SIE practice questionhardTrade Execution
A customer places a market order to buy 500 shares of a very thinly traded stock after hours. What is the greatest risk to the customer?
- AOrder will not be filled at all
- BReceiving an execution at a much higher price than expected✓ Correct answer
- COrder will be broken up over several executions
- DOrder will be delayed until the next trading day
Explanation
Why B — Receiving an execution at a much higher price than expected
With illiquid stocks, especially after hours, a market order exposes the client to the risk of a substantially higher execution price due to low volume and wide spreads. Orders may be filled in pieces or be delayed, but price risk is greatest.
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