Do stop orders get triggered by stock splits?

Question

Situation 1: Suppose I have a stop-loss order in place, and the company's shares split 2 for 1. As a result of the split, the company's share price will halve. Will the stop-loss order be triggered? Or will it be automatically adjusted? Or will it be automatically canceled?

Situation 2: Suppose I have a buy stop order (i.e. a stop-limit order) in place, and the company's shares undergo a 1 for 2 reverse split. As a result of the reserve split, the company's share price will double. Will the stop-limit order be triggered?

Answer 1

Corporate events such as a cash or stock dividend do not trigger orders. FINRA Rule 5330 provides for the adjustment of open orders:

5330. Adjustment of Orders

(a) A member holding an open order from a customer or another broker-dealer shall, prior to executing or permitting the order to be executed, reduce, increase, or adjust the price and/or number of shares of such order by an amount equal to the dividend, payment, or distribution on the day that the security is quoted ex-dividend, ex-rights, ex-distribution, or ex-interest, except where a cash dividend or distribution is less than one cent ($0.01), as follows:

(1) Cash Dividends: Unless marked "Do Not Reduce," open order prices shall be first reduced by the dollar amount of the dividend, and the resulting price will then be rounded down to the next lower minimum quotation variation.

2. Stock Dividends and Stock Splits: Open order prices shall be determined by first rounding up the dollar value of the stock dividend or split to the next higher minimum quotation variation. The resulting amount shall then be subtracted from the price of the order. Unless marked "Do Not Increase," the size of the order shall be increased by first (A) multiplying the size of the original order by the numerator of the ratio of the dividend or split, then (B) dividing the result by the denominator of the ratio of the dividend or split, then (C) rounding the result to the next lowest share.

Answer 2

Usually, your stop orders will be canceled before any corporate actions such as stock splits or ex-dividend days.