A customer instructs a broker-dealer to enter a Good-Til-Canceled (GTC) buy limit order for 500 shares of XYZ stock at 52. Which of the following statements regarding the execution rules and handling of this order are correct?
- The order remains active across subsequent trading sessions until it is either executed or canceled by the customer.Answer
- The order can only be executed at a price of $45 per share or lower.Answer
- CIf the order is not filled by the market close on the day of entry, it automatically converts into a market order at the next opening bell.
- DExecuting this customer order requires the broker-dealer to act as a principal trading directly out of its own proprietary inventory.
Answer
The order remains active across trading sessions until executed or canceled, and it can only be executed at $45 per share or lower.
A GTC buy limit order combines two key rules: the GTC time-in-force instruction keeps the order unexpired across trading days until filled or canceled, and the buy limit constraint guarantees that any execution occurs at the specified limit price ($45) or lower.
Step-by-Step Solution
Key Concept
GTC Buy Limit Order Execution Dynamics
Estimated Time:1m 15s