Stop-on-Quote Order Execution
Stop-on-quote orders allow you to set a price at which you want a market order to be triggered. Your order will not enter the market unless the stop price you specify is met or surpassed, and once it enters the market, it becomes a market order that executes at the next available price.
Stop-on-Quote Order Scenario
You place a stop-on-quote order to sell your 100 shares of XYZ if the price reaches or surpasses (in this case, drops below) $15 per share. XYZ hits $15 and your order triggers, but you end up selling your shares at $11, much lower than expected. What happened?
Your stop price is not necessarily the price at which your order will fill. Once the stop price is met or surpassed, your order becomes a market order. Market orders guarantee execution, but not price. So, if XYZ dropped past $15 and kept plummeting, your order would be triggered, but you would not necessarily get to sell at $15. Market orders get you the next available price for the shares you specify. Once stop-on-quote orders are triggered and enter the market as market orders, they do not hold priority over natural market and limit orders that have been placed. This means your order is potentially waiting in line behind other market and limit orders before it will be filled.
Also keep in mind that stop-on-quote orders do not trigger off of a single bid or ask price. They trigger off the National Bid/Best Offer, or NBBO, which is the best consolidated bid/ask combination among all quoting venues in the U.S. markets.