An order to buy or sell stock can be accompanied by a “do not increase” order to tell the broker not to correspondingly increase the shares offered or asked if a stock split or dividend of the shares occurs. Without such an order in place, the broker may opt to make an increase to compensate for the change in the overall number of shares. People can add a do not increase order to a buy or sell order if it is a concern for stock transactions, and the broker's representative will make sure it is complied with while executing the trade.
When dividends and splits occur, the number of overall shares increases. A broker concerned about maintaining proportional ownership on a client's behalf might decide to increase the number of shares available for sale, or to ask for more shares when seeking out stocks to buy. This may not be desirable to the investor, depending on the circumstances. Using a do not increase order ensures the broker will stick with the number of shares originally included in the order, no matter what happens. As long as the broker can find a buyer or seller satisfied with the terms of the offer, the order can be executed.
Typically, this type of order is attached to investor directives such as a stop order or a good till canceled order. In these types of orders, brokers are provided with specific directions on what to buy or sell in various circumstances. Additional limits, such as a do not increase order, can be added to make the investor's wishes as clear as possible. Typically, these types of orders are issued by experienced investors who are comfortable with making decisions about trading, but cannot or do not want to execute their own trades on the floor, instead selecting a brokerage to represent their interests in a financial market.
Financial advisers can assist people with determining if a do not increase order is appropriate for a given transaction, on the basis of the stocks involved, market movements, and other factors. Ultimately, brokers must comply with orders from their clients, as long as they are legal, and will execute ill-advised orders if clients insist on it. If the decision to make a do not increase order is based on insider information, material only known to a limited number of people inside a company, the sale will be considered illegal and people could face penalties.
