Discretionary Orders

A Discretionary order is a limit order submitted with a hidden, specified 'discretionary' amount off the limit price which may be used to increase the price range over which the limit order is eligible to execute. The market sees only the limit price.

For information about special handling for discretionary orders for US options and Penny Pilot Program US options, please see the Discretionary Order Handling page.

Products Availability Routing TWS
Stocks US Products Smart Attribute
    Non-US Products Directed Order Type
            Time in Force
            Price Attribute
Available for Limit orders only.
View Supported Exchanges  Open Users' Guide

Classic TWS Example

  • Discretionary Buy Order

    Order Type In Depth - Discretionary Buy Order

    Step 1 – Enter a Discretionary Buy Order

    In a fast-moving market, you want to place a limit order to buy 100 shares of XYZ, which is trading at 64.25 per share. To improve the chances of getting filled, you decide to add a discretionary amount to the Limit Price. You click the Ask Price to create a buy order and select LMT as the order type. Then you enter a Limit Price of 64.10 and enter a discretionary amount of 0.10 in the Discretionary Amt field. This is the amount added to the limit price to increase the price range over which the order is eligible to execute.Note that this amount is hidden from the market, which sees only the limit price of 64.10.

    Assumptions
    Action BUY
    Qty 100
    Order Type LMT
    Market Price 64.25
    Limit Price 64.10
    Discretionary Amt 0.10
     
  • Discretionary Buy Order

    Order Type In Depth - Discretionary Buy Order

    Step 2 – Order Transmitted

    You've transmitted your limit order with a discretionary amount of 0.10. If the price of XYZ shares falls to within 0.10 of your limit price of 64.10, your order for 100 shares will be filled.

    Assumptions
    Action BUY
    Qty 100
    Order Type LMT
    Market Price 64.25
    Limit Price 64.10
    Discretionary Amt 0.10
     
  • Discretionary Buy Order

    Order Type In Depth - Discretionary Buy Order

    Step 3 – Market Price Falls, Order Filled

    The market price of XYZ falls to 64.19, which is within the range specified by your discretionary amount. Your limit order for 100 shares is filled at 64.19.

    Assumptions
    Action BUY
    Qty 100
    Order Type LMT
    Market Price 64.19
    Limit Price 64.10
    Discretionary Amt 0.10
     

Mosaic Example

Markets or specific stock prices often move quickly resulting in wider-than-usual spreads. In some cases quotes on some stocks are higher and therefore accommodate a wide spread. In an effort to increase the chances of execution in a stock where a spread exists, clients may use a discretionary order type to add to a limit bid price or subtract from a limit ask price without exposing the price improvement to the market. In this example, the user wishes to purchase 1,000 shares in ticker TSLA at 3-cents more than the National Best Bid (NBB) displayed in the market quote. However, the user’s bid size is only displayed at the NBB although the discretionary amount increases the buyer’s chance of the trade executing. In addition the buyer wishes to limit the price he is willing to pay to no higher than $218.79.

Assumptions
Action BUY
Qty 1,000
Order Type LMT
Market Price 218.82
Limit Price 218.79
Discretionary Amount 0.03

Mosaic Discretionary Order

 

Enter the ticker symbol in the Order Entry field and click on the Buy button. This causes the background to turn blue. Sell orders create a red background. Enter the desired purchase value in the Quantity field and select LMT for the Order Type. Change the TIF if desired. In this example we are using a Day order. Clicking the Advanced button displays more parameters for the order. Click on the Discretionary Amount field, which allows the user to enter the desired amount in dollars and pennies over and above the Bid price we are willing to pay. With the NBB of $218.76 and a 3-cent Discretionary amount added to this order, the order might execute in the event the market price of TSLA falls to $218.79. Note that if the NBB rose to $218.77 the order would not fill should the market price decline to $218.80 on account of the limit price of $218.79 in place. With these values entered on the screen, you are ready to click the Submit button to transmit your order.

 

Note: Any stock or option symbols displayed are for illustrative purposes only and are not intended to portray a recommendation.