How does the order queue work

[ruaboy]

I had an order in for 25000 shares in a company there was approx 150000 shares in the buy queue before me, I got 20,000 last sale of the day and expected to be first in the queue next am for any shares at that price but 15000 went at the same price first trade and I get 500 in the next trade.There were no letters eg sp after the trade. This has happened a couple of times now and I am wondering how it works.I assumed, with no knownledge, that the queue system would be orderly. Was just wondering how this happens, mainly because the price has moved and not in a direction that is helpful in filling my order and I don't understand the process.Thanks

[Lizard]

Hi Ruaboy,

The queue system is normally "orderly", but at the open or close (or when a stock resumes trading after an announcement), someone can beat you to the stock at the same price through the auction that occurs during "pre-open".

The formula for the auction is given here (also applies to NZX):
http://www.asx.com.au/products/calculate-open-close-prices.htm

Basically pre-open allows everyone to place (or move) their bids in the 10-15 mins prior and then the orders are all processed at the auction price - the price where the volume of all bids above or at that price equals the volume of offers at or below. So when someone gets shares ahead of you, it is because they will have taken the risk of placing a bid at a higher price during pre-open, but then had it filled at a lower auction price. Often bids can be deliberately placed above what the buyer actually wants to pay, as this enables them to be at the front of the queue (although they potentially risk paying up if existing offers are pulled in the final seconds).

If you are using an on-line broker, you may be able to observe the match price by looking at depth during pre-open. Note that those market participants with more rapid trading systems are able to move quite quickly in the seconds moving up to the trades being placed, so depth can change almost invisibly to those of us working less directly and the match price may well change unexpectedly.

Occasionally, you can also end up out of the queue during trading where a broker has a cross-trade - i.e they have matched their clients in house and are able to put through the order ahead of other bids/offers at the same price. But, as you have noted, there were no codes attached to the trades you observed, so it is not likely to be the explanation in these cases.

[ruaboy]

Thanks for that Lizard,
I have watched the closing match price recently and being trying to figure out how it worked, now I know. I did see last week a quite large bid at a very high price right at closing and it got settled at the much lower match price, I wondered why at the time, but now know they just wanted or needed to be in front of the queue. Thanks again