What is a Fill Order?

Malcolm Tatum

A fill order is a trading order that is must be filled immediately, and in accordance with the provisions determined by the investor, or be canceled at once. Orders of this type are common with trading on most markets, and have the benefit of allowing investors to immediately acquire the securities they desire. Often, the use of the fill order can make a difference in the rate of return that the investor realizes on the trade.

Businesswoman talking on a mobile phone
Businesswoman talking on a mobile phone

There are several variations on the basic fill order. One example is known as the sweep to fill order. An order of this type allows the broker to split the order into several components, with an eye toward obtaining the best pricing and still complying with the number of shares the investor wishes to purchase. This approach is often useful when the client is more interested in obtaining the shares quickly, with unit price being a secondary consideration. By sweeping through the marketplace and incrementally securing the shares from various sources, the order can be executed even if the investor requires a odd lot of shares or if there is no defined lot of shares currently available.

A limited price order is a type of fill order in which the broker must observe the investor’s stated price range that her or she is willing to pay for the desired shares of stock. If available at a price below or equal to the price specified by the investor, the broker takes action to fill or execute the order immediately. If there are currently no shares available at or lower than the price set by the investor, the order is canceled. Once the order has been handled, either by securing the desired shares or by canceling the order due to an inability to fill it, the broker reports the action to the investor. In turn, the investor can either submit another order for execution or decide to let the current set of investments in the portfolio ride until something better is identified.

One of the benefits of a fill order is that the resolution of the order takes place in a short period of time. For investors who are uncomfortable with placing orders that may be executed days, weeks, or even months later, the fill order is a great way to keep on top of the current investing strategy. Since the dispensation of the order is handled quickly one way or another, the investor can quickly determine the next course of action and move on, without having to account for an order being executed unexpected at some later date.

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