Sales Process, Order Handling and Execution
This domain tests the mechanics between a client instruction and a completed trade: order types, timing, allocation, best execution and records.
Core rules
Record the order accurately: client, instrument, side, quantity, price limit, time received and validity. Market orders execute at the best available price; limit orders cap the price; a stop order becomes a market order once triggered and can fill away from the trigger. Execute promptly and in the client's interest; client orders take precedence over proprietary orders in the same instrument, and front-running is prohibited. Where orders are aggregated, allocate fills fairly and consistently, normally pro rata, and never allocate profitable fills to favoured accounts. Best execution considers price, cost, speed and likelihood of execution. Errors must be corrected, documented and escalated rather than concealed.
Worked example
A block buy order for three clients (50%, 30%, 20%) is filled for 60% of the requested quantity. Each client receives 60% of their allocation: 30%, 18% and 12% of the block. The remaining 40% stays unexecuted unless the clients instruct otherwise. Allocating the whole fill to the largest client would breach fair allocation.
Traps that cost marks
Treating a market order as price-protected; executing a proprietary trade ahead of a client order; reallocating fills after the price moves; failing to time-stamp orders; assuming verbal instructions need no record.