What is Fill or Kill (FOK)?
Fill or Kill (FOK) is a dynamic, conditional type of time-in-force order used in securities trading. This directive instructs a brokerage to execute a transaction immediately and completely or not at all. Designed primarily for active traders dealing in large volumes, this type of order insists that the entire order must be filled instantaneously or canceled (killed) altogether.
In essence, a FOK order merges the criteria of an all-or-none (AON) order with the prompt action required of an immediate-or-cancel (IOC) order.
Key Takeaways
- Immediate Execution: A Fill or Kill (FOK) order must be executed immediately at market or a specified price—or not at all.
- All-or-Nothing: FOK orders require full execution, drawing elements of the AON specification.
- No Partial Fills: FOK orders disallow partial fills, thus ensuring minimal disruption to stock prices.
The Significance of Fill or Kill Orders
The fundamental goal of a Fill or Kill (FOK) order is to guarantee the full execution of an extensive trading position at prevailing prices without delay. The absence of a fill or kill condition could result in prolonged transaction times, leading to potential market disruptions—especially for large quantity orders.
Certain exchanges mandate that an FOK order be executed within moments of being presented to the trading environment. Analogous to an “all or none” order, a market or limit order tagged FOK is instantly canceled if not filled in its entirety. Conversely, other exchanges process FOK orders by filling available shares off the initial bid or offer, followed by the immediate cancellation of any unexecuted shares. This split-execution approach caters to varied trader preferences while maintaining order quantity integrity.
Despite its strategic purpose, FOK trades are relatively rare. Other time-in-force directives like immediate-or-cancel (IOC) orders, which allow partial fills, and good ’til canceled (GTC) orders, which remain open until fulfilled at a specific price, are more commonly deployed trading strategies.
Fill or Kill Example
Let’s illustrate with an example:
Imagine an investor aiming to acquire 1 million shares of Stock XYZ at $15 per share. Seeking immediacy and bulk execution without flexibility on quantity, placing an FOK order is the strategic move. Here’s how execution scenarios might unfold:
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Partial Inventory: If a broker only offers 700,000 shares at $15 while the stipulated order targets 1 million shares, the FOK condition ensures the order is killed immediately.
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Price Deviation: A broker’s willingness to meet the quantity but at $15.01, differing from the specified price, also results in order cancellation.
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Perfect Match: Conversely, if the broker agrees to sell the entire 1 million shares at $15, the order is instantly executed. Alternatively, if the same quantity is offered at an advantageous $14.99, the order proceeds instantaneously.
Related Terms: All or None, Immediate or Cancel, Limit Order, Good ‘Til Canceled
References
- U.S. Securities and Exchange Commission. “Fill-Or-Kill Order”.
