Additional specifications

When working with a customer to place an order, registered representatives must submit order tickets. The representative describes the type of order, how many shares it covers, the time frame of the order, and other various specifications on the ticket. Some of those specifications include:

All or none (AON)

• Fill all shares or none at all
• Multiple attempts allowed

Immediate or cancel (IOC)

• Fill as many shares as possible
• One attempt allowed

Fill or kill (FOK)

• Fill all shares immediately
• One attempt allowed

Sometimes there are only a certain number of shares available at specific prices in the market. For example, a customer places an order to buy 1,000 shares of stock at $50, but only 500 are available. In this case, an all or none (AON) order would not execute until all 1,000 shares were available at $50 or less. With AON orders, the brokerage firm attempts to fill the order until the order is canceled (multiple attempts allowed).

In the same situation, an immediate or cancel (IOC) order would fill the 500 shares at $50, then cancel the rest of the order. Essentially, the customer requests an immediate purchase of as many shares at the price they specified. The brokerage firm has one try to get as many shares as they can, then cancels the rest.

Fill or kill (FOK) orders are the most stringent order specification that requires all of the shares to be filled immediately. In the same situation, the order would be canceled with only 500 of the 1,000 shares available.

There are other order specifications that involve more than just the price or amount of shares purchased. If an investor wants to trade a security at the opening or closing price, they can place a market on open or market on close order. A market on open (MOO) order fills a customer’s order at the market price when the market opens, while a market on close (MOC) order fills at the market price when the market closes. Both trades must be placed at least a few minutes prior to the market opening (for MOO orders) or the market closing (for MOC orders).

If an investor wants to give their financial firm the ability to determine the best time and/or price of an order, a not held (NH) order, sometimes referred to as a market not-held order, is placed. An example of an NH order would sound like this:

Buy me 100 shares of Target stock (TGT) sometime today.

The investor did not provide any price or time instructions (other than to get it done today). In most cases, NH orders are sent to floor brokers, who then make the time and/or price determination based on market dynamics.

NH orders usually take place by the end of the trading day. If this does not occur, the financial firm must either cancel the order or have power of attorney (POA) on file. If you recall from the SIE exam, any order requiring time and/or price discretion for more than a day is a discretionary trade requiring a POA. If the firm has a POA, they can attempt to fill the order the next day. If not, they must cancel the order and wait for the customer to renew it.

Another unique order submission is known as a proceeds transaction. This type of trade involves selling a security and using the sales proceeds to purchase another security. Investors commonly utilize proceeds transactions when rebalancing their portfolios (selling “overweight” allocations and buying “underweight” allocations).