SIE practice questionmediumTrade Execution
A client places a market order to buy 1,000 shares. During execution, prices rise rapidly. What is the risk?
- AThe order may go unexecuted.
- BThe client may pay a much higher price than expected.✓ Correct answer
- CThe order will be executed at the lowest daily price.
- DExecution will be split evenly between multiple prices.
Explanation
Why B — The client may pay a much higher price than expected.
Market orders guarantee execution, but not price. In fast markets, the execution price can be much higher than anticipated. Limit orders offer price protection. Market orders don't guarantee execution at the lowest price or any specific allocation.
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