All firms and agents are required to make an affirmative determination for all sell orders entered on behalf of the firm or a customer. All sell orders must be marked either long or short. A person is considered long the security if the investor:

  • Has possession of the security
  • Has purchased the security but the trade has not settled
  • Has issued conversion or exercise instructions for a right, warrant, option, convertible bond or preferred stock
  • If the investor owns rights, warrants, options, or a convertible security but has not issued exercise or conversion instructions the investor is not considered long the security.

The firm must make a determination if the customer is long the security or if they are selling short. If the customer is selling short, the firm must determine if the security can be borrowed for delivery.

An investor is only considered long the security to the extent of their net long position in the security. If an investor is long 1000 shares of ABC and is short 600 shares of ABC in another account, the investor may only mark a sell ticket for 400 shares of ABC long.

Need Help Passing Your Series 57 Exam?



Introduction

Related Articles
  1. Investing

    Investing In Stock Rights And Warrants

    Many companies choose to issue rights or warrants as an alternative means of generating capital to avoid dilution of existing share value.
  2. Trading

    A User's Guide To Warrants

    These investment vehicles are relatively uncommon in the United States, but they do still appear in U.S. markets.
  3. Investing

    Why Include Convertible Securities in Your Portfolio

    What are convertible securities and why you should include them in your portfolio.
  4. Investing

    Warrants And Call Options

    Warrants and call options are securities that are quite similar in many respects, but they also have some notable differences. Both give the holder the right, but not the obligation, to buy a ...
  5. Investing

    Introduction to Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  6. Investing

    Leverage Your Returns With A Convertible Hedge

    Find out how you can maintain your income stream by using this type of bond strategy.
  7. Investing

    Convertible Bonds: Pros And Cons For Companies And Investors

    Find out why businesses choose this type of financing and what effect this has on investors.
  8. Investing

    Bank Warrants Your Atttention

    Bank warrants are a lucrative way to make a bet that U.S. financials will once again be respected by the investing public.
  9. Financial Advisor

    Worried About Stocks? Try on Convertibles

    Convertibles are a good hedge against equity market risk (if you're o.k. with losing a bit of upside potential).
  10. Investing

    Convertible Bonds: An Introduction

    Find out about the nuts and bolts, pros and cons of investing in bonds.
Frequently Asked Questions
  1. How do you calculate r-squared in Excel?

    Calculate R-squared in Microsoft Excel by creating two data ranges to correlate. Use the Correlation formula to correlate ...
  2. What is the Difference Between International Monetary Fund and the World Bank?

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ...
  3. Where Did the Bull and Bear Market Get Their Names?

    The terms bull and bear are used to describe general actions and attitudes, or sentiment, either of an individual (bear and ...
  4. What's the difference between Google's GOOG and GOOGL stock tickers?

    Learn the difference between Google's GOOG and GOOGL ticker symbols. Splitting shares into classes prevents management from ...
Trading Center