Trade Execution and Order Handling
This domain tests the lifecycle of an equities order from receipt to execution and post-trade reporting. The exam focuses on client priority, order validity, execution quality and handling of errors and auctions.
Core rules and concepts
- An order must be captured with the client, security, side, quantity, price or market instruction, validity, capacity and any special conditions.
- Client orders must be handled promptly and in accordance with the mandate; personal or firm orders must not be front-run or given improper priority.
- JSE equities trading includes opening and closing auctions and continuous trading. Auction orders must respect the session’s order types and cancellation rules.
- Best execution requires consideration of price, speed, likelihood of execution and cost; it does not guarantee the best possible price.
- Error trades and cancelled trades must follow JSE error-trade procedures, with records and client notification.
Worked example
A client places a limit buy at R50 for 1,000 shares. The desk executes 600 at R49.90 and 400 at R50.10. The second fill breaches the limit. The correct reasoning is that the limit is a hard client instruction; the 400-share fill is an error. The desk must not simply average the price. It should escalate, apply the JSE error-trade process, correct or cancel as permitted, and inform the client. The order record must show the breach and remediation.
Traps that cost marks
- Treating a limit order as a target rather than a ceiling or floor.
- Using firm inventory to fill a client order without disclosing capacity and conflict.
- Failing to record auction-specific conditions or order validity.
- Correcting an error silently outside JSE procedures.
Exam focus
Scenario questions often test limit breaches, client-first priority, auction handling and documentation of execution decisions.