Exam Alert: FINRA requires orders with alternative triggers to be clearly distinguished from stop orders

Effective January 21, 2013, FINRA will revise its rules relating to stop orders in equity securities. The new rule provides that any market or limit order that triggers off of an alternative condition (any condition other than a transaction occurring at a specified price) must be clearly distinguished from a “stop order” or “stop limit order.” Continue reading

Effective January 21, 2013, FINRA will revise its rules relating to stop orders in equity securities. The new rule provides that any market or limit order that triggers off of an alternative condition (i.e., any condition other than a transaction occurring at a specified price) must be clearly distinguished from a “stop order” or “stop limit order.” For example, an order that triggers when a quote occurs at the stop price may be referred to as a “stop quotation order” or “stop quote order.”

If a firm provides orders that trigger off of alternatives conditions, the firm must disclose the nature of these orders in paper or electronic format to its customers prior to the customer placing such an order. For example, this disclosure could occur when a customer first opens an account with the firm. A firm that routes an order triggered by alternative conditions to another broker-dealer or to an exchange must take “reasonable steps” to ensure that the order is handled or executed in the correct manner.

Source: FINRA Regulatory Notice 12-50: SEC Approves Amendments Relating to Stop Orders

This alert applies to the Series 7, Series 65, Series 66, and Series 24.