

But yeah, it sucks for you.

From what I understand, other brokers offer you a short decision time after the buy price is stated.

Look, I’m not looking to make a fuss and complain. I’ve invested quite a bit in freetrade (the company itself) and am keen to see it succeed, but some of the operations so far have been a massive turn off for me. Hopefully they’ll do better with their own platform but I’ve got a really sour taste right now over a few things, and I assume many other potential users would be very much turned off because of them.


What are the things that gave you a sour taste?

yep, many other brokers give you a short window to accept the price displayed and I believe this is the maximum that you would pay, although in some cases you could get a cheaper price.

I’d love to see freetrade do the same, but I’m not holding my breath…

Two main things: this, and that $ transactions always seem to take the FX 0.45% (which I’m fine with) plus around another unexplained 1% (which has been acknowledged but not justified) but the but note is in £ so it makes it very difficult to track.

I thought this was because Freetrade displays the mid market rate?

I don’t pay any attention to what is displayed. It’s always way out of date and often completely wrong, even taking delay into account. But I’m not complaining about that since it’s a known problem so I use other sources. The problem is that any buy I’ve made is immediately down about 1.5%, which can’t be put down to FX rate and fluctuations (because it’s consistent). So someone - not freetrade, but someone - is taking their slice and Viktor had acknowledged this but not given a reason. It’s made me uninclined to buy anything in because with the two FXs and this mystery 1%, you lose 2% in the transactions.

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Just to clarify, I accept there will always be a difference between the buy and sell price, but on a stock like Apple, it shouldn’t be 1% and this “charge” consistently is.

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I’m kinda surprised in the market sell off that the “best execution” price was almost 10% higher than other transactions going through at that time (from looking at the data @lizmcp provided in other thread and looking at other orders from independent site)

I don’t know where the line is drawn with regards to “clients best interest”

If there is a hidden cost associated with the transactions via the invest platform, it should be made transparent, as that is one of the values that drew me to freetrade in first place. Even if it is a rough guide or a technical write up… We should know about it.

I’m a little confused on this too, I had about 5 orders rejected in a row, and was told that it was because no reasonable price was found, fair enough.

One order did go through, but at a much higher price than live price (not price shown on FT) and was told it was because it was the best price found.

I asked what the threshold was for “reasonable price” and got an even more confusing answer (basically re-iterating how orders got rejected if no reasonable price was found, totally not answering the question), so I just concluded that no one knows how it works.

This is not true. I’ve personally looked at the best execution report with our compliance team, including a snapshot of the LSE order book at the time of execution.

Much of what has been written in this thread is also factually incorrect, including the title of the thread.

The cause of the issue experienced is that the trade was executed at one of the most volatile times ever seen on the London Stock Exchange. The price swings were very large that morning and the bid/ask spread was much wider than under normal market conditions.

To be clear, Freetrade does not execute trades if the price quoted by a market maker is outside the observable bid/ask spread on the LSE order book. This can lead to order rejections, especially under turbulent market conditions, as experienced by many of our customers on Monday.

We’ve written about best execution, market makers and spreads extensively elsewhere so will leave a couple links here and close this thread.