DEFINITION of Canceled Order
A canceled order is a previously submitted order to buy or sell a security that gets canceled before it executes on an exchange. Investors may cancel an order if they enter an incorrect price or quantity or simply no longer want to buy or sell the stock.
Most market orders are executed almost immediately the moment they hit the exchange, providing there is sufficient liquidity. This makes canceling a market order before execution close to impossible. Limit orders that are outside of the current bid/ask spread can usually be canceled online or by calling the broker directly. Good ‘til canceled (GTC) orders, which remain active until purged by the investor or the trade executes, can no longer be directly placed with the Nasdaq and New York Stock Exchange (NYSE). However, most brokerages continue to offer this order type.
BREAKING DOWN Canceled Order
Orders can be canceled on the Nasdaq between 4 a.m. and 8 p.m. EST. For instance, if an investor places a cancellation order on their broker’s trading platform over the weekend, it is canceled on the exchange at 4 a.m. Monday. The NYSE allows investors to cancel orders between 7 a.m. and 4 p.m. EST. Other NYSE markets, such as NYSE American Equities and NYSE Arca Equities, also allow order cancellations in extended trading hours. As a safety check, investors should ensure that a canceled order gets purged from the order book. (To learn more about these exchanges, see: The NYSE and Nasdaq: How They Work.)
Fill or Kill Canceled Order
The fill or kill (FOK) order automatically cancels an order that cannot be filled in its entirety immediately. For example, an investor may only want to buy 1,000 shares of an illiquid stock if he or she can fill the entire order at a specific price. If the investor uses a FOK order, the order would only execute if it can fully complete. If the order cannot be completed, it would be immediately canceled. This type of order prevents small portions of stock from getting executed. Investors might also use an “immediate or cancel" order, which cancels any portion of the order that does not get filled immediately.
One-Cancels-the-Other Canceled Order
A one-cancels-the-other (OCO) order consists of two dependent orders; if one order executes the other order is immediately canceled. Traders who play breakouts could use this order type. For example, if a stock was trading in a range between $40 and $60, a trader could place an OCO with a buy limit just above the trading range and a sell limit slightly below the trading range. If the stock breaks out to the upside, the buy order executes, and the sell order gets canceled. Conversely, if the price moves below the trading range, a sell order executes, and the buy order is purged. This order type helps reduce risk by ensuring unwanted orders get automatically canceled.