Handling Instructions, Executing and Confirming Transactions
From instruction to confirmation
Orders arrive as market, limit, stop, or stop-limit, with time-in-force qualifiers (day, GTC, IOC, FOK) and size qualifiers (AON). Positioning is the trap: buy limits below the market, sell limits above it; buy stops above the market, sell stops below it. A stop becomes a market order once triggered, so the fill can be worse than the trigger; a stop-limit becomes a limit order and may not fill at all.
Handling rules require best execution (FINRA Rule 5310), no trading ahead of customer orders (Rule 5320), prompt display of customer limit orders, and marking each order solicited or unsolicited. Only market orders, and only under narrow conditions, may be held for price improvement. Clearly erroneous executions are handled under Rule 11890, not by the rep simply cancelling the trade.
Regular-way settlement for equities, corporate and municipal bonds, and options is T+1; mutual fund orders are priced at the next NAV. Margin accounts start at 50% under Reg T with 25% maintenance, and pattern day traders need $25,000 equity. Short sales require a locate and are subject to the alternative uptick rule after a 10% decline. Under Reg BI, even an unsolicited order needs a suitability/best-interest check when the rep recommends it.
Worked example. The market is at 50. A customer enters a buy stop at 55 and a buy limit at 45. The stop sleeps until the stock trades at 55, then becomes a market order and may fill at 55.40. The limit at 45 fills only at 45 or better, and may never fill at all.