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Good Til Canceled (GTC) Definition
Good ‘til canceled (GTC) order is an investment order to buy or sell a security or stock at a specified set price that remains in effect or active until it is executed, or the investor cancels the order. For example, an investor can specify to sell a stock at $10 per share, then the GTC will stand until the condition is met and share price has reached to $10, unless the investor intervenes and cancels the instruction. If the stock reached $10 per share, under the GTC order, the shares will be sold. With a GTC instruction, the order doesn’t expire at the end of the trading day like day orders but held for usually not more than 90 days after which the instructions are revisited, and further instructions are requested from the investor.
A Little more on What is Good-Till-Cancelled Orders
Through GTC orders, investors do not need to constantly monitor the stock price and can just buy and sell at specific price points and keep them for several weeks. For example, a GTC can be set to buy a stock at a specific price point different from current market price by looking at the stock’s price-to-earnings ratio, price-to-book ratio and so on without constant monitoring of the stock. Usually, GTC orders are placed because investors want to buy at a lower price than the current trading level or sell a price higher than current trading level. Sometimes, GTC order are also placed if market price of a share starts to fluctuate and there is uncertainty over its future. Sell orders can be placed at a slightly lower price to prevent further losses.
Even when using GTC orders, investor must closely monitor conditions in the market since the standing order might be executed even when there is an event that sends the stock in unexpectedly one direction or the other. Several exchanges, including the NYSE and NASDAQ do not accept GTC orders because it is considered a risk to the investors where the instructions might be carried out at an inopportune time. These usually arise due to temporary volatility in the market and might cause loss to the investor. The main risk of GTC order comes when a day of extreme volatility pushes the price past the GTC order before quickly snapping back. When the price rebounds, the investor just sold low and faces the prospects of buying high to regain the position. However, many brokerage firms still offer GTC among their services and execute the instructions internally.
References for Good Til Cancelled Orders
Academic Research on Good Til Canceled (GTC)
The information content of the limit order book: evidence from NYSE specialist trading decisions, Harris, L. E., & Panchapagesan, V. (2005). Journal of Financial Markets, 8(1), 25-67. The writer sheds light on the use of LOB (Limit Order Book) in the context of exchange business regulations. LOB helps traders to identify the future price of goods to compete with other limit order traders. The research focuses on the use of order quantities along with option values to identify the information content that is related to LOB. The writer shows the results of using SuperDot in TORQ database that helps to identify future prices of stock or goods. Stock market specialists utilize such information resources to get benefits from the market.
CGCX, Exchange, C. G. C. (2007). CGCX. In this research, the writer explores the role of Calfin Global Crypto Exchange (CGCX) that provides a platform for trading using cryptocurrency. The research indicates a complete mechanism based on CGCX model for buying and selling purposes and this model can be used to gain profits.
Limit Order Adjustment Mechanisms and Ex‐Dividend Day Stock Price Behavior, Jakob, K., & Ma, T. (2005). Financial Management, 34(3), 89-101. In this paper, the writer explores the working mechanism of NYSE and Toronto Stock Exchange as both of these exchanges do not adjust prices in OLO (Outstanding Limit Order) on ex-dividend days. The findings of the research suggest that TSX and NYSE stock behaviour is different from each other as the use of limit order is limited in TSX.
Transaction costs and market quality: Open outcry versus electronic trading, Tse, Y., & Zabotina, T. V. (2001). Journal of Futures Markets: Futures, Options, and Other Derivative Products, 21(8), 713-735. The research evaluates transactional costs and quality of exchange trading. The writer highlights the role of the London Stock Exchange (LIFFE) in the electronic trading system. The findings suggest that with the application of Hasbrouck model presented first in 1991 and reshaped in 1993 open outcry market trading has more information content. The research indicates that inventory controls have a great impact on the electronic market as compared to the open outcry market.
A USE AND SUPPORT OF STATISTICAL TOOLS IN ALGORITHMIC TRADING, Chimanbhai, S. N. (2015). In this research, the writer elaborates on the use of statistical tools that support online trading and stock exchange business. The research indicates how statistical tools are used to manage algorithmic-based trading.
Performance Analysis of COMMODITY EXCHANGES IN INDIA, Bhat, Z. H.(Doctoral dissertation, University of Kashmir). The researcher conducts a performance analysis related to the Indian Stock Exchange and explains how commodity exchanges take place in Indian online trading environment.
AN OVERVIEW TO THE INDIAN STOCK MARKET OPERATIONS, Oberoi, J., & Rani, A. This paper presents an overview concerning stock market operations in India in comparison to other global stock markets mechanisms. The findings suggest that India is increasing its stock market operations at a larger scale.
AACSB Standards: Assessment of a Finance Program, Gullett, N. S., & Redman, A. L. (2011). Journal of Academic Administration in Higher Education, 79. The research has been carried out to highlight AACSB standards that are used to assess the performance of the finance program. The paper provides a detailed analysis based on different perspectives.
The ex‐dividend day: action on and off the Danish exchange, Akhmedov, U., & Jakob, K. (2010). Financial Review, 45(1), 83-103. In this review paper, the writer investigates ex-dividend day in Danish Stock Exchange context. The Danish stock market has high price-drop rate in comparison to the US ratios. Denmark provides a unique average price mechanism that enables investors to capture dividends and they need not changing supply/demand of the regular market.
ADVISING CLIENTS AND SUBMISSION OF EXCHANGE ORDERS, Assenova-Velikova, M. G. ББК 65.34. 13 (2Рос–4Кем), 63. The research evaluates Ukrainian stock exchange business performance in comparison to the global stock exchange business. The study proposes a mechanism for exchange clients to use it to submit exchange orders.
Judgement Day: algorithmic trading around the Swiss franc cap removal, Breedon, F., Chen, L., Ranaldo, A., & Vause, N. (2018). This research throws light on the use and response mechanism of algorithmic-based trading in Siws and French stock exchange markets’ context. The writer negates a misconception that algorithm-based trading that is performed on lending platforms jeopardizes the market quality. The writer also highlights the incident of Swiss franc cap removal that was an incident of astonishment for market participants.
The order-matching engine, Shetty, Y., & Jayaswal, S. (2006).NET for Financial Markets, 41-103. This research shows how internet-based financial market works and in what ways the order-matching engine works that help stock exchange operations across the globe.