Trade-through
Definition · Level 6 · Desk language
Keep reading with Tradecraft
Without a subscription, you can read three definitions every 30 days. Tradecraft explains all 988 terms and strategies, with the lessons that teach them, flashcards that come back before you forget, quizzes and a payoff lab.
Filling an order at a worse price than a better protected quote displayed on another venue. US Regulation NMS (National Market System) generally prohibits it.
Example
Offer 30.02 on exchange A, but your buy fills at 30.04 on exchange B.
Rules and market figures change: check the current ones before relying on this.
Where Tradecraft teaches it
Level 6 · Desk language, in the lesson “Market makers, fees and price improvement”: Why spreads widen, who is paid to add liquidity and how a retail order can fill inside the spread.
Related terms
- Adverse selectionThe risk that whoever trades with you knows more than you do, so the trades you get are the ones that hurt; repeated one-way flow is a warning sign.
- Inventory riskThe risk of holding a position, bought from a client or sold short to one, while the price moves against you: a reason market makers widen spreads.
- Maker-takerExchange pricing that pays a rebate to orders adding resting liquidity and charges a fee to orders removing it.
- PFOFPayment for order flow: a wholesaler pays a retail broker to route it customer orders, which it fills itself, often with slight price improvement.
- Price improvementA fill at a better price than the best displayed quote (the NBBO): lower for a buyer, higher for a seller.
- “20 by 50”Size quote: the first number is the quantity on the bid, the second the quantity on the offer (round lots, contracts or millions, depending on the…