Securities Industry Essentials (SIE) ExamUnderstanding Trading, Customer Accounts, and Prohibited ActivitiesEasy
A registered representative (RR) receives an order from a client to purchase 500 shares of XYZ stock, but the client does not specify a price. The RR executes the trade immediately at the current market price. This type of order is known as a:
- AMarket order
- BLimit order
- CDiscretionary order
- DStop 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. When a client does not specify a price, it is assumed to be a market order.
Why the other options are wrong
- B. A limit order specifies a maximum purchase price or minimum selling price.
- C. A discretionary order is one where the RR decides the asset, amount, or action without specific client instruction for each trade.
- D. A stop order triggers a market order or limit order once a specified price is reached.
Market Order
A market order is an instruction to buy or sell a security immediately at the best available current price. It prioritizes execution over price.
- Executed as quickly as possible.
- No price specified by the client.
- Guaranteed to fill, but not at a guaranteed price.
Memory trick: Market orders are 'go now' orders!