"To err is human; to forgive, divine," says English poet Alexander Pope. Perhaps he had stock brokers in mind. Well, probably not, but they do make mistakes. For instance, you might receive a cancellation notice on a trade. This document will explain that there was an error made on some trade and detail what is being done to correct it.
As just a couple of examples, let's say Dick Doright places an order with his broker Joe Trader to buy 400 shares of Get It Right Inc. Joe is in a big hurry that day and mistakenly buys Get it Wrong Inc. Dick will receive a cancellation notice describing the error and Joe will then place the correct order. If the price of Get It Right has gone up in the meantime, Joe Trader will have to eat the difference between that and the original order.
Or let's say Joe Trader continues to have a bad day and purchases 1,000 shares of a stock for Sam Doright, instead of his requested 900. Joe will have to issue the cancellation and sell the extra 100 shares at his own expense.
Since errors are common even in the electronic age, the Securities and Exchange Commission (SEC) established rules in 2009 requiring that reviews of trades must take place within 30 minutes of the trade and be corrected within 30 minutes of the review process.
Related or Semi-related Video
Finance: What is a market order?3 Views
Finance a la shmoop what is a market order? alright people it's a type of buy
or sell order which simply says I will buy or sell this stock or bond at this
price right now that is whatever price the market is telling me it's worth [Investor discussing market orders]
right now that's my price so the market prices change all the time and yes of
course the broker can choose to look at his screen this minute or that minute or [Broker looking at computer screen]
the following minute and the market will be changing if you're placing the order
during the day so yes there is some discretion in defining exactly what
dollar amounts and penny amounts a market order means but in real life
usually through online portals or even through old-school telephones yes those [Person using an old-style telephone]
things the broker will say something like yep I see coca-cola quota here at
42.48 that's market right now you want it and if you want to sell well then you [Woman selling bonds while on the phone]
mumble something like go ahead and just so you know the kissing cousin of a
market order is a limit order like an investor might tell the broker give me a
42.50 limit on that coke sale if the stock never hits 42.50 like it's
below at 42.49 doesn't do it well then no sale ever happens and the [Coca cola stock price graph stamped with no sale]
owner of those coca-cola shares well they just keep them if the stock
suddenly pops and it gets there then blam the shares have been sold well in
practice most relatively sophisticated buyers and sellers put in limits like
limit orders not just naked market orders even if they are below what the
market currently floats because flash crashes happen all the time it seems
these days and in one fleeting moment shares of coca-cola could suddenly [Coca cola share price drops]
plummet to 34.12 a share and if the seller has a market order in while those
shares will transact or be sold at 34.12 even though 15 minutes later the markets
back to its 42.50 a share pricing so you can get really heard if you rely on
the market being a stable and rational so vanilla pure market orders can be a [Man with pigs head riding a bike]
dangerous thing be careful just ask the little piggy you know who went to market
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