Which one of the following statements regarding orders is false?

Question

BlackTom AI · Accepted Answer

A market order executes immediately at the best available price in the trading venue(s) where it is routed, so the statement "A market order is an order to buy or sell a stock on a specific exchange (market)." is false.

1) Relevant concepts:
- Market order: instruction to buy or sell immediately at the prevailing best available price (priority: speed/execution).
- Limit-sell order: instruction to sell only at or above a specified price.
- Limit-buy order: instruction to buy only at or below a specified price.

2) Step-by-step evaluation of each option:
- Option 1: "A market order is simply an order to buy or sell a stock immediately at the prevailing market price." This matches the textbook definition of a market order and is true.
- Option 2: "A limit-sell order is where investors specify prices at which they are willing to sell a security." That describes a limit-sell correctly (seller sets a minimum acceptable price) and is true.
- Option 3: "If stock ABC is selling at $50, a limit-buy order may instruct the broker to buy the stock if and when the share price falls below $45." A limit-buy at $45 will execute only at $45 or lower, so this statement is true.
- Option 4: "A market order is an order to buy or sell a stock on a specific exchange (market)." This confuses the order type with routing. A market order does not specify an exchange as its defining feature; it specifies immediate execution at the best available price and can be routed by the broker to any exchange or market maker. Thus this option is false.
- Option 5: "A limit-buy order instructs the broker to buy at or below a specified price." This is the exact definition of a buy limit and is true.

3) Why the correct answer is correct:
The false statement incorrectly defines a market order by implying it designates a specific exchange. In reality, "market" in market order refers to execution at the market price immediately, not selection of a particular exchange.

Conclusion: The false statement is "A market order is an order to buy or sell a stock on a specific exchange (market)." This matches the provided correct answer.

Which one of the following statements regarding orders is false?Single choice

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