Fill-or-kill vs immediate-or-cancel: what's the difference?

Fill-or-kill orders and immediate-or-cancel orders are two kinds of order that never wait. A fill-or-kill order must be filled in full straight away, or it is cancelled. With an immediate-or-cancel order, you get whatever can be filled straight away, and the rest is cancelled. Say you want 1,000 shares at $20 or less, and sellers are offering only 600 at that price right now. With fill-or-kill, you get nothing. With immediate-or-cancel, you get the 600 and the other 400 are cancelled. A normal limit order would get you the 600 and keep waiting for the rest. The choice comes down to whether 600 shares are any use to you.

A fill-or-kill order and an immediate-or-cancel order are both built to never wait. A fill-or-kill order must be filled in full the moment it reaches the market, or the whole order is cancelled. An immediate-or-cancel order is filled as far as it can be at that moment, and the rest is cancelled. The order book is the market's list of orders waiting to trade, and a normal limit order waits there until it fills. These two never do. Take an order to buy 1,000 shares at $20 or less when sellers are offering only 600 at that price. A normal limit order would get you the 600 and leave the other 400 waiting, perhaps for days. With fill-or-kill you get none, because all 1,000 weren't available. With immediate-or-cancel you get the 600, and the 400 are cancelled. Fill-or-kill suits a trade where a part is useless. A trader who needs exactly 1,000 shares, perhaps to balance another trade, gains nothing from 600 and might have to sell them again. Fill-or-kill also differs from all-or-none, which also refuses a partial fill but is allowed to wait. Immediate-or-cancel suits a trader who wants whatever is available now but not a leftover order that fills later, after the price has moved and the reason for the trade has gone. When either carries a price limit, as here, you never pay more than $20. So the test is the same every time. If part of the order is worth having, use immediate-or-cancel; if only the whole order is, use fill-or-kill.

Fill-or-kill means all of an order now or none of it. Immediate-or-cancel means whatever is there now, with the rest dropped. You can meet both on one trip to a DIY store. You need 20 boxes of floor tiles from a single batch, because the shade varies slightly between batches. The store has 14. Fourteen boxes won't finish the floor, and mixing batches would show, so you buy none. That is fill-or-kill. On the way out you pass paint on clearance. You wanted 6 tins, there are 4 left and no more are coming, so you take the 4. That is immediate-or-cancel. Neither choice is the safer one: the 14 boxes were useless to you, and the 4 tins were not. Where the picture breaks: in the store you make each call yourself, while an order makes it automatically in a split second.