What happens to the money that doesn't make a complete cent? Is this like Superman 3 with Richard Pryor?

From my trade yesterday: “Buy 1 AVGO Executed @ $246.2888”. Where does the .0012 cents go? I’m sure they are not only charging me 246.88, so who gets the .0012 cents? Is it being sent to some random bank account like in Superman 3? Does it just disappear? When I look at my cash position it’s only two decimals… Any idea? Is there some big pile of money sitting somewhere at my broker?

So many quotes from Office Space popped in my head.

Cameron said:
So many quotes from Office Space popped in my head.

I can’t talk to my mother so I talk to my diary!

Cameron said:
So many quotes from Office Space popped in my head.

That and the guy from the office whose small business idea was, “every time you swipe your credit card, I get .2 cents” haha

Cameron said:
So many quotes from Office Space popped in my head.

What would you say… ya do here?

I’ve dealt with this in payroll applications before, not investing. We used bankers rounding where you alternate between rounding up and rounding down and it balances out over enough transactions.

Lyle said:
I’ve dealt with this in payroll applications before, not investing. We used bankers rounding where you alternate between rounding up and rounding down and it balances out over enough transactions.

It literally doesn’t matter when it’s one cent. Nobody will come to fight you because their paycheck was one cent off. Look up the concept of de minimis. That’s what this is. Too trivial to care about.

@Kari
Keeping small amounts of transactions is ‘salami slicing’ and you have no idea what you’re talking about. It’s not one cent, it’s millions+ cents that will have to eventually be accounted for if banker’s rounding isn’t used.

@Casey
Oh yeah?

Kari said:
@Casey
Oh yeah?

Yeah

So there are a few things at play here:

  1. Banker’s rounding as another user said and de minimis rules as well. At my company, we accept +/-$1 or less difference. This is how your personal account stays square on their books. In your case, you basically paid 246.29.

  2. Pooling orders. You wanted one share. Rarely is your broker going to buy one share on the open market. They will generally pool your trade with millions of others to execute a large block/blocks. These blocks get executed partially or wholly. This means the broker is required to average the execution price obtained for all orders across their large block to satisfy fair execution.

So imagine your order was part of a block of 100 trades. 50 of them were executed at 246, 10 at 247, and 50 at 247.33. Average execution prices per share is 246.632. So that’s what they print your individual share at. You effectively pay 246.63.

I’m curious if you get a good answer. This question comes up fairly regularly and I have yet to see a complete response with links to support or references.

By far the best response I’ve seen is that brokers use 4 decimal places behind the scenes always but only show it sometimes because it’s not always necessary to see.

Just to throw in more information:

Having chatted with people on the finance team, I believe we use 8 decimals for USD (formerly 6). You need that level of precision if you work with foreign currencies or any conversions. In most cases, it’s for products listed in one currency and sold to someone else in another.