What Is a Fill?
A fill is the action of completing or satisfying an order for a security or commodity. It is the basic act in transacting stocks, bonds or any other type of security.
For example, if a trader places a buy order for a stock at $50 and a seller agrees to the price, the sale occurs, and the order fills. The $50 price is the fill or execution price.
Fill and Types of Securities Orders
There are several types of ways investors may attempt to fill a securities order. The first and most straightforward approach is the market order. In this scenario, an investor instructs a broker to buy or sell an investment immediately at the best available current price. This is usually a default option on an investor’s trading platform and highly likely to be executed. A market order is also sometimes called an unrestricted order and on average has low commissions, due to the lack of requirements, logistics, and effort needed to complete it.
In contrast, a limit order is an instruction to buy or sell a set amount of a financial instrument at a specified price or better. A limit order may not fill if the price the investor sets is not achieved during the period of time in which the order is left open. Limit orders may be canceled if this occurs. Limit orders guarantee that an investor does not miss a chance to buy or sell if the security achieves his or her desired price target. Buy limit orders put a cap on the price above which an investor will not pay, while sell limit orders set a target for the cheapest price the investor will sell for.
A stop order (also called a stop-loss order) is a limit order that becomes a market order once the target price is achieved. For example, if a buy stop order is entered at a price of $20 (above the current market price), and the stock achieves this price, it will automatically purchase specified shares at the next available market price (e.g. $20.05). In reverse, if a sell stop order is entered for $20, and the stock is declining, when it hits $20, it becomes a sell order at the next available market price, which could be $19.98.
Investor orders will fill in various ways, based on the type of order entered into a broker’s system. While most orders fill automatically when the price is triggered or achieved, at times, certain algorithms can specify that an order fills over a set period of time and/or based on the trading volume of a security.