What is IOC in the Share Market?

IOC stands for Immediate or Cancel order. It is one of the many types of order that a trader can place in the share market. With IOC, a trader gives instruction to broker that as soon as the order is released in the market, the buying or selling of securities should happen immediately and if it doesn’t happen, the order gets cancelled without any intervention from the investor.

It is a duration order where the investors decide how long the order will remain active in the market. IOC is a zero-duration order since there are only a few seconds of timelapse between the order placement and its execution.

Example:

Mr. A initiates a Market IOC order for 1000 shares of XYZ Ltd. at Rs. 100 each. As soon as the order is entered into the system only 200 shares are available at Rs. 100/-/ in this case, 200 shares will be bought and the market IOC order for the remaining 800 shares will be automatically cancelled.

What is the need for an IOC?

An IOC should be used for the following reasons:

  • To place a large order without manipulating the prices.
  • To place a large order which will possibly get executed in tranches
  • When placing multiple orders and you cannot monitor each trade

Flexibility with IOC

Any investor can set the IOC order as a market order or a limit order:

  • When an investor places a market order the shares are bought or sold at the prevailing market prices.
  • When an investor places a limit order, they can set a specific price at which they want to buy or sell a particular scrip.

When is an IOC order effective?

An IOC order is most effective when you place a large order but do not want to influence the markets. Especially large orders with low volume stock can influence the price if left open for a long time. The IOC order doesn’t remain open for a long time and the partial fulfilment facility makes it a flexible option.

Conclusion

If used correctly, IOC order can be very efficient. Multiple IOC instructions over time can be executed without the need to keep track of their status for an extended period. To start trading with IOC orders, you can open a Demat and Trading Account.

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FAQ (Frequently Asked Questions)

Immediate or cancel order means that the order to buy or sell the securities should be executed immediatelyand in case it doesn’t happen, the order should cancel instantly.

A day order is a condition placed on an order to execute a trade at a specific price which if not executed, will expire at the end of the trading day. Also, a day order can be a limit order that will get expired when the trading day end.

An Immediate or Cancel order should be used only when:

  • Multiple orders are placed, but unable to monitor each trade at the same time
  • Place orders without impacting the share prices.

A day order if not executed gets cancelled at the end of the trading day. Whereas an IOC ends as soon as the securities are unavailable under the given price and quantity.