In an atmosphere where trades are matched in microseconds, it becomes very difficult for traders, placing multiple trades throughout the day, to track and monitor each trade. This is where IOC order comes to the rescue.
What is IOC in share trading?
IOC stands for Immediate Or Cancel order and is one of the time bound orders available to traders. As the name suggests, when you place an IOC, or Immediate or Cancel order, if the order doesn’t get executed immediately as soon as it is placed on the exchange, it gets cancelled.
An IOC order needs to be executed almost instantly otherwise it stands cancelled. When cancelled, an IOC order is automatically cancelled, thus saving the trader the time and the effort to manually monitor and cancel pending orders.
What are the Types of IOC orders?
IOC orders can be:
- Limit IOC orders
- Market IOC orders
In a limit Immediate or cancel order, the order is executed or else cancelled when a particular limit or price point is reached.
Whereas in a market immediate or cancel order, the order is executed at the current market prices.
Example of an IOC Order
Let’s say Mr Ram initiates a market IOC order for 1,000 shares of ABC Ltd at Rs 105.50 each. As soon as the order is entered into the system, only 500 shares are available at Rs 105.50. In this case, 500 shares will be bought and the market IOC order for the remaining 500shares will be automatically cancelled.
What is a Day order?
A day order is an order, which if not executed, gets expired at the end of the trading day. A day order can be a limit day order but compulsorily gets expired at the end of the trading day.
What is the difference between a day order and IOC?
The main difference between a day order and an IOC lies in the execution part.
In a day order: Once an order is placed, if the order is not executed immediately, it stays active as pending orders and gets cancelled only at the end of trading day.
In an IOC order: Once an order is placed, if the order is not executed immediately, it gets automatically cancelled instantly.
When should you use an Immediate or Cancel order?
An IOC order should be used when:
- You want to place a large order but without manipulating the prices.
- You want to place a large order which will possibly get executed in tranches due to the huge trading quantity and low stock volume.
- You place multiple orders and cannot monitor each trade.
- To minimise the risk of forgetting to cancel an order manual at the end of trading hours.
IOC orders are extremely helpful for active traders with less time to monitor individual orders. IOC orders also help traders avoid auction trading and penalties.