What is a 'Firm Order'

A firm order may be referred to as an order for a trade from a brokerage’s proprietary account or an order that is kept open by an investor.

BREAKING DOWN 'Firm Order'

Generally there are two types of firm orders that may be encountered in the trading world, proprietary brokerage orders and client firm orders.

Proprietary Brokerage Orders

A proprietary brokerage order is an order to buy or sell a security for a brokerage's internal account. Brokerages may use firm orders to place trades on accounts associated with margin or securities lending. They may also choose to trade in a portfolio for other internal firm purposes. These trades require a trader to be fully authorized by the brokerage before executing the transaction. Shares purchased under this type of firm order are held directly by the brokerage.

Proprietary brokerage orders are treated in the same way as all other orders. They must be tagged with either long, short or short exempt. These markings are dictated by securities regulation and Regulation SHO. Firm orders for short sale purposes will be flagged with either short or short exempt.

Client’s Firm Order

A firm order from a brokerage client may also be referred to as an open order or a good ‘til canceled (GTC) order. These types of orders can be very beneficial for investors.

Once a firm order is placed with GTC instructions, the broker-dealer is not required to obtain further consent from the investor to place the trade. Therefore, a broker-dealer will execute a firm order regardless of the amount of time that has passed.

Open orders may have varying timeframes to expiration. Many open orders will only be live for 30 days, after which time the order expires and the investor must place a new trade to keep the order open.

Firm orders can help an investor to obtain an ideal price, stop losses or take gains. When placing a firm order, investors have a few options for customization. They can choose a firm, buy or sell limit order. Firm, buy limit orders have a specified price below the current market price. Firm, sell limit orders have a specified price above the current market price. A stop order can also be used to stop losses. A stop-loss order is a sell order at a specified price below the current market price. These orders can be used for risk management. All of these orders remain open until executed which can provide security through various specified price points.

RELATED TERMS
  1. End of Day Order

    An end of day order is a buy or sell order requested by an investor ...
  2. Open Order

    An open order is an order to buy or sell a security that remains ...
  3. Sell Plus

    A sell plus is an order to sell a quantity of stock at a price ...
  4. Bracketed Buy Order

    Bracketed buy order refers to a buy order that has a sell limit ...
  5. Fill

    A fill is the action of completing or satisfying an order for ...
  6. Below the Market

    Below the market can refer to any type of purchase or investment ...
Related Articles
  1. Trading

    Why limit orders may cost more than market orders

    Learn the difference between a market order and a limit order, and why a trader placing a limit order sometimes pays higher fees than a trader placing a market order.
  2. Investing

    Understanding Market Orders And Limit Orders

    A market order executes a transaction as quickly as possible at the present price. Immediacy is the main concern. A limit order is executed at or below a purchase or sale price. Price is the ...
  3. Investing

    Narrow Your Range With Stop-Limit Orders

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

    What's The Difference Between A Stop And A Limit Order?

    Find out what separates these two market orders and what they can do for you.
RELATED FAQS
  1. What is the difference between a buy limit and a sell stop order?

    Understand the differences between the two order types, a buy limit order and a sell stop order, and the purposes each one ... Read Answer >>
  2. What is the difference between a buy limit and a stop order?

    Learn the difference between buy limit orders and stop orders, including stop loss orders, and understand the risks of the ... Read Answer >>
  3. What is the difference between a stop order and a stop limit order?

    Learn the differences between a stop order and a stop limit order. Traders use these as stop losses and regular investors ... Read Answer >>
  4. How long does it take a broker to confirm a trade after it is placed?

    Learn about placing trades with a broker and the amount of time required to received confirmation of different types of orders. Read Answer >>
Trading Center