What Is an Immediate-or-Cancel Order?

An “immediate-or-cancel” (IOC) order is a type of buy or sell trade that instructs the broker to execute all or part of the order immediately, then cancels any unfilled portion of the order.

The main benefit of the IOC is that it allows investors to make a quick purchase of the order. An IOC in trading happens to be one of the easiest ways to get securities, even when an investor is unable to execute the full portion of the order. An IOC order can be a market order or a limit order.

For example, an investor places an IOC order to buy 1,000 shares of Renewable Energy Group Inc. (REGI) with a limit price of $10.25 per share. There are two bids on the market, one for 1,500 shares of Renewable Energy Group at $10.28 and one for 650 shares of the company at $10.25. Making the immediate transaction, the broker will buy the 650 shares and cancel the investor’s remaining portion of the order of 350 shares.

If there was no bid for any shares of Renewable Energy Group that came in at $10.25 per share or lower as soon as the trade is ordered, the order is canceled. Even if shares of the company cross below $10.25 later in the day, the IOC order has already been canceled.

When to Use an Immediate-or-Cancel Order

IOC orders are generally used when ordering large quantities of stock, usually by a brokerage firm or large investor. IOC orders keep large orders of shares from being filled at different prices with their timing restriction. IOC orders are related to other timing restrictions investors can put on trades.

A fill-or-kill (FOK) order is like an IOC order in that its imperative to the broker is also for an immediate transaction that is otherwise canceled when unfilled. However, the difference between an FOK order and an IOC order is the former’s trading instruction on the quantity of shares.

An FOK order specifies a quantity of shares for the order to be met, canceling the trade if the entire quantity can’t be transacted. An FOK order has the IOC order’s immediacy without the potential for partial order fulfillment.

IOC orders are in contrast to day orders and good-til-canceled (GTC) orders. Day orders are different from IOC orders in that they remain open only until the end of the day if not filled. GTC orders, also known as valid-til-canceled (VTC) orders, are the opposite of an IOC order. GTC orders remain open until they are filled. Most brokers will allow a GTC order to remain open for 60 days to 180 days before cancelation.

Closing

Immediate or cancel is a type of stock order best suited for ensuring a timely trade for shares of stock at either a limit or market price, regardless of whether the entire position is filled. Compared to other timing restrictions placed on trade orders, IOC orders allow at least a partial filling of the order by the broker. For large orders of stock, this keeps the investor from having to make multiple purchases at different prices.