Odd Lot (Ab)users (Credit Suisse)

February 2014

KEYWORDS: odd lot, Trading, data, High-Frequency Trading, HFT, SEC, Securities and Exchange Commission, Regulation NMS, retail investors, S&P 500, Institutional Investors

Authors:

Ana Avramovic, Phil Mackintosh

Organizations:
  • Credit Suisse

Summary:

When you see a trade for “1” IBM or “1” MSFT, it doesn’t mean 1 share. As a convention and convenience, 1 refers to 1 round “lot”, which is actually 100 shares*. Most traders therefore send round lots for convenience, or mixed lots (some multiple of round lots + a partial lot of fewer than 100 shares) if they are managing a specific $notional that does not divide cleanly into an integer number of lots. But according to recently-disclosed data from the SEC, from 18-24% of all trades are odd lots (but only 5% of share volume).

Why would anyone use odd lots? We present three popular theories – some maliciously-minded, some benign – then investigate what is actually behind the high odd lot rate.

Related Research and Data