Fill or Kill
Fill or kill (FOK) is a conditional type of time-in-force order used in securities trading that instructs a brokerage to execute a transaction immediately and completely or not at all. This type of order is most often used by active traders and is usually for a large quantity of stock. The order must be filled in its entirety or else canceled (killed).
A FOK is essentially an all-or-none (AON) and immediate-or-cancel order (IOC) combined.
Definition: Fill or Kill (FOK) is a type of conditional time-in-force order used in securities trading. It instructs the broker to execute the entire order immediately or cancel it entirely. This type of order is commonly used by active traders, especially when dealing with large quantities of stocks.
Origin: The concept of FOK orders originated from traditional stock exchanges, designed to provide traders with a way to quickly execute large trades. With the development of electronic trading platforms, FOK orders have become more widespread and convenient.
Categories and Characteristics: FOK orders can be seen as a combination of All or None (AON) and Immediate or Cancel (IOC) orders.
- All or None (AON): The order must be fully executed, or it will not be executed at all.
- Immediate or Cancel (IOC): The order must be executed immediately, and any unfilled portion will be canceled.
Specific Cases:
- Case 1: An investor wants to buy 10,000 shares of a company at $50 per share using an FOK order. If there are enough sell orders in the market to meet this condition, the order will be fully executed immediately; otherwise, the order will be canceled.
- Case 2: An institutional investor wants to quickly sell 20,000 shares of a tech company to avoid the risk of market price fluctuations. They submit an FOK order to sell the shares. If there are enough buy orders in the market, the order will be fully executed immediately; otherwise, the order will be canceled.
Common Questions:
- How does an FOK order differ from an AON order? An FOK order requires immediate full execution or cancellation, whereas an AON order only requires full execution but not necessarily immediate execution.
- In what scenarios are FOK orders suitable? FOK orders are suitable for scenarios where quick execution of large trades is needed to avoid market risk associated with partial fills.
- What are the risks of using FOK orders? The main risk is that the order may not be executed at all if there are not enough counterparties in the market to meet the order conditions.
