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Fractional Shares

Observant1
edited April 22 in Other Investing
I placed a limit order at Fidelity to purchase fractional shares of an ETF today (order was filled).
The Good til Cancelled option was unavailable so I selected the Day option.
Pershing lists the following information for fractional shares:
"Additionally, orders are good for that day’s trading session only."
So, do all brokerages prohibit fractional share orders which extend beyond a trading day?
If so, is this because of fractional share accounting rules or is there some other reason?
Inquiring minds would like to know...

Comments

  • yogibearbullyogibearbull
    edited April 22
    Where is your a/c? Looks like your broker clears through Pershing - T Rowe Price, TIAA, etc use Pershing as clearing broker.

    Fido, Schwab, Vanguard self-clear.

    At Fido, fractional trading allows only day-orders, not GTC.

    What types of orders can I place in fractions or dollars?
    When trading in fractions or dollars you can place market or limit orders. These orders are good for the day of the trade only.
    https://www.fidelity.com/trading/fractional-shares-investing

    Fractional trading is fairly new, so features may vary with brokers.
  • Observant1
    edited April 22
    Hi YBB,

    The trade was executed via Fidelity.
    I found the following Fidelity doc regarding fractional trading.
    Unfortunately, the doc doesn't state why limit orders with the Good til Cancelled option are prohibited.
    I'm not sure if Good til Cancelled is an available option for fractional trading at other brokerages
    (checked Pershing) and was hoping to possibly obtain this information from the group.

    https://www.fidelity.com/learning-center/trading-investing/fractional-shares
  • yogibearbullyogibearbull
    Brokers send fractional orders to small odd-lot brokers. My guess is that restriction may come from there - trying to track tiny fractional orders for GTC may not be worth their while.
  • Observant1
    edited April 22
    This certainly seems plausible.
    Thank you very much!
  • msf
    Yogi's description seems reasonable in light of Schwab's restrictions: only S&P 500 stocks (no ETFs) and market orders only (limit orders are harder to track). Further, fractional share orders are treated as ...
    market “not held” orders, and will be executed at market. A “not held order” means that you grant Schwab time and price discretion to transact your order(s) on a best-efforts basis. There may be a delay between the time when your order(s) are executed and when they appear in your account. You will not be permitted to enter limit or other conditional orders for Stock Slices purchases.
    https://www.schwab.com/public/file/P-12533231

    FWIW,
    The broker uses personal judgment on the best price and time to enter or exit a trade. Nonetheless, a not-held order holds the broker harmless, and they will not be responsible for any monetary losses that the investor suffers in the process. Usually, not-held orders are common with international stocks. The opposite of not-held orders is held order, which requires immediate execution since the trader is given little discretion in finding the best price.
    https://corporatefinanceinstitute.com/resources/career-map/sell-side/capital-markets/not-held-order/

    Robinood is likewise explicit in saying that fractional share orders there are on a not held basis. It does not appear to constrain fractional share orders to market orders (i.e. limit orders may be okay).

    Vanguard takes a different approach. The only fractional shares you can buy there are Vanguard ETFs. I infer that Vanguard handles these trades in-house.
  • Observant1
    Thanks for your detailed response, msf!
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