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Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Kill

What it is:

In the trading world, kill refers to half of a fill or kill (FOK) order, which is a client's instruction to his or her broker to either fill an order immediately and completely or cancel the entire order.
 

How it works (Example):

Let's assume you want to purchase 1 million shares of Company XYZ at $20 per share. You might instruct your broker to "fill it or kill it," meaning that your broker should buy the entire million shares at $20 a share right now (fill it) or do nothing at all (kill it).

Fill or kill orders are not the same as immediate-or-cancel orders, which permit at least partial fulfillment of an order.

Why it Matters:

Kills occur most often when a person wants to trade a large quantity of stock at a particular price or at a particular time and does not want to trigger the significant price change that often occurs when placing traditional market or limit orders for a large number of shares.

In our example, the rest of the market will know about a market or limit order to buy a million shares of Company XYZ at $20 or better and will react to the order accordingly. Traders might buy shares of Company XYZ if it is trading below $20 when you place the order or sell shares of Company XYZ if it is trading above $20 when you place the order. This can be costly to you as you wait for your broker to fill your entire order. To avoid this, you can instruct your broker to fill the order or kill it; he or she must essentially have a million shares worth of sellers lined up who are willing to sell at $20 per share in order to successfully execute your order. For this reason, fill or kill orders are pretty rare.

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