Difference between quoted price and bid price in UCITS ETFs

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Topic Author
Badcatn
Posts: 9
Joined: Sun Jul 25, 2021 2:06 pm

Difference between quoted price and bid price in UCITS ETFs

Post by Badcatn »

Hello bogleheads! While trading a few days ago I noticed the following discrepancy on the IBKR web trader(client portal). On the order ticket, right at the top section, while I was placing my trade, I noticed the following:
VWRA VANG FTSE AW USDA LSEETF
100.45
0.60
-0.26%

Bid
100.33x 250

Ask
100.49X 1085


2 questions:
1.Why is there a difference between the quoted price(100.45) for VWRA and the bid price(100.33)?
2.When placing a trade, should I use the quoted price(100.45) or should I use the bid(100.33) as an anchor for the best price someone was willing to pay for 1 share of VWRA? I tried to place an order for 100.37 and it did not fill in the time span of 20mins even though both the bid and ask prices remained practically the same and the order was 4 cents above the bid.

I could not find the answer while searching online. Many thanks for any replies!
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tre3sori
Posts: 460
Joined: Wed Jul 24, 2019 3:13 am

Re: Difference between quoted price and bid price in UCITS ETFs

Post by tre3sori »

Since nobody else answered so far:
Badcatn wrote: Wed May 18, 2022 9:09 am VWRA VANG FTSE AW USDA LSEETF
100.45
0.60
-0.26%

Bid
100.33x 250

Ask
100.49X 1085[/b]

2 questions:
1.Why is there a difference between the quoted price(100.45) for VWRA and the bid price(100.33)?
2.When placing a trade, should I use the quoted price(100.45) or should I use the bid(100.33) as an anchor for the best price someone was willing to pay for 1 share of VWRA?
ad 1.
The 100.45 is (probably, not sure) the price of the last trade that actually took place.
Bid is the price that a market participant (buyer) is willing to pay you for your security right now.
Ask is the price the market participant (seller) is willing to accept in order to sell you his/her security right now.

ad 2.
As a seller you want to be at the bid price in order to sell your security immediately.
Your 100.37 where to far above the bid price for the trade to take place.
So yes, you should have used the bid price (100.33) as an anchor to sell your security immediately.

As a buyer you want to be at the ask price in order to buy the security immediately.

Caveats:
I don't know if IBKR offers real time prices.
As a retail investor you often don't have access to real time prices. Prices are often delayed by 15 minutes or so.
Some brokers charge you extra for having access to real time prices.

If you use a market order, your trade gets executed in any case, but you don't have control over the price.
If you use a limit order, you have control over the price, but your trade may not execute.
The information provided is intended to be entertaining. It is not to be construed as professional advice. Use it at your own risk.
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andrew99999
Posts: 1021
Joined: Fri Jul 13, 2018 8:14 pm

Re: Difference between quoted price and bid price in UCITS ETFs

Post by andrew99999 »

tre3sori wrote: Thu May 19, 2022 2:23 am Caveats:
I don't know if IBKR offers real time prices.
As a retail investor you often don't have access to real time prices. Prices are often delayed by 15 minutes or so.
Some brokers charge you extra for having access to real time prices.

If you use a market order, your trade gets executed in any case, but you don't have control over the price.
If you use a limit order, you have control over the price, but your trade may not execute.
Not sure about other exchanges, but for US stocks, it is US 1c per real-time price (I think all others may be US 3c).
You also get $1 of free prices per month.

With ETFs you should always use limit orders (just a few cents beyond where you need to make sure it is executed) just in case market makers are unavailable momentarily. This will stop any nasty surprises that occasionally popup.
Topic Author
Badcatn
Posts: 9
Joined: Sun Jul 25, 2021 2:06 pm

Re: Difference between quoted price and bid price in UCITS ETFs

Post by Badcatn »

Thanks Andrew and Tre3sori for your replies. I did think it was quite odd since I tried to buy VWRA and played my limit order at 100.37 however it did not execute. I suppose no market maker received a sell order at that price, oh well. However I did thought it was very weird that VWRA showed a price of 100.45 in the interface when the best bid was at 100.33 and the best ask was at 100.49.
hithere
Posts: 198
Joined: Sat Mar 31, 2018 5:30 am

Re: Difference between quoted price and bid price in UCITS ETFs

Post by hithere »

As mentioned by others, IB shows delayed prices. You should always make a "snapshot" of the market before executing a trade (unless it's a market trade), so you know where the prices stand at the moment and place your limit/s accordingly.
Topic Author
Badcatn
Posts: 9
Joined: Sun Jul 25, 2021 2:06 pm

Re: Difference between quoted price and bid price in UCITS ETFs

Post by Badcatn »

hithere wrote: Mon May 23, 2022 7:22 am As mentioned by others, IB shows delayed prices. You should always make a "snapshot" of the market before executing a trade (unless it's a market trade), so you know where the prices stand at the moment and place your limit/s accordingly.
Hello Hithere, thank you for your reply. I do have delayed data while trading on the LSE, and I always use a snapshot when I place my limit order. However I was quite confused to see the discrepancy between the quoted price of 100.45 for VWRA and the best bid price of 100.33. Usually before placing a trade, I wait for the bid and ask price to tighten(Say no more than 8 cents). Then I proceed to place my bid 2 cents above the best ask price. I do this to create a marketable limit order.
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Kevin M
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Re: Difference between quoted price and bid price in UCITS ETFs

Post by Kevin M »

Badcatn wrote: Sat May 21, 2022 10:25 pm Thanks Andrew and Tre3sori for your replies. I did think it was quite odd since I tried to buy VWRA and played my limit order at 100.37 however it did not execute. I suppose no market maker received a sell order at that price, oh well. However I did thought it was very weird that VWRA showed a price of 100.45 in the interface when the best bid was at 100.33 and the best ask was at 100.49.
If you're buying, it's the ask price that will get your order filled. Your offer of 100.37 was too far below the ask price to get filled. Something closer to the midpoint might get filled. I don't know why you're focused on the bid price, since that is an offer to buy, and since you are buying, you need an offer to sell (ask).

Kevin
If I make a calculation error, #Cruncher probably will let me know.
hithere
Posts: 198
Joined: Sat Mar 31, 2018 5:30 am

Re: Difference between quoted price and bid price in UCITS ETFs

Post by hithere »

Badcatn wrote: Wed May 25, 2022 5:34 pm
hithere wrote: Mon May 23, 2022 7:22 am As mentioned by others, IB shows delayed prices. You should always make a "snapshot" of the market before executing a trade (unless it's a market trade), so you know where the prices stand at the moment and place your limit/s accordingly.
Hello Hithere, thank you for your reply. I do have delayed data while trading on the LSE, and I always use a snapshot when I place my limit order. However I was quite confused to see the discrepancy between the quoted price of 100.45 for VWRA and the best bid price of 100.33. Usually before placing a trade, I wait for the bid and ask price to tighten(Say no more than 8 cents). Then I proceed to place my bid 2 cents above the best ask price. I do this to create a marketable limit order.
That looks like a normal spread for this security. 100.33 bid, 100.49 ask, 100.45 last trade price. For a buy order, I'd probably start with a limit of 100.33 and slowly increase my limit until the order fills. I'd expect that to happen around the price of the last trade at the moment of the fill (the prices could change while I'm increasing my limit).

For narrower spreads, you need more liquid securities. For example, this ETF, both in its distributing and accumulating form, is available on other European exchanges where the trade volumes are higher, thus possibly the spreads are tighter. Take that for what it's worth, as you might not want to trade on other exchanges due to tax implications (I don't know if this is the case, I'm just stating that it might be).
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