What Is a Mixed Lot?
A mixed lot order is a blend of a round lot order, which is a standardized trading amount, and one or more non-standardized odd lot orders.
- A mixed lot order contains both round lots and odd lots.
- Commissions for mixed lots may put a dent in a trader's return because they are generally higher than those of standard trades.
- Mixed lot trades differ from standard trades in that they don't impact the bid or ask price and take longer to settle.
Understanding Mixed Lots
A mixed lot is an order to transact in a security for an amount that is not a round (or whole) lot order amount but is larger than the smallest round lot amount. Since this order cannot fit the round lot requirements, it has to be a combination of a round lot order, the exchange-established trading unit, and an odd lot order, an order that falls below the initial round lot amount.
Stocks typically trade in round lots of 100, which means orders made in these multiples are traded easily between parties. An odd lot would be all orders for 99 shares or less. If an investor wanted to buy 425 shares, they would have to use a mixed lot order, which is broken into a round lot order for 400 shares (4 x 100), and an odd lot order for 25 shares.
The fees that brokers normally charge are based on the standard size for trading. Commissions for mixed lots may put a dent in a trader's return because they are generally higher than those of standard round lot trades since they contain odd lots as well. This is called an odd-lot differential. These orders require a round lot in order to be executed simultaneously. Many odd lots piggyback onto round lot transactions.
Aside from commission fees, there are a few other ways mixed lot trades differ from standard trades. First, they don't impact the bid or ask price—the price a buyer will pay for a security and the price a seller will accept for the same security, respectively. Mixed lot trades also take longer to settle than standard trades, especially if there are no round lot orders coming through. According to the Securities and Exchange Commission (SEC), standard trades take two business days to settle.
Per New York Stock Exchange rules, round lot, mixed lot and odd lot orders are all prioritized equally, with no preference given to the completion of any particular order.
Benefits of Trading in Round Lots vs. Mixed Lots
Stock exchange trading systems are primarily set up to handle round lots. When submitting such a trade, it will show up on the bid or ask pricing data sent to traders from the exchanges. But odd lot orders (a mixed lot order is broken into a round lot and odd lot) are not included in these data reports. Traders often use bid or ask information to see where supply and demand are strongest in the markets.
Also, round-lot orders can be routed to off-exchange trading systems, where investors might get better prices or faster executions of their trades.
Are Round, Mixed, or Odd Lot Orders the Most Common?
Stock orders are most commonly in round lots, consisting of 100 shares. But in some cases, an investor will want to sell a smaller number of shares, and if that amount is less than 100, it would be considered an odd lot. Odd lots and mixed lots, which consist of a combination of a round and odd lot — are less common than round lots.
Does Odd Lot and Mixed Lot Trading Reflect Investor Sentiment?
Trends in odd lot and mixed lot orders can be seen as a reflection of individual investor sentiment, although not that of institutional investors. That's because odd lot orders are most commonly placed by individual investors buying or selling financial products for their personal trading or retirement accounts.
Why Are Mixed and Odd Lots More Expensive to Trade Than Round Lots?
Both mixed lots and odd lots typically have higher transaction costs than round lots. There is also the issue of availability, with fewer market makers willing to offer up liquidity for an odd lot trade.