FINRA Series 7Processes and Confirms TransactionsEasy
A customer places an order to buy 1,000 shares of XYZ stock and tells the registered representative, 'I want this filled today — use your judgment on the exact timing and price.' The customer does not sign any discretionary trading authorization. What type of order has the customer given?
- AAn all-or-none order
- BA discretionary order, which requires prior written authorization from the customer
- CA fill-or-kill order
- DA not held (NH) order, granting the RR discretion over timing and price only
Show answer & explanationAnswer & explanation
Correct answer: D. A not held (NH) order, granting the RR discretion over timing and price only
A 'not held' order allows the RR discretion only over the time and/or price of execution (not the choice of security or side of the market), and does not require written discretionary authorization. True discretionary orders (choice of security, action, or amount) require written power of attorney.
Why the other options are wrong
- A. AON relates to requiring the full quantity to be filled, not timing discretion.
- B. Full discretion over security/action/amount requires written authorization, but this customer only gave time/price latitude.
- C. FOK requires immediate full execution or cancellation, unrelated to this scenario.
Not Held (NH) Order
An order in which the customer gives the broker discretion only over the timing and/or price of execution, not over the choice of security, action, or amount.
- Does not require written discretionary authorization
- Differs from full discretionary orders (security/action/amount)
- Common on large block orders to get best execution
Memory trick: 'Not Held' = Not Handcuffed to time/price, but still my stock/side/amount.