GTC orders that are left with the specialist / DMM must be adjusted for stock splits. Orders that are placed above and below the market will be adjusted so that the aggregate dollar value of the order remains the same.

Example:

A customer has placed a GTC order. Let’s look at what happens to the order if the company declares a stock split:

Type of Split Old Order New Order

2:1

Buy 100 at 50

Buy 200 at 25

2:1

Sell 100 at 100

Sell 200 at 50

3:2

Buy 100 at 100

Buy 150 at 66.67

3:2

Sell 100 at 60

Sell 150 at 40

Notice that in all of the examples, the value of the customer’s order remained the same. To calculate the adjustment to an open order for a forward stock split, multiply the number of shares by the fraction and the share price by the reciprocal of the fraction.

Securities Training Course



Stopping Stock

Related Articles
  1. Investing

    If You Had Invested Right After Amazon's IPO

    Find out how much you would have made if you had invested $1,000 during Amazon's IPO, including how the power of the stock split affects investment growth.
  2. Trading

    The Basics Of Trading A Stock

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  3. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  4. Investing

    Making The Trade: Understand Order Types

    Buying and selling stock can be a lot like buying or selling a car. Traders should use and understand tools such as market orders, limit orders, day orders, and good-'til-canceled orders to ensure ...
  5. Investing

    Understanding Buy Stop Orders

    A buy stop order is an order to buy a stock at a specific price above its current market price.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center