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Difficulty: MediumTypes of Orders and Order Execution Strategies

A customer instructs a broker-dealer to purchase 1,000 shares of XYZ stock at a limit price of $40 per share. The customer demands that the order be filled immediately in its entirety at the specified price or better, and if the complete quantity cannot be executed right away, the entire order must be canceled without accepting any partial fill. Which order qualifier did the customer place?

  1. Fill-or-Kill (FOK)Answer
  2. B
    Immediate-or-Cancel (IOC)
  3. C
    All-or-None (AON)
  4. D
    Market-on-Close (MOC)

Answer

Fill-or-Kill (FOK)
The Fill-or-Kill (FOK) qualifier combines the requirement for immediate execution with the requirement for complete execution (no partial fills). If the trading volume at the limit price or better is insufficient to execute the full quantity immediately, the entire order is canceled automatically.

Step-by-Step Solution

1
Identify the two key constraints specified by the customer's order instruction.
The two constraints are: (1) full execution only (no partial fills) and (2) immediate execution upon order entry.
Understanding the combination of quantity constraints and timing constraints determines the correct order qualifier.
2
Compare the constraints against standard order qualifiers.
An order that must be filled immediately and completely or canceled in full is classified as a Fill-or-Kill (FOK) order.
Immediate-or-Cancel allows partial fills, while All-or-None allows deferred execution.

Key Concept

Order Qualifiers and Execution Instructions (FOK vs IOC vs AON)
Estimated Time:1m 0s
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Topics

Types of Orders and Order Execution Strategies