SIE Understanding Trading, Customer Accounts and Prohibited Activities Question 1: Answer and Explanation

Question: 1

Which of the following does a stop order become after the stop price is available on the market?

• A. Market order
• B. Good-'til-cancelled order
• C. Discretionary order
• D. Solicited order

Correct Answer: A

Explanation:

A: Choice A correctly indicates that a stop order is to be executed promptly when the stop price is available on the market. Unlike a limit order, a stop order does not need to be executed at a price at least as favorable as the stop price. Choice B relates to the length of time the order waits for execution but does not relate to the price. Choice C relates to whether the representation may select any characteristic of the order other than the timing or price. Choice D relates to whether the client accepted any recommendation from the representative about any characteristic of the order.