Any chance of allowing STOP LIMIT orders to work in the aftermarkets?
I use them often with Interactive Brokers which allows it, but looks like Alpaca only supports LIMIT order types?
STOP LIMIT allows me to place an order that only triggers when the asset moves in my direction. Having to use a LIMIT order means I am committed to entering whichever way it goes.
This is the first time I have come across a request to add a stop limit order for the afterhours. Traditionally, the extended hours is only for limit orders. Thank you for the idea on this here, we are working on quite a few exciting things right now, however I will be sure and bring this up with the product team.
It works really well with Interactive Brokers. Means if I see some news about a stock I can place an order in the pre-market and if the news turns out to be good and the stock moves up I can buy. If it goes down, then no order placed. These days a company can report great earnings and the stock ends up down because it wasnt âgreat enoughâ. The limit component allows me to adjust for risk - ie avoid those that do a massive gap up.
@Angus Itâs very important to understand that data reporting and trade executions are regulated differently and work differently in after hour trading. Both of these factor into the implementation, and trader expectations, if stop orders were supported after hours.
First consider market data, or specifically, trade execution data. This is the âlast trade priceâ which would trigger a stop order. During market hours there is a requirement that all trades must be sent to a Trade Reporting Facility (TRF) or Securities Information Processor (SIP) within 10 seconds of execution. After market hours this time is extended to 15 minutes. Moreover, some TRFs are not open during the entire after hour trading session. If a TRF receives trade data, and it isnât open, it will simply queue those trades and send them to the SIP when they do open (typically the next trading day). So, the first issue is the trade data which triggers a stop order can be significantly delayed in after hour trading. Perhaps not what is expected.
Second consider trade execution. The SEC has in place a number of rules broadly grouped under Regulation NMS. One of these rules often refferred to as the the Trade-Through Rule prohibits orders from executing on one trading venue if a better price is offered on another venue. This is the primary rule which makes trading on the 20+ exchanges, 40+ ATNs, and hundreds of individual brokers, seem like trading on a single âmarketâ. The Trade-Through Rule however doesnât apply to after market hour trades. There are no protections prohibiting orders from executing at different prices on different trading venues in after hour trading. So, while a stop order may get triggered, there is no guarantee it will execute even if better trades are executing on other venues. This can of course currently happen with plain limit orders (one sees the current price better than ones limit price but ones order doesnât fill). The expectation however, may (incorrectly) be that a stop order would fill or fill sooner?
Those are some of the challenges with implementing and setting expectations if/when stop orders are supported in after hour trading.