Execution, Validity, and Clearing Instructions


Execution is defined as how to fill the order. Here are many ways how orders can get filled:

  • Market order: obtain the best price immediately available.
  • Limit order: same as the market order, except the price must be no higher than a specified amount for buy orders and no lower than a specified amount for sell orders.
  • Marketable limit order: When the price is placed above the best offer for buy orders, or below the best bid for sell orders.
  • Behind the market: buy (sell) order placed below (above) the best bid (offer).
  • Standing limit orders: limit orders waiting to trade.
  • Inside the market: the price gap between the best offer and best bid.
  • Market making: offering to trade by placing standing limit orders.
  • Market taking: accepting an offer to trade through a market order or marketable limit order.
  • All-or-nothing order (AON): trades only if the entire order can be filled.
  • Hidden order: exposed only to brokers or exchanges that receive them.
  • Display size: amount of the order shown to the public.


Validity is defined as when the order may be filled, with examples below:

  • Day order: order is good only for the day on which it is submitted.
  • Good-till-cancelled order (GTC): usually limited to a few months, but can stay open for longer.
  • Immediate or cancel order (IOC): good only upon receipt by broker or exchange
  • Good-on-close order (Market-on-close): can only be filled at the close of trading.
  • Good-on-open order (Market-on-open): can only be filled at the open of trading.
  • Stop order (stop-loss order): sell orders are only executed if a trade occurs at or below the stop price; buy orders are only valid once the price rises above stop price.

Clearing Instructions

Clearing is defined as how to arrange the final settlement of the trade. Unlike other instructions, clearing instructions are not attached to each order. Clearing instructions simply indicate what entity is responsible for clearing and settling the trade, and if the sale is a long sale or short sale.


A trader submits a buy order at the beginning of the day on 10,000 shares of a stock trading at $48 per share. The stock gradually rises to $52 per share by market close. The trader acquired 5,000 shares of the stock over the day at a price between $50 and $51 per share, and the order was still valid when the market opened the next day. What order did the trader most likely submit?

A. Day, stop 50, limit 51 buy order

B. GTC, stop 48, limit 51buy order

C. GTC, stop 50, limit 51 buy order


The correct answer is C.

Since no shares were purchased at prices between $48 per share and $50 per share, it’s unlikely the trader had a stop order at $48. Given that the order was not canceled at the end of the day, it could not be a day order. Therefore, the most likely option is GTC, stop 50, limit 51 buy order.

Reading 36 LOS 36g:

Compare execution, validity, and clearing instructions


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