Reasons why an order can be automatically cancelled or rejected
If you’ve had an order cancelled or rejected, read more below on why and what you can do to help avoid this in the future.
If a corporate action takes place
When a company undertakes a dividend, stock split, merger, acquisition, or spin-off, this is called a corporate action. Any active orders will be cancelled to comply with the FINRA Rule-5330. This is a move to protect investors from changing circumstances in companies when these actions take place, because this new information could have an impact on your decision to invest.
If your order doesn't meet criteria
Your order may be cancelled due to a decision made by the exchange itself (i.e. the NASDAQ, NYSE, NZX etc) if their rules determine a limit, stop-loss or stop-buy order has been placed by mistake.
If your order exceeds our limits
There are some restrictions on the orders that you place through Hatch. Our broker DriveWealth has internal monitors that flag large orders to reduce the risk imposed by accidental or corrupt trading. Because of this, if you place a buy order for more than 20,000 shares or a sell order for more than 50,000 shares, the order will be cancelled. In addition, a single buy or sell order will be cancelled if it exceeds US$1.5 million.
How to avoid your order being cancelled or rejected
Corporate actions
If a corporate action takes place, all active orders will be cancelled. There’s no way to avoid this sort of cancellation, but you’re more than welcome to place a new order immediately following the corporate action.
💡 Note: The most common reason for an order being cancelled is that the price you entered is either too close or too far away from the current or closing market price.
Limit orders
Limit buy order: The price you entered was too high
The purpose of limit buy orders is to buy shares at the current market price or lower. The exchanges (i.e. Nasdaq and NYSE) have automated checks in place to cancel an order if the price you entered was so far above the current market price that it looks like a mistake.
For example:
Company X has a closing share price of $100
You place a limit order to buy shares for $105 thinking the opening share price may be higher than the closing price
During after-market trading, the share price actually drops to $80
When the exchange runs their checks before the market opens, they see you tried to buy shares for $25 above the opening market price. There's no reason why an investor would want to pay more for shares than they have to (unless they've placed a stop-buy order), so your order is considered a mistake and automatically cancelled.
Limit sell order: Your price was too low
The purpose of limit sell orders is to sell shares at the current market price or higher. The exchanges (i.e. Nasdaq and NYSE) have automated checks in place to cancel an order if the price you entered is too far below the current market price that it looks like a mistake.
For example:
Company X has a closing share price of $100
You place a limit order to sell shares for $110 thinking the opening share price may be higher than the closing price
During after-market trading, the share price actually rises to $130
When the exchange runs their checks before the market opens, they see you tried to sell shares for $20 below the opening market price. Investors shouldn't be selling their shares for less than the current price (unless they place a stop-loss order), so your order is considered a mistake and automatically cancelled.
Limit sell order: Your price was too high
With a limit sell order, you set the price to above the current market price. Due to the broker requirements to maintain fair pricing for orders filled (NBBO), there is an upper limit on sell orders. Limit sell orders with a price greater than 2x the current share price may be cancelled. If you wish to have a higher limit order, you’re more than welcome to cancel an existing pending limit sell order and place a new one.
For example:
Company X has a closing share price of $100
You place a limit order to sell shares for $201
When the exchange runs their checks before and during market hours, they may see you placed an order 2x the current share price. To maintain and ensure fair pricing of orders, they may cancel your order.
💡 Note: It's a good idea to check Yahoo finance while the markets are closed because prices can change a bit from the closing price you see in Hatch. This will give you the most accurate current price and can help you avoid having your orders cancelled.
The cancellation rules for limit orders
A lot of Hatch investors place a limit buy and sell orders just above or below the current market price, because they just want certainty over the share price and to be asleep when the US markets open. You're allowed to do that! These rules are in place to stop investors placing the wrong order by accident and are there to protect you. You can place a limit buy or sell order up to these thresholds:
$1 - $25 USD a share: 10% above market price for limit buys (10% below for sells)
$26 - $50 USD a share: 5% above market price for limit buys (15% below for sells)
$50+ USD a share: 3% above market price for limit buys (3% below for sells)
Stop-loss/stop-buy orders
The purpose of a stop order is to buy or sell shares if the price changes. If you want to buy or sell shares at the current price, you may be looking for a limit or market order.
🚨 Important: If you place a stop order for too close to the current price, it'll be considered a mistake and immediately rejected.
Stop-loss orders
The price you enter when placing a stop-loss order must be at least $0.05 below the current Best Bid. Basically, your stop-loss order needs to be placed for at least $0.05 lower than the highest price an investor is currently willing to pay for the shares. You can see the current bid for any shares on Yahoo finance.
Stop-buy orders
The price you enter when placing a stop-buy order must be at least $0.05 above the current Best Ask/Offer. Basically, your stop-buy order needs to be placed for at least $0.05 more than the lowest price an investor is currently willing to sell their shares for. You can see the current ask for any shares on Yahoo finance.
🚨 Important: Bid and Ask/Offer prices can change second by second so it's always best to avoid placing stop orders for prices too close to the current price.
How to make sure your order doesn’t exceed order limits
If you wish to buy more than 20,000 shares or sell more than 50,000 shares, you will need to place more than one order (additional orders can only be placed after the initial order has been filled). Similarly, if you are placing a dollar amount buy or sell order that exceeds $1.5 million USD, you will also need to place more than one order.