Series 7

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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:

  1. 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.

  2. A limit order is an order to buy or sell securities at a specified price. A limit order may also be placed "with discretion", meaning the floor broker executing the order may use her discretion to buy or sell at a set amount beyond the limit if she feels it is necessary to fill the order.

  3. 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.

  4. 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.

  5. A day order expires at the end of the day.

  6. 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:

  1. All-or-none orders are market or limit orders that must be executed in their entirety or not at all.

  2. Fill-or-kill orders must be executed immediately and in their entirety or else the order is cancelled.

  3. 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.

  4. 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, often invoked for trading in overseas markets when exchange hours are past your client's bedtime, 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.

Filling and Confirming Orders

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