Day Order
Day Order
A securities order that automatically expires at the end of the trading day if not executed. This is the DEFAULT time-in-force instruction unless the client specifies otherwise (such as Good-Til-Cancelled). Day orders prevent stale orders from executing at unintended times and require clients to reaffirm their trading intentions if market conditions change.
A client calls at 10:00 AM to place a limit order to buy 100 shares of XYZ at $50 (currently trading at $52). Unless the client specifies otherwise, this is automatically a day order. If XYZ never trades at or below $50 by market close (4:00 PM ET), the order expires unfilled and the client must call back the next day to re-enter the order if still interested. This protects the client from having a week-old order execute when market conditions or their investment objectives may have changed.
Students often confuse day orders with GTC (Good-Til-Cancelled) orders. Day orders are the DEFAULT and expire at end of trading day, while GTC orders remain active until executed or cancelled (typically up to 90 days). Another common error is not recognizing that market orders are typically filled immediately, so the day order designation is most relevant for limit orders and stop orders that may not execute right away. Some students incorrectly think the client must always specify "day order," when in fact day order is assumed unless GTC or another time-in-force instruction is given.
How This Is Tested
- Identifying that day order is the default time-in-force instruction unless otherwise specified
- Understanding when a day order expires (end of trading day at market close)
- Distinguishing between day orders and GTC orders in terms of duration and client protection
- Recognizing situations where day orders protect clients from stale order execution
- Understanding that unfilled day orders require clients to re-enter orders the next trading day
Regulatory Limits
| Description | Limit | Notes |
|---|---|---|
| Default order duration | End of trading day (typically 4:00 PM ET) | Unless client specifies alternative time-in-force instruction |
| GTC maximum duration | Typically 90 days | Good-Til-Cancelled orders remain active until executed or cancelled, usually up to 90 days depending on broker-dealer policy |
Example Exam Questions
Test your understanding with these practice questions. Select an answer to see the explanation.
Robert, a client, calls his adviser on Monday morning at 10:00 AM to place a limit order to sell 200 shares of ABC stock at $75 per share (currently trading at $73). Robert does not specify any time-in-force instructions. The stock trades between $72 and $74 all day Monday but never reaches $75. What happens to this order at the end of the trading day on Monday?
B is correct. Since Robert did not specify a time-in-force instruction, the order is automatically treated as a day order (the default). When the order is not filled by market close on Monday, it automatically expires. If Robert still wants to sell at $75 on Tuesday, he must call back to re-enter the order. This protects Robert from having a stale order execute days or weeks later when market conditions or his investment objectives may have changed.
A is incorrect because limit orders never automatically convert to market orders; they either execute at the specified limit price or expire unfilled. C is incorrect because GTC status must be explicitly requested by the client, it is not the default. D is incorrect because without GTC specification, orders do not remain active indefinitely; they expire at end of day.
The Series 65 exam tests your understanding that day order is the DEFAULT time-in-force instruction, automatically protecting clients from stale order execution. This is a critical client protection mechanism that requires clients to reaffirm their trading intentions if market conditions change. Questions often present scenarios where clients place orders without specifying duration, testing whether you understand the automatic day order designation and its implications for order management.
When a client places an order to buy or sell securities without specifying a time-in-force instruction, what is the default order duration?
B is correct. Day order is the DEFAULT time-in-force instruction for securities orders. Unless the client explicitly specifies an alternative duration (such as GTC), the order automatically expires at the end of the trading day if not executed. This default protects clients by preventing old orders from executing when market conditions have changed.
A (GTC) is incorrect because Good-Til-Cancelled must be explicitly requested; it is not the default. GTC orders remain active for extended periods (typically up to 90 days) until executed or cancelled. C (GFW) is incorrect because Good-For-Week is a specialized instruction that must be specified and is not commonly used. D (IOC) is incorrect because Immediate-Or-Cancel is a specialized execution instruction requiring immediate fill or cancellation, not a default setting.
The Series 65 exam frequently tests knowledge that day order is the automatic default unless otherwise specified. Understanding this default protects both advisers and clients from liability related to stale order execution. Exam questions often ask about order duration when clients give no specific instructions, testing whether you know the default protective mechanism built into order entry systems.
Master Investment Vehicles Concepts
CertFuel's spaced repetition system helps you retain key terms like Day Order and 500+ other exam concepts. Start practicing for free.
Access Free BetaA client placed a day order on Tuesday to buy 500 shares of DEF at $40 per share. The stock traded between $41 and $43 all day Tuesday and the order was not filled. On Wednesday morning, the stock opens at $39.50. What must happen for the client to purchase the shares at $40?
B is correct. Because the original order was a day order (the default), it automatically expired at the close of trading on Tuesday when it was not filled. Even though the stock is now trading at $39.50 (below the client's $40 limit), the expired order cannot execute. The client must place a new order on Wednesday to purchase shares at the desired price.
A is incorrect because day orders do not carry over to the next trading day; they expire at market close. C is incorrect because orders do not automatically convert to GTC status; GTC must be explicitly specified by the client when placing the order. D is incorrect because an expired order cannot execute at any price; it is no longer active in the market.
The exam tests your understanding that day orders require client re-entry after expiration, even when market conditions become favorable. This demonstrates how day orders protect clients by requiring conscious reaffirmation of trading intentions rather than allowing old orders to execute automatically. Advisers must understand this to properly manage client expectations about unfilled orders and next-day procedures.
All of the following statements about day orders are accurate EXCEPT
C is correct (the EXCEPT answer). Day orders do NOT automatically convert to GTC orders. When a day order is not filled by market close, it simply expires and is cancelled. The client must place a new order the next trading day if they still wish to execute the trade. Automatic conversion to GTC would defeat the protective purpose of day orders.
A is accurate: day order is indeed the default unless the client explicitly requests an alternative time-in-force instruction like GTC. B is accurate: unfilled day orders automatically expire and are cancelled at the close of the trading day (typically 4:00 PM ET). D is accurate: day orders serve a protective function by preventing old orders from executing days or weeks later when market conditions or client objectives may have changed significantly.
The Series 65 exam tests your understanding of what happens to unfilled day orders and the distinction between automatic expiration versus conversion to extended-duration orders. Understanding that day orders simply expire (rather than convert or carry forward) is critical for proper order management and client communication. Questions frequently test common misconceptions about day orders automatically becoming GTC orders.
A client places a limit order to sell 1,000 shares of GHI stock at $65 per share at 11:00 AM on Friday. The stock trades between $63 and $64.50 throughout Friday. The client did not specify any time-in-force instructions. Which of the following statements are accurate?
1. The order is automatically treated as a day order
2. The order will expire at the close of trading on Friday if not filled
3. The order will remain active on Monday morning
4. The client must re-enter the order on Monday if still interested in selling at $65
C is correct. Statements 1, 2, and 4 are accurate.
Statement 1 is TRUE: When no time-in-force instruction is specified, the order automatically defaults to a day order. This is the standard protective mechanism in securities trading.
Statement 2 is TRUE: Since the stock never reached $65 during Friday's trading (trading between $63 and $64.50), the unfilled day order automatically expires at market close on Friday.
Statement 3 is FALSE: The order will NOT remain active on Monday morning because it expired Friday at market close. Day orders do not carry over to subsequent trading days.
Statement 4 is TRUE: If the client still wants to sell at $65 on Monday, they must place a new order because the Friday order expired. This requirement protects the client by ensuring they consciously reaffirm their trading decision rather than having a multi-day-old order execute automatically.
The Series 65 exam tests comprehensive understanding of day order mechanics including default designation, automatic expiration timing, and the requirement for order re-entry. Questions often present multi-day scenarios to test whether you understand that day orders do not carry over to subsequent trading days and that clients must take affirmative action to reinstate expired orders. This concept is critical for proper order management and meeting best execution obligations.
💡 Memory Aid
Think "Day order = Dies at Day's end." Unless the client says otherwise, orders are DAY orders that EXPIRE at market close. Remember: "Every DAY is a fresh start" (must re-enter orders). GTC = "Good Till I Change my mind" (stays active up to 90 days). Default = Day order = Client Protection.
Related Concepts
This term is part of this cluster:
More in Order Types
Where This Appears on the Exam
This term is tested in the following Series 65 exam topics: