An institutional trader enters two separate equity orders: a Fill-or-Kill (FOK) order and an Immediate-or-Cancel (IOC) order. Which of the following statements regarding the execution characteristics of these two order types are correct?
- Both FOK and IOC orders require immediate execution upon submission to the trading venue.Answer
- An IOC order permits partial execution, with any unfilled portion of the order immediately canceled.Answer
- CA FOK order permits partial fills, provided the unexecuted balance remains active as a day order.
- DAny unfilled portion of an IOC order automatically converts into a Good-'Til-Canceled (GTC) limit order.
Answer
The correct statements are that both FOK and IOC orders require immediate execution upon submission, and that an IOC order permits partial fills while canceling the unexecuted balance.
Both Fill-or-Kill (FOK) and Immediate-or-Cancel (IOC) orders require immediate market interaction. The distinguishing factor is that FOK must be filled completely or canceled entirely, whereas IOC accepts whatever quantity can be filled immediately and cancels the remainder.
Step-by-Step Solution
Key Concept
Order Execution Qualifiers: Fill-or-Kill (FOK) vs. Immediate-or-Cancel (IOC)