 (Updated April 2001)As today's investors know, the U.S. securities markets are experiencing a period of extraordinary trading volumes and price volatility. While these conditions affect most segments of the markets, currently they are especially acute in certain securities, such as technology stocks and initial public offerings ("IPOs"). |
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| In addition, investors in rapidly increasing numbers are taking advantage of technological developments that enable them to obtain market information and personal account information and to initiate securities transactions through electronic channels such as the Internet, telephone, personal computer, and wireless access devices. | |
| Former SEC Chairman Arthur Levitt often reminded investors of the importance of knowing what they are buying, the environment in which transactions take place, and the level of associated risk involved. | |
| At Fidelity, we believe that investors should stay informed about important investing issues. Therefore, we want to provide you with information that is important as you consider your trading through Fidelity. | |
| Potential Delays in Order Execution, Quotes, and Reporting | |
| Fidelity Brokerage Services LLC ("FBS") routes most orders to its affiliated broker-dealer, National Financial Services LLC ("NFS"). Orders for exchange-listed securities are sent to an exchange specialist for execution. With over-the-counter ("OTC") securities, NFS either executes the order as market maker or routes the order to an unaffiliated market maker for execution. Market makers generally have their own procedures for handling orders (consistent with industry rules). In periods of heavy trading and price volatility, market makers may alter their procedures on individual stocks or groups of stocks. For example, they may execute orders manually rather than electronically, or reduce the order size for which they guarantee execution. Changes in trading procedures and other circumstances may result in queues and backlogs of orders, both intra-day and at the market opening, and corresponding delays in executions in the OTC and listed markets. In such cases, the execution price of a market order may be significantly higher or lower than the market price quoted or displayed at the time you entered your order. During periods of heavy trading or volatility, the quotes displayed on your computer screen as "real time" may not reflect the current trading price or quote of the security. In addition, when quotes are rapidly changing, each quote update may not be reported to you. These conditions may also delay the transmission of order execution reports. To help you manage some of the risks of trading in a volatile market, below is a reminder of the types of orders you may place and how they are handled in the market. | |
| Types of Orders | |
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Market orders When you place a market order, Fidelity will transmit the order to a market center for full and prompt execution without regard to price. Therefore, in a volatile market, a market order may receive an execution price significantly different from the price of that security quoted when the order was entered either because the price changed abruptly or the order was delayed in transmission. Additionally, if you place a market order when the markets are closed (e.g., nights or weekends), your order will be executed at the prevailing price when the market next opens. There can be substantial changes between the most recent closing price of a security and the next opening or available price. If you have limited assets to allocate to a transaction, you should consider placing a limit order, whether during the trading day or after hours. For example, your ability to make additional contributions to your retirement account is subject to certain requirements. Therefore, transactions in retirement accounts are generally limited to the assets available in the account. If your transaction price exceeds your available account balance and you cannot otherwise pay for the transaction, Fidelity will be required to liquidate all or a portion of the transaction or other account assets to the extent necessary to satisfy your financial obligation. Any losses or costs of such a liquidation will be your responsibility. Since market orders are executed as promptly as possible, it is generally not feasible to cancel a market order even if you have not received an execution report. Your request to attempt to cancel a market order will be handled on a best-efforts basis. Although you may receive an electronic notice or verbal confirmation that we have received your request for the attempted cancellation, do not assume that it means that the trade was cancelled. Fidelity is not responsible in cases where a replacement order is placed and executed prior to your receiving confirmation of the cancellation of a prior order. In addition, due to the queuing of orders, if a market order is entered near the close of trading it may not be eligible to receive an execution. |
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Limit Orders1 A limit order will only be executed at a specific price or better. With a limit order to buy, the stock is eligible to be purchased at or below your limit price, but never above it. Similarly, with a limit order to sell, the stock is eligible to be sold at or above your limit price, but never below it. By placing a limit order instead of a market order you protect yourself from buying the stock at a price higher or selling at a price lower than you had expected. However, in volatile markets, although your limit order receives price protection, due to priority of other orders your order may not be executed even if the security is trading at your limit or better after your order is entered. Similarly, the security price may move away from your limit after your order is entered, in which case your order will not be executed. |
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Stop Orders1 Stop orders are available on certain securities to buy or sell after a stock has reached a certain specified price. A buy-stop order is placed above the current market price and automatically becomes a market order to buy when the "stop" price is reached. A sell-stop order is placed below the current market and automatically becomes a market order to sell when the "stop" price is reached. As with any market order in volatile markets, the market order triggered at the stop price may receive an execution price significantly different from the quoted price of that security when the order is triggered. In some cases, stop orders can be combined with limit orders. Market makers' procedures vary with respect to the handling of stop orders that have already hit the stop price. In addition, some market makers may not be willing to accept stop orders under certain market conditions, and this practice varies among market makers. When this occurs, Fidelity may not accept certain stop orders. |
| Investing on Margin | |
| Investing on margin involves leveraging your investments with borrowed money. The effect of using margin is amplified during periods of high price volatility. Margin investors should periodically examine how the use of margin fits within their investment objectives, risk tolerance and financial resources. Fidelity has higher margin requirements for volatile securities (refer to Fidelity.com) and may also require higher margin for concentrated accounts. | |
| IPO Securities Trading in the Secondary Market | |
| Due to the extreme volatility that is sometimes associated with trading an IPO in the secondary market (particularly one that is trading at a price much higher than the initial offering price), a customer who places a market order for such a security is at risk of receiving an execution price that is substantially different from the market price at the time the order was placed. As discussed above, this risk can be reduced by appropriate use of limit orders. The placement of a limit order in such situations would address the risk of receiving an execution that is substantially away from the market price that was quoted at the time the order was placed. However, as with any limit order in a volatile market, due to order imbalances and fast markets, a limit order may not receive an execution even if the security is trading at your limit or better after your order was entered. | |
| Access to Fidelity | |
| Fidelity has an ongoing commitment to provide the highest level of service and technology to enable you to access your account, obtain market information, and to enter your orders quickly, easily, and efficiently. However, during periods of extraordinary volatility and volume, customers using online or automated trading services may experience delays in accessing their account due to high Internet traffic or systems capacity limitations. Similarly, customers may experience delays in reaching telephone representatives. Please be aware that market conditions, including stock and bond prices, may change during these periods. Fidelity offers multiple channels through which you may place orders or access information, including the Web, touch-tone phone, and telephone representatives, so you have alternative ways to do business with us. Please be assured we are committed to providing the level of service you expect of Fidelity. | |
| 1 There may be additional fees for limit and stop orders. Refer to the commission schedule for complete details. | |
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