Understanding different types of orders

Orders are simply instructions to buy or sell shares. The most common types of share trading orders are buy and sell orders. You can also place stop loss sell and target buy orders, which are known as trigger orders and are more specialised orders used by advanced share traders.

The basics of an order are your instructions which specify:

• How many shares you want to buy or sell.
• The price per share or the price at which you are prepared to buy or sell those shares.

When placing a trigger order, you’ll also choose a trigger price, which we’ll explain a bit later.

But before we look at each of these order types in detail, it’s important to understand your choices when setting your price. For every type of order you can choose to trade at the current market price of a share, or you can choose a limit price. This guide will take a look at these concepts.

A buy order is the standard order type for buying shares. Your instruction will specify:

• How many shares you want to buy.
• The price per share or the price you are prepared to pay for the shares. This can be a specified limit price, which is the maximum price that you are willing to pay, or the market price.

A target buy is a type of trigger order and allows you to control when your order will be sent to the market. This is done by specifying a trigger price; a price at which your order to buy is placed on the market and becomes active. Your order will only be actioned (triggered) if the shares you wish to buy begin to trade at the price you’ve specified.

This trigger price is always above the current market price for that share. Target buy orders are aimed at traders who believe that if the price of a stock reaches a certain level, the share price will continue to rise so they want to buy in and take advantage of that rise.

As well as setting a trigger price for a target buy order, you also need to set a price per share (like you would for a standard buy order) which is the price you are willing to pay for the shares.

You can choose to set a limit price - a maximum price which you are prepared to pay per share. The shares will be purchased at no more than this limit price. Just be aware that if you set a limit price and the market rises quickly, you may miss the opportunity to buy shares if the market moves above your limit price.

Alternatively, you can choose to trade at the market price for that share, but you’ll have no control over the price you pay.

When you are buying shares using a buy order or target buy order, there are some things you need to know:

• You need to have sufficient cleared funds in your settlement account to cover the cost of your order.
• Those funds must remain in your settlement account from the time you place the order until settlement date, which is the date the trade is complete and the shares are registered into your name as the new owner. For trades on the New Zealand and Australian stock exchanges, settlement date is usually two business days after your trade.
• If your buy order is executed below the minimum holding requirements you’ll have to either purchase more shares to make up the requirement, or sell your holding. If you need to take one of these actions, you’ll be making a further buy or sell transaction and therefore have to pay brokerage again.

• Your order will be valid for 20 business days, after that, it will expire. If you wish to continue with your order after 20 days, you’ll need to place a new order.
• When you buy or sell shares you’ll pay a fee or commission, this is called brokerage. ASB Securities brokerage rates vary depending on what kind of shares you are buying and selling. For example, New Zealand, Australia and other international shares all have different brokerage rates.
• Be aware that sometimes there may be a delay in confirming your order and it being placed on the market; this can happen if the market is busy or systems are slow or offline.
• Sometimes ASB Securities may act for both the buyer and the seller in a transaction, and these orders may be crossed. This means that if we receive a buy order and a sell order for the same shares at the same price from two different clients, we may offset the two trades between buyer and seller directly, instead of putting both the buy and the sell order onto the market. We’ll disclose these crossed trades to the New Zealand stock exchange either that day or the next morning before the market opens.
• The New Zealand Stock Exchange closes at 5pm. If we receive your order to buy or sell shares on the New Zealand stock exchange (NZX) after 5pm, or after 6pm for the Australian Stock Exchange (ASX), we’ll treat your order as though we had received it the next business day and your order will be placed on the market when it opens.
• If you’ve placed an order and there is some breaking news regarding the company, i.e. if it announces a merger with another company, or a stock split, or a dividend payment for example, we may cancel your order. Corporate actions such as these may affect the value of the company whose shares you are trying to buy or sell, so we’ll always try and contact you first to check whether you wish to continue with your order.

ASB Securities reserves the right to take any steps we think are necessary to check the bona fides of any client, order or instruction before acting on that order or instruction.

ASB Securities reserves the right to cancel your order if it doesn’t comply with validation rules.

ASB Securities reserves the right to charge you a fee plus any costs if:

• your trade is not settled by the due date
• your payment is dishonoured or returned
• an invalid CSN and FIN is quoted and the order has been executed
• you fail to deliver a certificate for a certificated stock.