Professional Documents
Culture Documents
, DEALER or
MARKET MAKER) to execute the purchase or sale of SECURITIES or other ASSETS. There are
four broad classes of orders: MARKETORDERS, LIMIT ORDERS, STOP ORDERS, and TIME
ORDERS, each with their own variations related to time, price, and discretion.
Types of Orders
ALL-OR-NONE ORDER An ORDER to purchase or sell SECURITIES that must be filled at the
limit price or better in its entirety or else cancelled. All-or-none orders are often marked FILL OR
KILL.
AT BEST ORDER An ORDER to buy or sell SECURITIES at the best price available at the time the
order is placed. An at best order is a form of MARKET ORDER.
AT THE CLOSE ORDER An ORDER to buy or sell SECURITIES at the market closing price; if
the order cannot be fully executed, it is cancelled.
AT THE FULL ORDER An ORDER to buy or sell SECURITIES at the integer closest to the BID
(for a purchase) or OFFER (for a sale).
AT THE OPEN ORDER An ORDER to buy or sell SECURITIES at the market open price; if the
order cannot be fully executed, it is cancelled.
AWAY FROM THE MARKET A BID on a LIMIT ORDER that is lower than the current price, or
an ASK that is higher than the current price. The order is held for later EXECUTION unless it is
specifically identified as an ALL-OR-NONE ORDER.
BLOCK ORDER EXPOSURE SYSTEM In the United Kingdom, an electronic mechanism that
provides QUOTES for BLOCK ORDERS of STOCK.
BOARD LOT A minimum ORDER size established by an EXCHANGE, i.e., one board lot may be
set equal to a given number of shares. See also LOT,ODD LOT, ROUND LOT.
BUNCHING The process of grouping together many small retail trade ORDERS (i.e., ODD LOTS)
and combining them into a single large order. Bunching often permits better EXECUTION levels and
reduces the administrative expenses associated with processing each small trade individually.
BROKERS can only bunch orders if all INVESTORS agree.
BUY MINUS An ORDER to purchase a block of SECURITIES at a price that is lower than the
current market price.
BUY THE BOOK An ORDER given by a client to a BROKER to purchase all of a SPECIALIST’s
or MARKET MAKER’s inventory of a SECURITY, as well as the inventory of other
BROKER/DEALERS, at the current market price.
CLEAN Matched buy and sell ORDERS on a BLOCK TRADE that leave the MARKET MAKER,
DEALER, or INTERMEDIARY without a RISK position.
CROSSED TRADE A practice where ORDERS to buy and sell listed SECURITIES are matched
without being channeled through an EXCHANGE; once crossed, the details may be reported to the
exchange. Crossed trades are not permitted in certain market jurisdictions as they are thought to
reduce transparency and leave open the possibility for unfair pricing practices.
DAY ORDER A LIMIT ORDER for the purchase or sale of SECURITIES that is automatically
cancelled if it is not executed during the trading day.
DO NOT REDUCE ORDER An ORDER with a price that is not to be adjusted in case of a STOCK
SPLIT or DIVIDEND payout.
DUTCH AUCTION An AUCTION MARKET technique used in certain marketplaces where the
price of a SECURITY or ASSET being sold is lowered until a BID is obtained; the remaining orders
are then filled at the same price.
ENGLISH AUCTION An AUCTION MARKET technique applied in certain market places where
the price of a SECURITY being sold is publicly announced at each stage, allowing parties to submit
higher BIDS. When no further bids are received, the orders are filled.
EXPOSED TO THE MARKET A purchase or sale ORDER in the SECURITIES markets that must
be shown to the market at large before it can be INTERNALIZED or CROSSED on an alternative
venue.
FIRM ORDER An ORDER submitted by a client to a BROKER or DEALER that remains valid
until it is cancelled by the client. If the specific parameters regarding price, quantity, and time can be
executed the broker/dealer is not required to refer back to the client.
GOOD FOR MONTH ORDER A LIMIT ORDER or STOP ORDER to buy or sell a SECURITY
that remains in effect until the end of the current month.
GOOD TILL CANCELLED ORDER A LIMIT ORDER for the purchase or sale of a SECURITY
at a specific price that remains in effect until the price target is met and the TRADE is executed, or is
otherwise cancelled by the individual or institution placing the order.
LIMIT BUY ORDER An ORDER to buy SECURITIES if a target level is reached, with no
assurance the order can be filled at the limit price. See also LIMIT SELLORDER.
LIMIT ON CLOSE ORDER An ORDER to buy or sell SECURITIES at the market close, but only
if the closing price is better than the limit specified.
LIMIT ORDER An ORDER for the purchase or sale of a SECURITY at a specific price limit. If the
price is not attained the order expires unfilled or it remains open until the client instructs otherwise.
LIMIT SELL ORDER An order to sell SECURITIES if a target level is reached, with no assurance
the order can be filled at the LIMIT PRICE.
LIMIT BUY ORDER An ORDER to buy SECURITIES if a target level is reached, with no
assurance the order can be filled at the limit price.
LIMIT ON CLOSE ORDER An ORDER to buy or sell SECURITIES at the market close, but only
if the closing price is better than the limit specified.
LIMIT ORDER An ORDER for the purchase or sale of a SECURITY at a specific price limit. If the
price is not attained the order expires unfilled or it remains open until the client instructs otherwise.
LIMIT SELL ORDER An order to sell SECURITIES if a target level is reached, with no assurance
the order can be filled at the LIMIT PRICE.
MARKET ORDER An ORDER for the purchase or sale of a SECURITY at the current market level;
as long as sufficient LIQUIDITY is available, the order will be filled at the market price.
MATCHED BARGAIN In the United Kingdom, the pairing of an ORDER to buy and an order to
sell a specific STOCK.
MIXED LOT [COL] A total ORDER comprised of ROUND LOTS and ODDLOTS.
ODD LOT An ORDER that is smaller than the standard institutional TRADING size in a particular
SECURITY or market. Odd lots, which are most often associated with RETAIL INVESTORS, are
generally subject to higher COMMISSIONS/fees than ROUND LOTS.
OPEN DISPLAY The electronic LIMIT ORDER book of BIDS and OFFERS in a given STOCK as
supplied by an ELECTRONIC COMMUNICATIONSNETWORK. Open displays provide full
visibility on all orders that are not held back as RESERVE ORDERS or HIDDEN ORDERS.
PARENT ORDER An overarching ORDER to execute a particular transaction that can be divided up
into smaller CHILD ORDERS. A parent order is commonly used as a fundamental starting point in
ALGORITHMIC TRADING.
RESERVE ORDER An ORDER on an EXCHANGE that is only partially visible in the exchange’s
order book – the balance remains hidden, and is only fed into the order book as executions take place.
Reserve orders are a form of DARKLIQUIDITY.
ROUND LOT A SECURITIES ORDER executed in the standard TRADING size associated with the
security marketplace. Round lots typically carry lower COMMISSIONS or fees than small size ODD
LOTS.
SELL PLUS ORDER An ORDER to execute a SECURITIES sale only if the price is higher than the
preceding TRADE.
SELL THE BOOK ORDER An ORDER to sell as much of a current position as possible at the
prevailing market price.
STOP LIMIT ORDER An ORDER to buy or sell SECURITIES at a limit price once the stop level is
reached, rather than the market price characteristic of a traditional STOP ORDER.
STOP LOSS ORDER A STOP ORDER to sell a SECURITY at the market once a particular price
level is reached. The stop loss does not guarantee a specific EXECUTION price; it simply invokes an
order to sell at the stop level.
STOP ORDER An ORDER to purchase or sell SECURITIES once a particular price level is reached
on the upside or downside. The stop order does not GUARANTEE specific price EXECUTION,
simply that the order will become an effective purchase or sale and will then be filled at the best
available price. The most common stop order is the STOP LOSS ORDER.
STOPPED OUT A situation when the market price of a given SECURITY or ASSET moves below
a particular level and triggers a STOP LOSSORDER.
SUNSHINE TRADE A large ORDER in a SECURITY that is made public before EXECUTION, in
order to increase transparency and reduce any potential for confusion.
SWEEP-TO-FILL ORDER A MARKET ORDER which is divided into several individual orders to
capture the best available price at that point in time, in order to ensure fast EXECUTION. The order
gives greater weight to speed of execution than price.
TIME ORDER An ORDER to purchase or sell SECURITIES with a specific time constraint, such as
at the close or open of a market, or at some future date.
WHIPSAW A fall in the price of a SECURITY, triggering a STOP LOSS ORDER and sale, followed
by a price rebound. Alternatively, a rise in the price, triggering a buy order and purchase, followed by
a price decline.
WIRE TRANSFER An electronic ORDER for the payment of funds from one party to another.
Various wire mechanisms exist to accommodate such transfers, including the Fed Wire,
CLEARINGHOUSE AUTOMATED PAYMENTSYSTEM, and the CLEARINGHOUSE
INTERBANK PAYMENT SYSTEM.