Floor Operations and Order Types – Series 7 Exam
- April 1, 2025
- Posted by: 'FINRA Exam Mastery'
- Category: Finance
🧾 Floor Operations and Order Types – Series 7 Exam
The Series 7 exam tests your knowledge of how securities are traded — including what happens on the trading floor and how different order types function in various market conditions. Mastering this material is essential for understanding execution, client instructions, and market behavior.
Here’s what you need to know about floor operations and order types to pass the Series 7.
🏛️ Floor Operations Overview
Although most trading is now electronic, Series 7 candidates are expected to understand the structure and function of the physical trading floor, especially for NYSE-listed securities.
Key Roles on the Trading Floor:
🔹 Floor Broker – Executes orders on behalf of broker-dealer clients; acts as agent, not principal.
🔹 Designated Market Maker (DMM) – Formerly known as a specialist; maintains a fair and orderly market in assigned stocks.
🔹 Two-Dollar Broker – Assists floor brokers during busy periods; operates as a freelance floor broker.
🔹 Order Book Official (OBO) – Used on options exchanges to maintain order books and execute public customer orders.
🔹 Trading Posts – Physical locations on the exchange floor where stocks are traded and DMMs operate.
📑 Types of Orders You Must Know
The Series 7 will test your understanding of how each order type behaves under different market conditions.
🟢 Market Order
- Execute immediately at best available price
- No price protection
- Priority for execution, not price
🟡 Limit Order
- Execute only at a specified price or better
- May not be filled if market doesn’t reach your limit
- Example: Buy at $50 or less, Sell at $60 or more
🔴 Stop Order (Stop-Loss)
- Becomes a market order once the stop price is triggered
- Used to limit losses or protect profits
- Example: Sell stop at $45 means it becomes a market order once stock hits $45
🟠 Stop-Limit Order
- Becomes a limit order once the stop is triggered
- Offers price control but no execution guarantee
🕓 Time and Duration Instructions
| Order Type | Behavior |
|---|---|
| Day Order | Expires at market close if not filled |
| Good-Til-Canceled (GTC) | Stays active until executed or manually canceled |
| Fill or Kill (FOK) | Must be executed in full immediately or canceled |
| Immediate or Cancel (IOC) | Fill what can be executed immediately; cancel the rest |
| All or None (AON) | Must be fully executed or not at all — not time-sensitive |
⚖️ Key Test Points
- Buy Stop orders are placed above the current market price
- Sell Stop orders are placed below the current market price
- Limit orders provide price protection but may go unfilled
- Stop orders help protect against large losses
- DMMs must maintain fair and orderly markets and act as both dealer and auction facilitator
🧠 Exam Tips
- Expect scenario-based questions asking which order type a client should use
- Know how to prioritize orders on the book (time and price precedence)
- Understand how order execution differs in fast-moving markets
- Recognize how stop and limit orders behave after a trigger is hit
🚀 Practice for Real-World Confidence
Want to drill order scenarios, execution logic, and market rules the way the exam asks them? Access flashcards, mock exams, and platform walkthroughs tailored to Series 7 at:
👉 finra-exam-mastery.com