Which of the following trade allocation procedures being considered for Horizon’s trade allocation policy would NOT be consistent with Standard III(B)—Fair Dealing? A) All clients participating in block trades are give the same execution price and are charged the same commission. B) Regular orders are processed and executed on a pro-rata basis. C) When the full amount of a block order is not executed, partially executed orders are allocated on a first-in, first-out basis. Your answer: B was incorrect. The correct answer was C) When the full amount of a block order is not executed, partially executed orders are allocated on a first-in, first-out basis. All orders should be allocated on a pro-rata basis based on order size, not on a first-in, first-out basis. The other regulations satisfy the fair-dealing Standard. (Study Session 1, LOS 2.a)
C seems like an unfair method of allocating partial fills. Disclaimer: I just read section III(B) in the SOPH about 5 minutes ago.