Order Handling, Execution, and Client Account Procedures
Scope
This domain tests the lifecycle of a client order: account approval, order capture, execution, allocation, confirmation, and settlement. It focuses on authority, accuracy, and client priority.
Core rules
- Open and approve the account before trading; capture KYC, risk profile, authorized signatories, and whether the account is cash or margin.
- Each order ticket should record client and account, security, side, quantity, order type and price, time received, and salesman. Verbal orders must be documented promptly.
- A limit order executes only at the limit or better; a market or “at best” order seeks immediate execution but does not guarantee price. Partial fills are possible.
- Client orders generally have priority over proprietary orders. Allocations must be fair and consistent with the order and client instructions.
- Discretion requires written authorization and firm approval; it is not inferred from a client’s general confidence.
Worked example
A client instructs: “Buy 5,000 ABC at PHP 20 limit.” The stock trades at PHP 19.90, then rises to PHP 20.10. The broker may fill up to 5,000 at PHP 20 or lower, but not at PHP 20.10. If only 2,000 are available at PHP 20, the ticket shows a partial fill and the remainder stays open or is cancelled per the order’s terms. The confirmation must reflect the actual fill.
Traps
“At best” is not a limit order and can fill at several prices. Do not assume a client’s past acceptance authorizes discretion. Do not allocate a favorable fill to a proprietary account after a client order was received; sequence and time-stamp matter.