Allocating a partially filled order fairly
Series XXI-B case study · set 1, case 6 of 6 · 5 questions · 2 marks each
Question 1 of 5Case practice
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A PMS firm’s written allocation policy requires pre-trade recording of each eligible account’s intended quantity and proportional allocation of partial fills, without preference for fee level. Account A requests 600 shares and Account B requests 400 shares of the same security through one combined order. Only 500 shares are filled at ₹200, with total brokerage of ₹1,000 allocated in proportion to filled quantity. Both accounts have enough cash and the purchase fits both mandates. After the fill, the share price rises sharply. A salesperson asks the manager to assign all 500 shares to A because A pays a higher fee. Assume whole-share proportional allocation is possible and no other costs apply.
All amounts and contract terms in this case are hypothetical.
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The case and its answers
Every question of this case, with its answer and why each other option is wrong.
A PMS firm’s written allocation policy requires pre-trade recording of each eligible account’s intended quantity and proportional allocation of partial fills, without preference for fee level. Account A requests 600 shares and Account B requests 400 shares of the same security through one combined order. Only 500 shares are filled at ₹200, with total brokerage of ₹1,000 allocated in proportion to filled quantity. Both accounts have enough cash and the purchase fits both mandates. After the fill, the share price rises sharply. A salesperson asks the manager to assign all 500 shares to A because A pays a higher fee. Assume whole-share proportional allocation is possible and no other costs apply.
All amounts and contract terms in this case are hypothetical.
Q1How many filled shares should Account A receive under the stated policy?
Option A. 300 shares — Correct answer
Option B. 600 shares
Why it is wrong: Only 500 shares were filled in total.
Option C. 250 shares
Why it is wrong: This splits equally despite unequal intended orders.
Option D. 500 shares
Why it is wrong: This favours A contrary to the proportional policy.
Answer: A. A receives 500 × 600/(600+400) = 300 shares. Remember: Apply a documented allocation method consistently.
Hint, shown before you answer in practice mode: A requested 60% of the total order.
XXIB-S1-C06-Q1easynumerical
Q2How many filled shares should Account B receive?
Option A. 400 shares
Why it is wrong: This is B’s intended order before the partial fill.
Option B. 200 shares — Correct answer
Option C. 250 shares
Why it is wrong: This ignores the original 60/40 order ratio.
Option D. 0 shares
Why it is wrong: This follows the salesperson’s preference, not the policy.
Answer: B. B receives 500 × 400/1,000 = 200 shares. Remember: Partial fills should reconcile to the total executed quantity.
Hint, shown before you answer in practice mode: B receives 40% of the available fill.
XXIB-S1-C06-Q2easynumerical
Q3What total purchase cash including allocated brokerage is charged to A?
Option A. ₹60,000
Why it is wrong: This excludes A’s brokerage share.
Option B. ₹61,000
Why it is wrong: This assigns all brokerage to A.
Option C. ₹1,01,000
Why it is wrong: This charges the full combined order to A.
Option D. ₹60,600 — Correct answer
Answer: D. 300 × ₹200 + 60% × ₹1,000 = ₹60,600. Remember: Allocate execution costs with the stated allocation basis.
Hint, shown before you answer in practice mode: Add A’s share purchase value and 60% of brokerage.
XXIB-S1-C06-Q3mediumnumerical
Q4What is the key problem with changing the allocation after the price rise?
Option A. A always must receive no shares
Why it is wrong: The recorded rule entitles A to its proportion.
Option B. It uses a favourable known outcome to prefer one client over the pre-recorded fair method — Correct answer
Option C. Fee levels can never be recorded
Why it is wrong: The policy forbids using them to favour allocation, not keeping fee records.
Option D. The trade automatically becomes unprofitable
Why it is wrong: The issue is fair allocation, not this claim about profitability.
Answer: B. The proposed reassignment abandons the recorded method after observing a favourable outcome and disadvantages B. Remember: Avoid hindsight-based client preference in trade allocation.
Hint, shown before you answer in practice mode: Compare the request with the pre-trade policy.
XXIB-S1-C06-Q4mediumapplication
Q5Which evidence best supports a later review of this allocation?
Option A. Only the final share-price chart
Why it is wrong: It does not establish what was intended before execution.
Option B. A verbal statement that the salesperson agreed
Why it is wrong: Agreement after the event does not replace a traceable process.
Option C. Time-stamped intended quantities, execution details and the allocation calculation — Correct answer
Option D. Only A’s fee invoice
Why it is wrong: A fee invoice does not prove fair allocation.
Answer: C. Pre-trade intentions plus fill and cost records let a reviewer verify the 300/200 allocation and related charges. Remember: Maintain records that connect policy, order and allocation.
Hint, shown before you answer in practice mode: The reviewer must reconstruct the decision before and after execution.
XXIB-S1-C06-Q5mediumapplication
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