Securities Trader Representative (Series 57) Practice Exam

Which statement is TRUE regarding broker-dealers and customer orders for NMS-listed stock?

1. A member firm may, but is not required to, accept stop orders and stop limit orders

2. A member firm is required to accept stop orders but not stop limit orders

3. A member firm is required to accept stop limit orders but not stop orders

4. A member firm is not permitted to accept stop orders or stop limit orders

The correct answer is: A member firm may, but is not required to, accept stop orders and stop limit orders

The correct statement highlights that a member firm may accept stop orders and stop limit orders, but it is not obligated to do so. This reflects the discretion that broker-dealers have in choosing which types of orders to accept from their customers. While broker-dealers typically provide a range of order types to meet customer needs, they retain the right to establish their own policies and procedures regarding the acceptance of various order types, including stop and stop limit orders. Consequently, although these orders can be important tools for traders looking to manage risks or execute specific strategies, broker-dealers are not mandated by regulations to accept them, thereby allowing flexibility in their trading practices.