A not-held order is a type of investment order that empowers the individual charged with the execution of that order a degree of authority in deciding exactly when to take action. An order of this type may be in the form of a limit or a market order, meaning that a broker or even a floor trader may be the professional charged with making a decision about when to actually execute the order. This type of arrangement allows the professional to use his or her judgment in the execution, presumably so that the investor can benefit from the most advantageous pricing within the marketplace.
The reference to a not-held order basically implies that the investor structures the order, then hands it off to the floor trader or broker to manage at his or her discretion. From there, the investment professional will work within whatever guidelines may be in place in terms of not only the bid or ask price but also the time frame in which to execute the order. Once in the hands of the professional, the investor usually does not attempt to hold or intervene in any way, although trade regulations in many nations that recognize the not-held order do allow the investor to cancel the directive if desired.
One of the main benefits of a not-held order is the ability to place the order in the hands of a trusted broker or floor trader that possesses a more comprehensive knowledge of the market as well as current trends. With this in mind, the investor is able to tap into that expertise and hopefully be able to benefit from the transaction in ways that would have not been possible using some other type of order strategy. Going with this type of arrangement is especially helpful when the broker has a proven track record within that market of being able to identify and secure the best possible deals for clients.
While the concept of a not-held order is attractive and can often result in a significant amount of success, there are some potential drawbacks to consider. Since the broker is granted control of when and how much is involved with the execution of the order, there must be a high level of trust on the part of the investor. In addition, brokers who accept this type of order from clients assume no responsibility if their efforts turn out to be less than successful. Unless the investor has a strong history with the broker or is able to determine the broker has a high rate of success, using some approach other than the not-held order may be a better strategy.
