Fill or Kill order plays a huge role in the crypto market. It is a type of conditional, short-lived trade that must be fulfilled immediately otherwise, the order will be canceled. Scroll down to get the full details about the Fill or Kill (FOK) order.
What is Fill or Kill (FOK)?
A fill or kill (FOK) order is a conditional time-in-force order that is used to trade stocks, currencies, metals, and energy. When a trader or investor uses this sort of transaction, the broker must instantly execute or cancel the entire order.
On a FOK order, partial closing or opening of a position is not permitted. The order can only be executed in the specified volume. A FOK is essentially a combination of an all-or-none (AON) and an immediate-or-cancel order (IOC).
Understanding Fill or Kill
A fill or kill (FOK) order is used to ensure that a full position is executed at current prices and in a timely manner. A large order may take a long time to complete if it does not have a fill or kill indication. Because such orders are often submitted in huge numbers, the order’s delayed execution has the potential to create major changes in a stock’s price and market disruption.
A FOK should be performed on some exchanges within a few seconds of being displayed to the trading community. The market or limit order FOK is considered similar to an “all or none” order in this context, with the distinction that it is promptly canceled if it is not completely filled.
On other exchanges, a FOK is performed by filling the order with the number of shares made available by the first bid or offer. Any unfilled share balance would then be canceled. In this situation, the FOK allows a buyer or seller to fill what is possible and then cancel the remainder.
In reality, however, the fill-or-kill type of trade is uncommon. Other methods of instructing a brokerage on the time frame in which a trade is to be executed include immediate or cancel (IOC) which means to fill all or part of the order immediately, then cancel any part that cannot be filled, and good ‘til canceled (GTC), which keeps an order open until it is able to be filled at a specified price.
Fill or kill Order vs. Immediate or Cancel Order
The fill-or-kill type of trade does not occur very often instead, traders prefer employing “instant or cancel” (IOC) or “good till canceled” (GTC) type of orders. IOC allows you to fulfill a portion of your order right away. GTC holds the order open until a position at a specific price is filled.
Example of Fill or Kill
Assume an investor wants to buy 1 million shares of Stock XYZ for $15 each. A FOK order should be filed if the investor intends to buy 1 million shares fairly quickly and no less than at $15 (or greater).
Assume the order has been placed. If a broker has more than a million shares in inventory but only wants to sell 700,000 at $15, the order will be killed. If the broker is willing to sell one million shares but only at $15.01, the order will also be killed.
If, on the other hand, the broker is willing to sell the entire 1 million shares for $15, the order will be filled immediately. Furthermore, if the broker is willing to sell the full 1 million shares at a better price, say $14.99, the order would also be filled.
Conclusion on Fill or Kill Orders
So there you have it, traders! Along with the other time in force orders, a FOK order gives more flexibility for a trader when placing an order. It takes away the need to set orders manually, as they will be automatically placed if certain stipulations are met.