I've done some active trading in my personal account at Fidelity. With surprising frequency when I enter market orders I am filled at the bid for buys and at the ask for sells! How and why does this happen?

Following is an example: I entered three market orders to sell, during which the NBBO stayed at 7.17 / 7.20, and the book looked pretty much the same as below. On all three sales I was filled at the offer (as shown in the right-most column).

Level-2 book with three market sales filled at the ask

  • 1
    $\begingroup$ Nowadays Order Routing (what the broker does with your order) is complex. I believe under SEC regulations you are entitled to ask Fidelity how your order was executed, i.e. how you got the "price improvement" that you experienced. Presumably the counterparty (buyer) was none of the ones shown here, but who it was, I don't know. $\endgroup$
    – nbbo2
    Apr 8, 2020 at 21:08

1 Answer 1


Your broker was able to offer you a better price than the NBBO because they receive payment for order flow, your order was probably submitted to a high-frequency trading firm which paid Fidelity in order to trade with you, and Fidelity passed back some of those savings.

Those HFT firms do that because they consider that retail traders flow has value for them (typically they consider retail traders are unlikely to be insiders or to have more information than they do).


  • $\begingroup$ So is this an all-or-nothing arrangement that brokers make with a pay-for-flow intermediary? Or is a trade-by-trade thing that goes on behind the scenes – i.e., PFOF is advertised to a broker for some stocks at some times, and that's part of the broker's routing algorithm? $\endgroup$
    – feetwet
    Apr 9, 2020 at 15:35
  • 1
    $\begingroup$ It's trade by trade, it could be through a darkpool, or the hft may have a last look before your order is routed to exchanges. $\endgroup$
    – Lliane
    Apr 10, 2020 at 1:31

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.