DEFINITION of 'Imbalance Only Orders (IO)'

Limit orders that provide liquidity during the opening cross and closing cross on the Nasdaq. Imbalance Only (IO) orders will execute only on the opening cross or closing cross. IO buy orders only execute at or below the 9:30am or 4pm bid price, while IO sell orders only execute at or above the offer price. Before opening/closing crosses are executed, buy/sell IO orders are re-priced to the best bid and ask price, respectively, on the Nasdaq book. IO orders must necessarily be limit orders; market IO orders are not permitted.

BREAKING DOWN 'Imbalance Only Orders (IO)'

IO orders are not displayed or disseminated. They neither add to an imbalance, nor do they establish the opening or closing price. Since IO orders are only executable during the opening cross or closing cross, they are not at risk of being executed prior to market open or close, unlike continuous market orders.

IO orders are accepted on the Nasdaq starting from 7am. Market participants cannot update IO orders for the opening cross after 9:28am, or update IO orders for the closing cross after 3:50pm. However, in both cases, new IO orders can still be entered after those deadlines.
 
Note that IO orders can sell short. Sell-short IO orders and sell IO orders priced at or below the best bid price are re-priced to the best offer price at 4pm. During the closing cross, sell-short IO orders are executed on a downtick only if the closing price is better than the best bid; these orders will not participate if the closing price is at or below the best bid.
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