What Is Fill or Kill (FOK)?
Fill or kill (FOK) is a conditional type of time-in-force order used in securities trading that instructs a brokerage to execute a transaction immediately and completely or not at all. This type of order is most often used by active traders and is usually for a large quantity of stock. The order must be filled in its entirety or else canceled (killed).
- A Fill or Kill (FOK) order is an order that is directed to be executed immediately at the market or a specified price or canceled if not filled.
- A FOK order combines an all-or-none (AON) specification indicating it must be filled entirely with an immediate-or-cancel (IOC) timeframe.
- Typical FOK orders last a couple of seconds to minimize disruption to the stock's price and partial fills are not allowed.
Understanding Fill or Kill
The purpose of a fill or kill (FOK) order is to ensure that an entire position is executed at prevailing prices in a timely manner. Without a fill or kill designation, it might take a prolonged period of time to complete a large order. Because such orders are typically placed for large quantities, prolonged execution of the order has the potential to cause significant changes to a stock's price and causing market disruption.
On some exchanges, an FOK should be executed within a few seconds of it being shown to the trading community. In this context, the market or limit order FOK is treated similarly to an "all or none" order with the exception that it is immediately canceled if not completely filled. On other exchanges, an FOK is executed by filling the order with the number of shares that the first bid or offer makes available. Then, any unfilled balance of shares would be canceled. In this context, the FOK is a way for a buyer or seller to fill what is possible, then cancel the rest.
In reality, however, the fill-or-kill type of trade does not occur very often. 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 Example
Assume an investor wants to purchase 1 million shares of Stock XYZ at $15 per share. If the investor wants to buy 1 million shares fairly immediately, and no fewer, at $15 (or better), an FOK order should be placed. Assume the order is placed. If a broker has more than a million shares in its inventory and would only like to sell 700,000 shares at the $15 price, the order would be killed. If the broker is willing to sell 1 million shares but only a price of $15.01, the order would be killed.
On the other hand, if the broker is willing to sell the full 1 million shares at $15, the order would be filled instantly. Also, 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.