What Is the Meaning of Fill or Kill (FOK)?
A fill-or-kill (FOK) time-in-force order in securities trading orders a brokerage to execute a transaction promptly, entirely, or not at all. Active traders generally place huge stock orders using this sort of order. Complete the order, or it will be canceled. A FOK is a combination of AON and IOC.
Comprehending Fill or Kill
Fill-or-kill (FOK) orders quickly execute a position at current prices, and colossal demand may take a long time without a fill-or-kill indication. Because such charges are usually significant, protracted execution might cause stock price movements and market disruption.
Some exchanges should execute a FOK within seconds of showing it to traders. Market or limit order FOKs are handled as “all or none” orders, except they are promptly canceled if not filled, and other exchanges execute FOKs by filling the order with the first bid or offer’s shares. Unfilled shares would be canceled. Buyers and sellers can use the FOK to fill in what’s available and cancel the remainder.
In actuality, this trades are rare. IOC and GTC are other ways to instruct a brokerage on the time frame for a transaction. The IOC immediately fills all or part of the order and cancels the rest. GTC keeps an order open until it can be filled at a specified price.
Example
Say an investor wishes to buy 1 million Stock XYZ shares at $15 each. If the investor wishes to acquire 1 million shares quickly and at $15 or better, submit a FOK order. Say the order is placed, and brokers who possess over a million shares and wish to sell 700,000 for $15 disrupt the order. The broker would kill the order if offered 1 million shares at $15.01.
If the order is promptly fulfilled after the broker sells 1 million shares for $15, the broker can also be satisfied by selling all 1 million shares for $14.99.
Conclusion
- Fill-or-kill (FOK) orders are swiftly fulfilled at market price or canceled if they cannot be finished.
- Fill-or-kill (FOK) hierarchies have an all-or-none (AON) condition and an immediate-or-cancel (IOC) phase.
- To avoid any fluctuations in stock values, FOK orders, also known as “fill or kill” orders, often have a concise duration, only lasting a few seconds at most. In addition, these orders include a firm prohibition on partial fills.
