Adjustment of Open Orders
Chapters in this video
- 0:00 The open order problem and Cora's execution risk
- 1:27 The open-order adjustment rule and de minimis exception
- 2:29 Cash dividends and which orders get cut: BLISS
- 4:23 Forward splits, reverse splits, and the DNI trap
- 5:45 When distribution value is unknown: the four-step halt
- 6:23 Series 6 product scope: closed-end funds, ETFs, and the open-end mutual fund exclusion
- 7:16 Rapid-fire exam recap
What this video covers
- Why the open-order adjustment rule exists, and which four ex-dates trigger mandatory price or share adjustments
- The de minimis exception: when a cash dividend below $0.01 means Rita leaves the order completely alone
- The BLISS rule in plain English: which two order types (buy limit and sell stop) are reduced on ex-dividend and which two (sell limit and buy stop) stay put
- What the Do Not Reduce (DNR) instruction actually blocks, and why it does NOT prevent stock-split or stock-dividend adjustments
- How forward splits and stock dividends adjust share count and price (plus the rounding-up rule for stock distributions), and how a reverse split cancels open orders outright rather than adjusting them
- The mandatory four-step flow when a distribution's value is unknown: halt execution, then reconfirm with the customer before any further action
- Why the open-order adjustment rule applies to closed-end funds and ETFs but does NOT apply to open-end mutual funds, which use forward pricing and net asset value (NAV) instead
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