What is spread price protection?

When you place a market order, you expect it to fill right away without the price moving much. Spread price protection limits how far the price you get can drift while your order fills. This article explains how the protection works and what you can do if your order is canceled or partly filled.

What spread price protection does

Spread price protection limits how far the price you get can drift from the best prices in the order book when you place a market order.

Two things create that drift:

• The spread: the gap between the best buy price and the best sell price at that moment.
• Slippage: the extra difference that builds up when your order is large enough to fill across several price levels.

Bitvavo sets a maximum for the two combined, and it differs per market.

Which price we measure from 

The order book has two sides: the prices people are offering to buy at, and the prices people are willing to sell at.

When you buy, your order fills against the sell side. But we don't start measuring from there. We start from the best price on the buy side, which is the highest price anyone is currently offering to buy at.

When you sell, it works the other way around. Your order fills against the buy side, and we start from the best price on the sell side, which is the lowest price anyone is currently willing to sell at.

Starting from the opposite side is deliberate. It means the gap between the two sides, the spread, counts towards the limit along with any slippage. If we measured from the side your order is filling against, the spread itself would be invisible to the check.

Why it exists

Without this protection, a market order could fill at prices far from where an asset is actually trading. In markets where little is being traded, or when your order is large compared with what's available, the later parts of your order can fill at much worse prices than the first. Spread price protection stops that from happening.

Which orders it applies to

This protection only applies to market orders. It's most likely to trigger in markets where less is being traded, or when your order is large compared with what's available at the best prices.

What happens if it is triggered

If spread price protection is triggered, one of two things happens:

• Nothing fills: if your whole order would go past the limit, no part of it fills and your balance is unchanged.
• Part of your order fills: if part of it can fill within the limit, that part fills and we cancel the rest. You'll see this as a partial fill, and anything that doesn't fill stays in your account.

An example

Say the maximum for this market is 2%, and you place a market order to buy 1.000 coins. The best buy price is € 9,95, and this is what's available to buy:

• 400 coins at € 10,00, which is 0,5% above the best buy price
• 300 coins at € 10,10, which is 1,5% above the best buy price
• 300 coins at € 10,50, which is 5,5% above the best buy price

Notice that all three are measured from € 9,95, the best buy price, even though you're buying at the sell prices. That's the opposite side, and it's why the spread counts.

The first 700 coins fill, because both prices sit within 2% of the best buy price. The last 300 would fill at € 10,50, which is past the limit, so we cancel that part. You end up with 700 coins at an average price of € 10,04, and the amount for the other 300 stays in your account.

If the spread itself had been more than 2% at that moment, nothing would have filled at all, whatever amount you tried to buy.

What you can do

If your order is canceled or partly filled because of spread price protection, you can try the following:

• Trade a smaller amount, so your order fills within the best available prices.
• Set your own price with a limit order and wait for the market to reach it.
• Try again later, since spreads change as trading activity changes.

Tip: if nothing filled at all, a smaller amount won't help. That happens when the spread on its own is already over the limit, and the spread is the same whatever size you trade.