What is Mixed Lot
A mixed lot is a type of order for a number of securities that is not a round (or whole) lot order amount. This type of order is comprised of a round lot order and an odd lot order. A round lot is the exchange-established trading unit, which defines the interval at which securities typically should be traded. An odd lot is an order that falls below the initial round lot amount.
BREAKING DOWN Mixed Lot
Stocks typically trade in round lots of 100, which means orders made in these intervals are traded easily between parties. An odd lot would be all orders for 99 shares or fewer. If an investor wanted to buy 425 shares he or she would use a mixed lot order, which is broken into an round lot order for 400 shares (4 x 100 round lots) and an odd lot order for 25 shares.
Broker commissions for trades are typically stated in terms of a standard trading unit for a security. In the case of common stock, the fee charged by a broker to execute a trade would be stated as a minimum fixed amount for a standard trading unit. In the past, traders would try to avoid placing orders for odd or mixed lots, since the commission can have a significant impact on the trader's return on investment.
Mixed lots are treated differently by exchanges too, since the investor is not trading in a standard unit. For example, these orders will not affect the displayed bid / ask prices, and they are not posted to tickers. Finally, since the trade is not in a standard unit, the execution of the transaction is also delayed.
Some brokers charge extra money to process mixed lots because they contain odd lots. The charge is called an odd-lot differential. Since odd-lot orders are not the standard transaction size, there are several rules governing them. Odd lot orders require that a round lot order be executed at the same time. A lot of odd lots piggyback onto round lot transactions. As such, odd lot market orders for shares are not always filled immediately if there are no round lot orders coming through.
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/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/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 you might get a better price or faster completion of your trade. However, exchanges give preference to the completion of mixed-lot orders over odd-lot orders.