One of the first things new investors should familiarize themselves with is the types of buy and sell orders they can use to trade stocks. A partial fill occurs under specific circumstances and can take the investor by surprise. How much you will owe in commissions for a partially filled stock trade depends on whether and when the unfilled portion of your order is executed by the broker.
Types of Orders
A partial fill is possible only under specific circumstances. You can avoid it by placing what is called an all-or-none order. If you place an all-or-none buy order for 100 shares of a particular stock, you're indicating that you will accept a trade only if all 100 shares are bought at once. If the broker locates fewer than 100 shares to buy, it won't buy any at all. You can also specify a day order or good-til-canceled order. The former is canceled if it remains unfilled by the end of the business day, while the latter remains in effect until it is executed.
A partial fill occurs when the broker buys or sells fewer than the number of stocks specified in your order. If, for example, only 80 shares of the stock you want are available for purchase and your order is not of the all-or-none type, the broker will purchase 80 shares, leaving you with an unfilled portion of 20 shares. A partial fill is more likely to occur if you set a ceiling in terms of how much you are willing to pay when buying or you specify a floor when selling shares. More than 100 shares of the stock you seek might be available for purchase, with only 80 available at the price specified.
When the broker partially fills your order, you will be automatically charged the full commission specified by your brokerage agreement. If the remaining portion of your order is executed over the course of the same day, you will not pay additional commissions for those portions. Assume, your broker buys 80 shares at 1 p.m., 15 shares at 1:02 p.m. and the remaining five shares at 1:03 p.m. You will be charged a commission only for the first trade occurring at 1 p.m.
If the unfilled portion of your order is executed on a later day, you will be charged an additional commission. If the partial order is filled in pieces over multiple days, you will pay one commission for each day. If, for example, the broker buys 80 shares on Monday and purchases the remaining 20 units in three installments on Tuesday, you will pay a commission for only the first purchase on Tuesday. The other two Tuesday purchases will be commission-free.
Hunkar Ozyasar is the former high-yield bond strategist for Deutsche Bank. He has been quoted in publications including "Financial Times" and the "Wall Street Journal." His book, "When Time Management Fails," is published in 12 countries while Ozyasar’s finance articles are featured on Nikkei, Japan’s premier financial news service. He holds a Master of Business Administration from Kellogg Graduate School.