World Library  
Flag as Inappropriate
Email this Article

Small-order execution system

Article Id: WHEBN0001840450
Reproduction Date:

Title: Small-order execution system  
Author: World Heritage Encyclopedia
Language: English
Subject: Stock market
Publisher: World Heritage Encyclopedia

Small-order execution system

The Small-Order Execution System (SOES) was a system to facilitate clearing trades of low volume on NASDAQ. It has been phased out and is no longer necessary.


  • Establishment 1
  • Rules 2
  • Initial reactions 3
  • Effect 4


SOES was first introduced in December 1988 for 25 stocks. The lack of liquidity after the 1987 market crash led NASDAQ to implement a mandatory system (since June 1988) to provide automatic order execution for individual traders with orders less than or equal to 1000 shares. (For stocks with low volume, it may be less than 200 shares). Market makers must accept SOES orders and so this provides excellent liquidity for smaller investors and traders.


There were several restrictions for those who used SOES, rather than a traditional electronic communication network (ECN), to place their orders.

  1. Trades could not be in excess of 1000 shares for a particular stock.
  2. SOES did not allow trades in stocks that were trading at prices greater than $250 per share.
  3. Once a trader received an execution through SOES, they had to wait 10 minutes to place a trade on the same side of the market in the same stock.
  4. Institutions and stockbrokers were not allowed to place orders for their own accounts through SOES, but they could for a client's account.
  5. Market makers had to honor their advertised bid/ask prices to SOES orders, provided that they were for the amount that the market maker was seeking.

Initial reactions

Initially, when SOES was mandatory, it was met with heavy pessimism from NASDAQ member firms because it forced them to execute all SOES trades that met the market maker's advertised price. There were also significant limitations implemented to prevent day traders from exploiting the system and taking advantage of old prices quoted by market makers.


SOES revamped the trading market for individual investors. It gave small investors and traders the opportunity to compete on a level playing field with larger investors, such as institutions, for access to orders and execution.

This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.