What is IOC in the Share Market

Immediate or Cancel (IOC) orders execute instantly and automatically cancel any unfilled portion of the order. Discover their features, benefits, and use in high-frequency trading.

IOC (Immediate or Cancel) is an order type that executes immediately or cancels any unfilled portion of the order.

In stock market trading, execution speed can significantly impact trading outcomes. An Immediate or Cancel (IOC) order allows traders to act swiftly by ensuring that the part of the order that can be executed is completed instantly, while the remaining unexecuted portion is cancelled automatically.

This makes IOC orders particularly useful in fast-moving markets, where price fluctuations occur within seconds. Understanding what IOC orders mean, how they function, and when to use them helps traders manage transactions efficiently while minimising the risk of pending or unfilled orders.

IOC, or Immediate or Cancel, is a type of order used in the share market that ensures a trade is executed immediately or cancelled if it cannot be fully filled. It helps traders act swiftly without leaving pending orders in the system.

For example, if you place an order to buy 2,000 shares of a company at ₹100 each, and only 1,600 shares are available, the system instantly executes the 1,600 and cancels the remaining 400.

Key Takeaways:

• IOC ensures speedy execution for traders without waiting for order completion.
  

• Prevents unfilled or pending orders from remaining active in the trading system.
  

• Commonly used by active traders and institutions dealing with large volumes in fast-moving markets.

They are suitable in specific scenarios, especially for traders who need immediate action. Here are some scenarios where you can use IOC orders:

• For Time-Sensitive Trades

If you need to execute a trade quickly without leaving orders pending, an IOC order ensures completion of the process for you based on the status of the market. 

• In Volatile Markets

Stock prices can fluctuate rapidly, and IOC orders can help avoid the risks of unexecuted orders.

• For High-Volume Trades

Large trades or high-frequency traders can benefit from IOC orders. With it, you can quickly execute multiple transactions to make sure you are ordering the desired portion of the trade.

This tool comes with unique features that make it a preferred choice for many traders. These include:

• Execution: These orders work instantly, which is typically suitable for traders who need fast transactions

• Partial Execution: Unlike all-or-none orders, IOC orders can fill part of the trade and cancel the rest

• Risk Control: Traders can manage risks effectively by setting exact price levels for execution

• Useful in Volatile Markets: IOC orders help secure trades quickly and reduce exposure to sudden price changes

• Flexible Setup: Traders can customise them as limit orders (at a set price) or market orders (at the current price)

It works on the fundamental concept of safe and immediate execution, especially when the market is volatile. Here’s how it works:

• Placing an Order 

When a trader submits an IOC order, the broker sends the order to the stock exchange, where it attempts to execute the trade immediately. It will immediately execute the order based on market conditions.

• Immediate Execution and Partial Fulfilment

If the order is large, and there is not enough liquidity to fulfil the entire order, it will only fill the available portion and cancel the rest of the order. 

• Comparison with Other Types of Orders

Unlike market orders (which you can execute at the current available price) and limit orders (which specify a price at which to buy or sell), an IOC order will execute immediately or cancel.

IOC (Immediate or Cancel) orders can be placed as either Limit Orders or Market Orders, depending on how traders want their transactions to be executed. Understanding the distinction helps in choosing the right approach for specific market conditions.

1. Limit IOC Order

• The trader specifies a particular price at which the order must be executed.
  

• If the trade cannot be completed at that price immediately, the unfilled portion is cancelled.
  

• Useful when traders want price control but need quick execution.

2. Market IOC Order

• The order is executed instantly at the current available market price.
  

• Any unexecuted shares are automatically cancelled.
  

• Typically suitable for traders prioritising speed and order completion over price precision.

In short, Limit IOC Orders prioritise price, while Market IOC Orders prioritise execution speed.

Immediate or Cancel (IOC) orders provide traders with speed, precision, and control, making them particularly useful in fast-moving stock markets. They help ensure that trades are executed promptly without leaving unfilled orders in the system.

Here are some of the key benefits:

• Immediate Execution of Orders

One of the main benefits of using IOC orders is the ability to execute trades without delay. This is particularly useful for day traders or those dealing with fast-moving markets.

• No Pending Orders

Since any unexecuted portion of an IOC order is cancelled automatically, traders avoid having pending orders in the system.

• Risk Mitigation 

IOC orders help reduce the risk of slippage. This is common when the market moves between the time of placing and executing an order. By ensuring quick execution, IOC orders reduce this risk.

• Enhanced Control for Traders

As a trader, you need to have control over your order execution. With the help of IOC orders, you can ensure that the trade is complete without leaving parts of the order unfilled or pending.

By using IOC orders, traders can manage their trades efficiently while minimising risks and maintaining control in the stock market.

While Immediate or Cancel (IOC) orders can help traders execute trades quickly, they come with certain drawbacks that investors should be aware of before using them in the stock market.

• Partial Execution

The main drawback of IOC orders is that they execute only the available portion immediately and cancel the rest.

• Market Liquidity Impact

IOC orders rely on market liquidity. In low-liquidity markets or during periods of high volatility, there may not be enough shares available to fulfil the order. This can result in partial fills or cancellations.

• Risk of Order Rejection

These orders may get rejected if liquidity is insufficient or prices move unfavourably.

• Additional Fees and Costs

Using IOC orders may involve extra charges or hidden fees.

• Market Impact Risk

Although IOC orders aim to reduce market impact, large orders can still cause price fluctuations. This can affect the execution price and trade results.

Before placing IOC orders, investors should carefully consider these limitations to make informed decisions in the stock market.

Follow these steps to place an Immediate or Cancel (IOC) order on a standard trading platform.

Step 1: Log in
Access your broker’s app or web platform using your credentials.

Step 2: Choose the security
Search and select the stock or instrument; review live price, depth, and liquidity.

Step 3: Open the order ticket
Tap Buy or Sell to launch the order form.

Step 4: Select order type
Choose Market or Limit.

• For Limit IOC, enter your limit price.
  

• For Market IOC, price is auto-matched at current available levels.

Step 5: Set quantity
Enter the number of shares/contracts to trade.

Step 6: Set time-in-force
Select IOC as the validity/duration option.

Step 7: Review and place
Verify side, quantity, price (if limit), and IOC validity; submit the order.

Step 8: Check execution
View Order Book/Trade Book:

• Filled quantities execute instantly.
  

• Any unfilled portion is cancelled automatically.

Step 9: Post-order actions
If partially filled and you still intend to trade, place a fresh order as required.

IOC orders are an essential tool for traders. They offer quick action and risk mitigation in volatile markets. They also come with risks, such as partial execution and dependence on liquidity. Understanding when and how to use IOC orders is crucial for effective trading strategies.

IOC orders will be suitable for you if you are an active trader who requires immediate execution and is trading in liquid, fast-moving markets. For passive investors or those with long-term investment strategies, other order types, such as limit or market orders, may be more appropriate.

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.