FINRA Series 7Processes and Confirms TransactionsEasy
A registered representative enters a market order to buy 200 shares of a NYSE-listed stock for a customer. At what price will this order be executed?
- AThe next available price in the market once the order reaches the trading venue
- BA price no higher than the current bid price
- CThe closing price on the day the order is entered
- DThe price specified by the customer when the order was entered
Show answer & explanationAnswer & explanation
Correct answer: A. The next available price in the market once the order reaches the trading venue
A market order has no price restriction; it is executed immediately at the best available (next) price in the market, guaranteeing execution but not a specific price.
Why the other options are wrong
- B. There is no price ceiling on a market order; the customer would buy at the ask, not the bid.
- C. Market orders execute when entered, not at the day's close.
- D. That describes a limit order, not a market order.
Market Order
An order to buy or sell immediately at the best currently available price.
- Guarantees execution, not price
- Executed at next available price
- Contrast with limit orders, which guarantee price, not execution
Memory trick: Market orders move NOW at whatever price is available.