Order Execution Qualifiers: Fill-or-Kill (FOK) vs. Immediate-or-Cancel (IOC)
A customer instructs a registered representative to enter an order to buy 10,000 shares of XYZ stock at $45.00. The customer specifies: 'Execute the entire 10,000 shares immediately in one single fill, or cancel the entire order right away.' What order qualifier must be placed on the ticket?
Fill-or-Kill (FOK) requires immediate execution of the ENTIRE order quantity at the limit price or better; if the entire order cannot be filled immediately, it is cancelled.
Complete Analysis & Legal Rationale
Order qualifiers specify execution conditions: (1) Fill-or-Kill (FOK): Must be executed IMMEDIATELY in its ENTIRETY; if not, the entire order is immediately cancelled (no partial fills); (2) Immediate-or-Cancel (IOC): Must be executed immediately, but partial fills ARE permitted (any unfilled balance is cancelled); (3) All-or-None (AON): Must be executed in its entirety, but does NOT require immediate execution (can be held as an open order).
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Fill-or-Kill (FOK) requires immediate execution of the ENTIRE order quantity at the limit price or better; if the entire order cannot be filled immediately, it is cancelled.
Fails to adhere to trade execution and settlement rules regarding B.
Fails to adhere to trade execution and settlement rules regarding C.
Fails to adhere to trade execution and settlement rules regarding D.
Official Standard: Order qualifiers specify execution conditions: (1) Fill-or-Kill (FOK): Must be executed IMMEDIATELY in its ENTIRETY; if not, the entire order is immed