Not-Held Order: Definition, Uses, Types, Benefits, and Limitations

A not-held order gives a broker discretion over the timing and price of execution. Instead of requiring immediate execution at the prevailing market price, the investor allows the broker to seek a better fill within any limits specified. Because the broker is granted discretion, they are generally not liable for missed opportunities or losses that occur while attempting to obtain a better price.

Key takeaways
* Not-held orders grant brokers time and price discretion to seek better execution.
* They can be issued as market or limit orders.
* They are useful in illiquid or volatile markets but transfer execution risk to the investor.
* Brokers have no obligation to rebook or compensate an investor if a discretionary execution does not produce a better price, provided regulatory requirements are met.

How not-held orders work

When an investor places a not-held order, the broker may use judgment and market insight to decide when and at what price to execute. This is also called a discretionary or “with discretion” order. The investor can attach limits (e.g., a maximum buy price or minimum sell price), or leave it as an instruction to seek the best available price during the trading day.

Example: an investor gives a broker a not-held order to buy 1,000 shares with an upper limit of $16. The broker may wait for a more favorable opportunity; if the market rallies above $16 before execution, the broker’s discretion means the investor cannot demand compensation for the missed lower price.

When to use not-held orders

Not-held orders are most appropriate when:
* Trading in illiquid securities where immediate execution would require accepting a wide bid-ask spread.
* Markets are unusually volatile (e.g., around earnings, downgrades, or economic releases) and the investor prefers a broker’s judgment on timing.
They are less useful in highly liquid markets, where immediate execution at competitive prices is readily available.

Types of not-held orders

• Market not-held order: A discretionary market order that typically expires at the end of the trading day. The broker seeks the best available price during that window.
• Example: “Buy 1,000 AAPL — not held — execute at best price before market close.”
• Limit not-held order: A discretionary order with an attached upper or lower limit. The broker may still choose not to execute at the limit if conditions make the limit unattractive.
• Example: “Buy 1,000 AAPL with an upper limit of $200 — not held.” The broker may decline to fill at $200 if they judge a better opportunity is forthcoming.

Benefits

• Access to broker expertise: Brokers can observe order flow, patterns, and timing that retail investors cannot, potentially improving execution quality.
• Potentially better fills: In illiquid or volatile markets, discretion can avoid paying wide spreads or harmful market impact.
• Flexibility: The broker can adapt execution strategy to evolving market conditions.

Limitations and risks

• Execution risk transfers to the investor: The investor cannot generally dispute a discretionary execution if the broker followed applicable rules and procedures.
• No guarantee of better price: Discretion may lead to missed opportunities; there is no guaranteed improvement versus immediate execution.
• Requires trust: The arrangement depends on the broker’s competence and integrity; misuse of discretion is a potential concern and subject to regulatory oversight.

Conclusion

A not-held order is a useful tool when an investor prefers a broker to use judgment about timing and price, particularly in illiquid or volatile markets. It can produce better execution but shifts execution risk and responsibility to the investor, so it should be used only when the investor is comfortable granting discretion to the broker.