Secondary Market
What the domain tests
This domain tests on-exchange trading after listing: order types, execution priority, price discovery, settlement timing and market-conduct rules. You should be able to trace an order from client instruction to PSX execution.
Core rules
- PSX is the main equity trading venue. Brokers route client orders to the exchange’s trading system; the exchange matches orders under price-time priority.
- Limit order: execute only at the specified price or better. Market order: execute immediately at the best available price. A stop order becomes active only when a trigger price is reached.
- Trades settle on T+2: trade date plus two business days. Execution and settlement are separate events.
- Market-conduct rules prohibit insider trading, front-running, wash trades and price manipulation. Listed companies must disclose price-sensitive information.
- Circuit breakers and index movements affect trading but do not change a client’s contractual obligation to settle a valid trade.
Worked example
A client places a limit buy order for 100 shares at Rs 100. The stock is trading at Rs 102, so the order rests. Later the price falls to Rs 99 and the order executes. The client pays no more than Rs 100 and in fact gets the better price of Rs 99, subject to costs. If the client had placed a market buy order at Rs 102, it could have filled immediately at Rs 102 or the next available offer. Settlement of either trade occurs on T+2 through NCCPL and CDC, not at the moment of execution.
Traps
Believing a limit buy must execute at exactly the limit price rather than at the limit or better; confusing order execution with settlement; assuming a market order guarantees a specific price; ignoring business-day counting for T+2.