Securities Industry Essentials (SIE) ExamUnderstanding Trading, Customer Accounts, and Prohibited ActivitiesEasy
A client instructs their registered representative to purchase '500 shares of XYZ stock at the best available price immediately.' Which type of order has the client placed?
- AMarket order
- BStop-limit order
- CStop order
- DLimit order
Show answer & explanationAnswer & explanation
Correct answer: A. Market order
A market order is an order to buy or sell a security immediately at the best available current price. The key phrases 'best available price' and 'immediately' are indicative of a market order.
Why the other options are wrong
- B. A stop-limit order combines a stop trigger with a limit price, which is more complex than the client's instruction.
- C. A stop order becomes a market order only after a trigger price is met, which is not implied.
- D. A limit order specifies a price at which to buy or sell, which is not indicated here.
Market Order
An order to buy or sell a security immediately at the best available price.
- Guarantees execution, not price.
- Executed as soon as possible after it is entered.
- Most common type of order.
Memory trick: 'Market' means 'Go Now!'