GTC Orders that are placed underneath the market and left with the specialist / DMM for execution will be reduced for the distribution of dividends. Orders that will be reduced are:

  • Buy Limits
  • Sell Stops

These orders are reduced because when a stock goes ex dividend its price is adjusted down. To ensure that customer orders placed below the market are only executed as a result of market activity, the order will be adjusted down by the value of the dividend.

Example:

A customer has placed an order to buy 500 XYZ at 35 GTC. XYZ closed yesterday at 36.10. XYZ goes ex dividend for 20 cents and opens the next day at 35.90. The customer’s order will now be an order to purchase 500 XYZ at 34.80 GTC.

If the customer had entered the order and specified that the order was not to be reduced for the distribution of ordinary dividends, it would have remained an order to purchase 500 shares at 35. The order in this case would have been entered as:

Buy 500 XYZ 35 GTC DNR

Orders placed above the market are not reduced for distributions.

Need Help Passing The Series 57 Exam?



Adjustments For Stock Splits

Related Articles
  1. Investing

    Narrow Your Range With Stop-Limit Orders

    With stop-limit orders, buyers protect themselves from prices too high for their tastes.
  2. Investing

    Understanding Immediate-or-Cancel Orders

    A trader places an immediate-or-cancel order to immediately execute a trade in full or in part. Any part of the order that remains unfulfilled is canceled.
  3. Investing

    Stop Limit Orders

    A stop limit is an order to sell or buy a stock once it reaches a certain level, but only if the shareholder can obtain a specified price.
  4. Trading

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
Frequently Asked Questions
  1. What is the formula for calculating internal rate of return (IRR) in Excel?

    Understand how to calculate the internal rate of return (IRR) using Excel and how this metric is used to determine anticipated ...
  2. What is the formula for calculating net present value (NPV) in Excel?

    Understand how net present value is used to estimate the anticipated profitability of projects or investments, and how to ...
  3. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Find out why contributions to IRA, Roth IRA and 401(k) retirement savings plans are limited by the IRS, including what the ...
  4. What is GDP and why is it so important to economists and investors?

    The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy.
Trading Center