Not-Held Order

An institutional customer wants 200,000 shares of Aldridge Chemical without disturbing the market and tells the floor broker to work the order over the session. A market-not-held order:

1. A.Gives the floor broker discretion on time and priceCorrect - discretion to work the order.
2. B.Must execute instantly at the NBBOThis describes an ordinary held market order, where the broker must go to the market immediately at the best available price. Marking an order not held is precisely what relieves the broker of that obligation.
3. C.Is only for bondsNot held is an instruction about execution discretion, not a product category. It is used routinely on equity orders, most often on large blocks a broker wants to work over the session.
4. D.Cannot be executedThis reads not held as not executable. The phrase means the broker is not held to a particular time and price, which grants latitude in working the order rather than blocking it.

Why: A not-held order gives the floor broker discretion over the time and price of execution.

The portfolio manager at Rutledge Pension Fund telephones the trading desk at Halsey Securities and says: "Work 200,000 shares of Corriente for us today. Use your judgment on timing and price - do not hold me to any particular fill." This instruction creates:

1. A.A market-on-close order, since the trader is expected to complete the order within the session.Wrong. A market-on-close order executes at the official closing price. This instruction expressly asks the trader to use judgment throughout the day.
2. B.A discretionary account, requiring the customer's written authorization and prior principal approval.Wrong. Discretion over the account arises when the firm chooses the security, the side or the amount. None of those was delegated here.
3. C.An unauthorized exercise of discretion, since any discretion over price and time requires written authorization.Wrong. Time and price discretion is expressly distinguished from account discretion and does not require written authorization.
4. D.A not-held order, giving the trader discretion over time and price without making this a discretionary account.Correct. The customer fixed the security, the side and the size; only timing and price were delegated.

Why: A NOT-HELD order hands the trader discretion over the timing and the price of execution so that a large order can be worked into the market without moving it, while the customer agrees not to hold the firm responsible for missing any particular print. Critically, discretion limited to TIME AND PRICE is not the same thing as discretion over the account: the customer has already decided the security, the side and the quantity. Because those three elements are fixed by the customer, no written discretionary authorization is required.