Definition of canceled order

What is a canceled order?

A canceled order is a pre-submitted order to buy or sell a security that is canceled before it is executed on an exchange. Investors can cancel standing orders, such as a limit or stop order, for any reason, as long as the order has not yet been completed.

Limit and suspended orders can stay for hours or days before being executed depending on the price movement, so these orders can be logically canceled without difficulty. Market orders are a type of order that is highly unlikely to be canceled.

Key takeaways

  • Canceled orders are those that have been shipped but are no longer in effect.
  • These are mainly stop or limit orders that investors no longer want to be executed.
  • Investors cancel orders through an online platform or by calling the broker on the phone.
  • Special types of automatic cancellation orders include fill or kill (FOK), immediate or cancel (IOC), and one cancels the other (OCO).

How a canceled order works

Most market orders are executed almost immediately the moment they go public, provided there is sufficient liquidity and the market is open during normal hours. This makes canceling a market order before execution almost impossible.

Limit buy orders that are lower than the offer price, or sell orders above the offer price, can usually be canceled online through a broker’s online platform or, if necessary, by calling to the broker directly. Good Until Canceled (GTC) orders, which remain active until purged by the investor or the trade is executed, can no longer be placed directly on the Nasdaq and New York Stock Exchange (NYSE). However, most brokerages continue to offer this type of order.

Orders can only be canceled on the Nasdaq between 4 a.m. and 8 p.m. EST on normal trading days. For example, if an investor places a cancellation order on his broker’s trading platform over the weekend, it will be canceled on the exchange at 4am on Monday.

The NYSE allows investors to cancel orders between 6:30 am and 3:58 pm EST. Other NYSE markets, such as NYSE American Equities and NYSE Arca Equities, also allow order cancellations during extended trading hours. As a safety check, investors should ensure that a canceled order is removed from the order book.

Complete or delete canceled order

The Fill or Kill (FOK) order automatically cancels an order that cannot be fully filled immediately. For example, an investor may only want to buy 1,000 shares of an illiquid stock if he can fill the entire order at a specific price. If the investor uses a FOK order, the order will only be executed if it can be fully completed. If the order cannot be completed, it will be canceled immediately.

This type of order prevents small portions of stock from being executed. Investors can also use an immediate or cancellation order (IOC), which cancels any part of the order that is not completed immediately. A FOK is essentially an all or nothing (AON) order and an IOC order combined.

Order canceled one cancels the other

An order from one cancels the other (OCO) consists of two dependent orders; if one order is executed, the other order is immediately canceled. Traders who play breakouts can use this type of order. For example, if a stock was trading in a range between $ 40 and $ 60, a trader could place an OCO with a buy order just above the trading range and a sell order slightly below the trading range. If the stock shoots higher, the buy order is filled and the sell order is canceled.

Conversely, if the price moves below the trading range, a sell order is executed and the buy order is purged. This type of order helps reduce risk by ensuring that unwanted orders are automatically canceled.

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Mark Holland

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