What is a Fill or Kill (FOK) order?
– A Fill or Kill (FOK) is a time‑in‑force instruction attached to a securities order that requires the entire order to be executed immediately and completely or else be canceled (killed). If the broker/exchange cannot fill the full quantity at the specified terms right away, the order is not executed at all.
– FOK combines the “all‑or‑none” (AON) requirement with the “immediate” requirement of an immediate‑or‑cancel (IOC) order.
Why traders use FOK
– Ensure all‑at‑once execution: prevents a partial fill that would leave the trader with an unwanted partial position.
– Control market impact: reduces the time over which a large order is worked in the market, potentially limiting information leakage and price movement.
– Certainty of outcome: you either get the entire trade immediately at the price you set (or better) or you get no trade.
Key differences (FOK vs similar orders)
– FOK: All shares must be filled immediately or the entire order is canceled.
– IOC (Immediate‑Or‑Cancel): Fill all or part immediately; cancel any unfilled portion.
– AON (All‑Or‑None): Requires whole order to be filled but not necessarily immediately — may remain active until filled or canceled (depending on TIF).
– GTC (Good‑Til‑Canceled): Remains active until canceled or filled (subject to exchange rules).
How exchanges may treat FOK
– On some venues, FOK must be executed within a few seconds of being displayed; if the full size isn’t available immediately, the order is canceled.
– On other venues, the order may be filled to the extent the first counterparties can satisfy, and any unfilled balance is canceled (this behavior is closer to an IOC). Practices can vary by exchange and order‑routing logic, so confirm with your broker.
Illustrative example
– You want to buy 1,000,000 shares of XYZ at $15.00 FOK (limit).
– If a counterparty is willing to sell the full 1,000,000 at $15.00 (or better), the FOK is filled immediately.
– If only 700,000 shares are available at $15.00, the FOK is canceled (no partial execution).
– If the full size is available only at $15.01, the FOK is canceled because the limit price was exceeded.
Advantages
– Prevents partial execution that could complicate hedging or portfolio targets.
– Limits time in the market, lowering the chance of signalling and adverse price movement.
– Provides quick certainty: filled in one event or not at all.
Disadvantages and risks
– Execution risk: higher chance of no execution compared with flexible types (IOC or GTC).
– Missed opportunity: if only part of the liquidity exists now but more becomes available moments later, you’ll miss that additional liquidity.
– Market orders with FOK: risky — if you place a market FOK, the broker must fill the entire size instantly at prevailing prices, which could lead to severe price slippage on large orders or thin markets.
– Not widely supported by all brokers/exchanges; behavior may vary.
When to consider using a FOK
– You need a large block filled in one go (institutional/block trades).
– You cannot accept a partial position because of hedging, regulatory, or operational constraints.
– You want immediate certainty about execution and are willing to forgo execution if the full size isn’t available at once.
Alternatives to FOK
– IOC: If partial fills are acceptable but you want immediate execution of what is available.
– AON with GTC: If you want the all‑or‑none requirement but are willing to wait.
– Work the order algorithmically (TWAP/VWAP) or use block/desk trades and dark pools to find liquidity with less market impact.
– Iceberg orders (display just a portion) to hide true size and reduce market impact.
Practical steps to place and manage a FOK order
1. Pre‑trade planning
– Determine whether you truly require an all‑or‑none execution immediately.
– Estimate market liquidity for the size you want — check recent trade sizes, depth of book, and typical daily volume.
– Decide limit vs market: prefer a limit price to avoid unexpected slippage.
2. Confirm broker/exchange capabilities
– Verify with your broker that they accept FOK orders and confirm the exact behavior they will follow (strict FOK vs FOK that allows immediate partial fill then cancellation).
– Ask how order routing, smart‑routing, or internalization will be handled.
3. Enter the order
– Specify: ticker, buy/sell, total quantity, limit price (or market), and time‑in‑force = FOK.
– For large institutional orders, consider routing to a block desk or using algorithms rather than a single public FOK.
4. Monitor execution
– Execution should be immediate. If filled, verify fills and price(s). If killed, no partial fills should show (unless broker’s venue rules differ — verify).
– If killed, evaluate next steps (see step 5).
5. Post‑kill decision (if order is canceled)
– Reassess: was the limit price too aggressive? Is liquidity transient?
– Options: place an IOC at the same price to capture partial liquidity, use multiple smaller FOKs on different venues, use a limit GTC/AON, engage a broker’s block desk, or employ algorithmic execution.
6. Record keeping
– Keep execution reports and timestamps for compliance and performance analysis — FOKs are typically time‑sensitive.
Practical examples of usage
– Institutional block trade: an asset manager must buy 2 million shares to meet a mandate and cannot accept partial completion for risk limits — they may use FOK when a counterparty is likely to have block inventory.
– Opportunistic short‑window trade: a trader sees a temporary quote improvement and will only transact if the full amount can be taken immediately — they issue a FOK to lock that outcome.
Best practices and cautions
– Use a limit price whenever possible to cap execution price.
– For very large orders, consider alternative liquidity sources (block desk, dark pools, crossing networks) because public FOKs may be difficult to satisfy.
– Confirm whether your broker or trading platform shows FOK as an option and how it’s implemented.
– Backtest or paper‑trade execution strategies if you intend to use FOKs regularly.
Regulatory and educational sources
– Investopedia — definition and explanatory material on Fill or Kill (FOK): https://www.investopedia.com/terms/f/fok.asp
– U.S. Securities and Exchange Commission / Investor.gov — glossary and investor guidance on order types including FOK: https://www.investor.gov/introduction-investing/investing-basics/glossary/fill-or-kill-order
Summary
A Fill or Kill order is a precise tool for traders who require an immediate, all‑or‑nothing execution. It is most appropriate for large block trades or situations where a partial position would be problematic. Because of its strict execution requirements and uneven support across brokers/exchanges, verify broker behavior and consider alternative execution strategies (IOC, algorithms, block desks, dark pools) when liquidity is uncertain.