The seC’s office of Investor education and Advocacyis issuing this Investor Bulletin to help educate investorsabout the different types of orders they can use to buyand sell stocks through a brokerage firm. The followingare general descriptions of some of the common ordertypes and trading instructions that investors may use tobuy and sell stocks. Please note that some of the ordertypes and trading instructions described below may notbe available through all brokerage firms. Furthermore,some brokerage firms may offer additional order typesand trading instructions not described below. Investorsshould contact their brokerage firms to determine whichtypes of orders and trading instructions are availablefor buying and selling as well the firms’ specific policiesregarding such available orders and trading instructions
For these stocks, some brokerage firms use only last-sale prices to trigger a stop order, while other firms use quotation prices. Investors should check with their brokerage firms to determine the specific rules that will apply to stop orders.
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Stop-limit Order A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. once the stop price is reached, a stop-limit order becomes a limit order that will be executed at a specified price (or better). The benefit of a stop-limit order is that the investor can control the price at which the order can be executed. Before using a stop-limit order, investors should consider the following: n As with all limit orders, a stop-limit order may not be executed if the stocks price moves away from the specified limit price, which may occur in a fast-moving market. n short-term market fluctuations in a stocks price can activate a stop-limit order, so stop and limit prices should be selected carefully.
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For example, a sell stop limit order with a stop price of $3.00 may have a limit price of $2.50. such an order would become an active limit order if market prices reach $3.00, although the order could only be executed at a price of $2.50 or better. www.investor.gov n For certain types of stocks, some brokerage firms Fill-Or-Kill and All-Or-None Orders have different standards for determining whether the stop price of a stop-limit order has been reached. For these stocks, some brokerage firms use only last-sale prices to trigger a stop-limit order, while other firms use quotation prices. Investors should check with their brokerage firms to determine the specific rules that will apply to stop-limit orders.
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Day Orders, Good-Til-Cancelled Orders, and Immediate-Or-Cancel Orders two other common special order types are Fill-Or-Kill (FOK) and All-Or-None (AON) orders. An FoK order is an order to buy or sell a stock that must be executed immediately in its entirety; otherwise, the entire order will be cancelled (i.e., no partial execution of the order is allowed). An Aon order is an order to buy or sell a stock that must be executed in its entirety, or not executed at all. However, unlike the FoK orders, Aon orders that cannot be executed immediately remain active until they are executed or cancelled. Day orders, Good-til-Cancelled (GtC) orders, and Immediate-or-Cancel (IoC) orders represent timing instructions for an order and may be applied to either market or limit orders. unless an investor specifies a time frame for the expiration of an order, orders to buy and sell a stock are Day orders, meaning they are good only during that trading day.
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