DEFINITION of 'Cancellation'

Notice by a broker informing his or her client that an erroneous trade was made and that the situation is being addressed. For example, if a broker purchased 3,000 shares in the Acme Widget Company and the order was supposed to be for 2,000 shares, the broker will need to sell the additional shares at his or her expense. Thereafter, the broker will need to inform his or her client of the transaction.

BREAKING DOWN 'Cancellation'

Even in this era of electronic trading, mistakes get made. And when they do, it is important for the broker that made the mistake to quickly rectify the situation. Naturally, everything is recorded and statements are sent, showing the cancellation to ensure that the broker in question is not improperly handling the account.

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