What is a Not-Held Order?

A not-held order, usually a market or limit order, gives the broker, or floor trader, both time and price discretion to get the best possible price.

Understanding Not-Held Orders

An investor placing a not-held order is trusting that the floor trader can obtain a better market price than what the investor can get by accessing the market on their own. Although the floor trader has price and time discretion, they are not responsible for any losses that the shareholder may suffer with this type of order.

Not-held orders are most common when trading international equities. The opposite of a not-held order is a held order, which is the order that most investors are more familiar with, and one that demands immediate execution.

Key Takeaways

  • A not-held order, usually a market or limit order, gives the broker, or floor trader, both time and price discretion to get the best possible price.
  • Two types of not-held orders are Market Not-held and Limit Not-held.
  • Not-held orders absolve the broker from any losses that the shareholder may suffer.

Types of Not-Held Orders

  • Market Not-Held Order: This is a market order that the investor does not want executed immediately. For example, an investor might give the broker a market not-held order to buy 1,000 Apple (AAPL) with an instruction to execute the order at the best price they can get before the market closes.
  • Limit Not-Held Order: An upper or lower limit is attached to this type of not-held order, but the broker is given discretion in executing it even if market trades at the limit price. For instance, a broker may receive a limit not-held order to buy 1,000 AAPL with an upper limit price of $200. This means the investor would, ideally, like to buy AAPL at $200, but would prefer not to pay more than that for the stock. The broker, though, has the authority to use their judgement as to whether they fill it at $200, especially if they feel that they can get a better price for the investor. The broker is not held responsible if the order either does not get executed, or gets executed at a price other than what the investor indicated.

Benefits of Not-Held Orders

Floor traders have the benefit of seeing order flows and trading patterns, which often gives them an edge when determining the best price and time to execute a customer’s order. For example, a trader may notice a recurring spike in volume on the buy side of the order book that suggests a stock’s price is likely to continue rising. This would result in the trader executing a client’s not-held order sooner, rather than later. They may also have other customer orders that they can cross simultaneously.

Limitations of Not-Held Orders

Once the investor gives a not-held order to the trader, they are placing full confidence in that individual to execute the trade at the best possible price. The investor cannot dispute the trade execution, provided that the broker met all regulatory requirements. For instance, if a shareholder thinks the broker shouldn't have executed their not-held order before an FOMC interest rate announcement, they cannot seek a rebooking.