Welcome to Understanding Order Types: the unit that supplies the vocabulary every later trading question is written in, from a plain market order to a pegged order that follows the protected quote.
Exam Weight: about 3 of the 50 scored items (CertFuel planning estimate; FINRA publishes weights only by function, and Function 1, Trading Activities, is 41 items / 82%)
What You'll Learn
In this unit, you'll cover:
- The Three Order-Type Rules and Their Vocabulary: which rule governs options and which governs equities, the quotations the definitions are measured against, and the four priority labels the equities rule assigns
- Market Orders and Limit Orders: the two base types in both markets, the working price an equity market order takes from the contra-side quote, and the two price controls that stop each of them
- Stop Orders and Stop Limit Orders: what each becomes when it triggers, the trade-or-quote trigger, and where an untriggered order rests
- Market-on-Open, Market-on-Close and the Auction-Only Orders: the five auction-only orders, the halt qualifiers that split the two opening orders, and the two conditions an imbalance offset order must satisfy
- Contingency and Stipulation Orders: the two-branch contingency definition, the day and good-til-cancelled clocks, and the difference between fill-or-kill and all-or-none
- Reserve Orders and Other Undisplayed Interest: how a display quantity is replenished, which working time survives it, and the three other types the equities rule groups with it
- Pegged Orders: the three pegs, which side of the market each follows, and what a locked or crossed quote does to each of them
- Equity Order Types and Modifiers: the orders that will not route, the orders with a fixed routing instruction, and the modifiers that decide when an order may trade
- Options Order Types and Their Routing Rules: the multi-leg orders, the qualified contingent cross, and the post-no-preference family's differing answers to a locked or crossed market
Why This Matters
A trader spends the day choosing between these types, and the exam tests them the way the desk uses them: as a set of conditions on when an order may trade, at what price, and what happens to the part that does not fill.
The rules also disagree with each other in ways that are themselves testable. Some of those disagreements run between the two options rulebooks, which define many of the same order names without defining them identically, and others run between the options rules and the equities rule:
- Which rule defines the type at all, since one rulebook is shorter than the other
- Which quotation the definition is measured against, the national quote or the protected quote
- What happens to the remainder: cancelled, hidden, repriced, or rested undisplayed
- Which working time an order keeps when part of it is replenished, routed or returned
Let's start with the three rules themselves and the words they use.