The Risks of Higher Fees from Partial Sales and Partial Buys

At most Canadian online discount brokerages the fee is the same whether you sell 18 or 100 shares. However, there is one risk to know about.

Screen capture of low volume thinly traded stock

Be Aware of Thinly Traded Stocks

Some stocks are hard to sell or buy. No one wants to sell or buy their shares, so the stock is “thinly” traded.

You can check this fairly easily by looking at the volume of shares being traded, and the total volume of shares in the marketplace. If a week can pass without any sales of the stock, it is very thinly traded indeed! If a half-hour can pass without a single trade, it is also pretty thin.

For example, on this bonny October afternoon, the volume of TD shares is 400, 515. That is not thin. The volume of FC shares is 16,459. Quite thin. The volume of LNF is 668. Very thin indeed.

Partial Sales or Buys (Fills) of Thinly Traded Stocks

If you put in an order to sell a quantity of shares and you do not limit that order to be good for today only, the brokerage will keep trying to sell the shares until they are gone. On any one day, the sell order may be only partly sold, called a “partial fill.”

However, the financial institution will usually charge you a fee for each day they make a sale. So if they sell 2 shares today, 17 shares tomorrow, and 81 shares the next day, the fees will be 3d x ($29/d) = $87.

To minimize your risk, you can usually set the order to last only one trading day. Then you can decide whether it’s worth spending another fee to try to sell more stock another day.

Unfilled Orders Usually Do Not Cost You a Fee

It may be worth noting that most brokerages do not charge you for an order that is not filled at all. For example, if you set an order to sell TD stock if it reaches $100 and it only reaches a high of $85 that day, there is no fee from BMO InvestorLine for this unfilled order.

Partial Sales or Buys of an Extremely Large Order of Shares
This risk applies whether you are selling 1 share or 1,000,000 shares. Even if a stock is traded in large volumes, if your order to sell is huge, it may not all sell on one day.

This is usually less of a problem, though, because you are making so much profit you don’t mind paying several days fees!

Related Reading

Join In
Have you ever got burned by excessive fees when buying or selling a thinly traded stock? What tips can you suggest to protect yourself (or us!) in the future?

Leave a Reply

Your email address will not be published. Required fields are marked *