Securities Transactions - Types of Securities Orders
Taking control of your client's portfolio means knowing when to use particular orders and if they pose added costs. The article The Basics of Order Entry is an excellent primer for this section.
Types of Securities Orders
There are six types of securities orders:
- A market order is the default; it is an order to buy or sell securities at the current market price, and it will be filled as long as there is a market for the security.
- A limit order is an order to buy or sell securities at a specified price. A limit order, unlike a market order guarantees a price but not an execution. An investor who places a limit order to purchase a stock is setting a maximum price that they are willing to pay to buy the shares. In the case of an order to sell shares a limit order sets the minimum amount the investor will accept for the shares.
- A stop order is an order either to buy a stock at the market price when the price rises to a certain level, or to sell a stock at the market price when the price falls to a certain level.
- A stop-limit order is similar to a stop order, but it becomes a limit order, rather than a market order, when the security trades at the price specified on the stop.
- A day order expires at the end of the day.
- A good-till-canceled (GTC)or open order remains in effect until it is either filled or canceled. These orders must be renewed at least twice a year - no later than the end of April and end of October.
Not all exchanges accept all these types of orders. Furthermore, option exchanges such as the CBOE or the Amex accept straddle and spread orders, so that puts and calls do not have to be ordered separately.
Four Types of Discretionary Order Execution Qualifiers
There are also four discretionary order execution qualifiers:
- All-or-none orders are market or limit orders that must be executed in their entirety or not at all. AON orders may be entered as day orders or as GTC orders.
- Fill-or-kill orders must be executed immediately and in their entirety or else the order is cancelled.
- Immediate-or-cancel (IOC) orders are market or limit orders that are to be executed immediately in whole or in part, and any portion that cannot be executed as soon as the order hits the trading floor is cancelled.
- Not-held (NH) orders are market or limit orders in which the customer gives the trader or floor broker time and price discretion; this qualifier, does not hold the broker responsible for missing the best price.
Exam Tips and Tricks
Memorize the various types of securities orders and execution qualifiers. One or more questions on this material are likely to appear on your exam.
BrokersIndependent broker-dealers are a great choice for experienced, self-starter planners who have established practices.
Personal FinanceRIAs and brokers are held to different standards when providing investment advice. Here's how they differ.
Trading Systems & SoftwareLaunching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
ProfessionalsLearn how to answer option questions on the Series 7 exam. Pass your Series 7 exam with the help of these tips.
ProfessionalsFINRA Series 55 Exam Guide
ProfessionalsFINRA Series 62 Exam Guide
ProfessionalsFINRA/NASAA Series 99 Exam Guide
ProfessionalsFINRA/NASAA Series 65 Exam Guide
ProfessionalsFINRA Series 6 Exam Guide
ProfessionalsFINRA/NASAA Series 63 Exam Guide
- No results found.
The Financial Industry Regulatory Authority (FINRA) offers a variety of licenses that must be obtained before conducting ... Read Full Answer >>