Least Guaranteed Fill (MGF) Order
What Is a Minimum Guaranteed Fill (MGF) Order?
A base guaranteed fill (MGF) order in the financial markets expects traders to satisfy small purchases from retail investors at the best current bid or ask price on the off chance that the purchases are at or below the set least.
Individual investors who place market orders or limit orders might benefit from MGF orders.
How a MGF Order Works
A base guaranteed take care of request is planned to empower an investor who buys seven shares of stock to get as fair a price as an investor in 100 shares. It likewise guarantees that essentially a negligible amount of the most broadly held stocks can be bought and sold immediately at some random time, keeping a perpetual cycle of activity.
The job of the market maker or trader is in part to advance liquidity while keeping a fair market for a specific rundown of stocks. They are centered around individual investors, which is the reason MGF orders commonly include small market orders.
The trader's employer, the market maker, offers this service since it draws in an adequate number of orders for a similar stock to capture the bid/ask spread.
Thus, a MGF benefits the retail investor by making the transaction fast and efficient. It benefits market markers who can offer this support on a large scale and capture buy and sell orders all the while.
Instances of MGF Orders
The MGF for a particular stock is plainly defined. In the event that a certain stock has a MGF of 500 shares, that stock will constantly have a quoted bid and offer size of something like 500 shares.
To sell 400 shares however just 200 are bid at the price looked for, the investor can in any case enter the sell order for 400 shares and the order will be completely filled. The initial 200 will be filled by the buyer who presented the bid, and the remainder will be taken consequently by the market maker.
Notwithstanding, assuming an investor endeavors to sell 700 shares, which surpasses the laid out MGF for that stock, just the order for the 200 shares that have really been bid will be completed.
Another model: Assume a stock that has a MGF volume of 1,200 shares is trading at $4-$4.10, with 600 shares bid for $4 and 400 shares offered at $4.10.
On the off chance that a client puts in a market order to purchase 900 shares, the client will receive 400 shares at the posted offer price of $4.10, and the balance 500 shares from the market maker, likewise at $4.10.
Features
- The MGF system benefits the market as a whole by guaranteeing liquidity and proficiency.
- Orders in amounts up to or below the MGF are filled right away.
- Least guaranteed fill (MGF) orders empower individual investors to purchase small amounts of stock at the best current price.
