Posted in Finance, Accounting and Economics Terms, Total Reads: 528
Definition: Non-Directed Order
An instruction to a broker to sell or buy a security on the broker’s choice of exchange. A client can tell the broker to buy or sell a security on his/her preferred exchange. An order is considered to be directed unless the client clearly states otherwise. A non-directed order does not impose a restriction on broker to execute an order on any particular exchange however it is assumed that the broker will choose the exchange based on best price.
Many securities like foreign issues are listed on multiple exchanges, so the order for the same security can be executed on any exchange. In non-directed order the broker can choose any of the exchanges to execute the order as the broker is not specifically directed. Before the era of electronic exchanges, most of the orders were directed as brokers worked with specific exchanges. But after the advent of computers and electronic exchanges, investors and brokers have freedom to choose the exchange. Even if brokers choose the exchange, they will choose the exchange offering the best terms.