Stock exchange order: peculiarities of the document
A stock exchange order is an instruction that is made by a client for a broker when trading operations are carried out at a stock exchange. This document must contain the following obligatory points:
- trade code under which the member is registered;
- period of validity of the application;
- type of application, which depends on certain conditions of the transaction;
- information about the subject matter of the transaction, for example an exchange contract or a share;
- if the application is addressed, the counterparty must be indicated.
For operations in the futures market, they indicate the purpose of the procedure, for example, hedging.
The document has several types. The market exchange request is made when making a sale or purchase in the minimum time at the current price. The limit involves the execution of the operation at a price that exceeds the agreed one. In most cases, an order of this type is fixed lower than the market price. In this case, when buying a trader specifies the maximum amount that he is ready to pay. In case of sale, the threshold is set higher than the accepted price, and the seller specifies the minimum amount for sale. The limit order allows controlling the transaction price to some extent, but the client can influence its execution.
A conditional order includes a document of any type, except for a limit order, as the latter binds the client to fulfil specific conditions.
A stop-loss order is issued if the value of the object of sale or purchase exceeds the agreed stop-price. When this mark is reached, the stop-order becomes a market stop-order. This factor means the conclusion of the transaction, but its value may not be at the level of the achieved indicator. This is possible if market conditions change very quickly.
In the exchange application of the address type data of the person with whom the transaction will be concluded are fixed. In this case, a counter document should be received, and then the ticket for the participants of the transaction indicates that the transaction will take place not with a certain counterparty, but with the exchange, which assumes the role of the counterparty.
Exchange applications may be limited in time. One-day orders are market and limit types of documents, and they are valid until the end of the trading day. In the case of transactions carried out with securities, the stock exchange independently determines when it will close.
For Good-til-cancelled orders a special cancellation must be received, which has to be waited for a different period of time.
Immediate-or-cancel is executed immediately or the exchange cancels it. In this case, a partial execution is possible, as opposed to the Fill-or-kill request.
Fill-or-kill is in most cases a limit order, the execution or cancellation of which must take place without delay.