What Is All-Or-None Order (AON)?
All-or-None Orders are orders that fall under a type of contingency order that is executed and must be filled entirely at a single price without recourse to partial fills. All-or-None (AON) transactions are only allowed in some specific products that meet or even exceed the minimum quantity for the product. It involves a directive applied on a buy or sell order giving instructions to the broker to completely fill out the order, or not at all. It can also be that an AON transaction is executed opposite many other counterparties provided all opposing parties meet or exceed the minimum counterparty requirement specified by the exchange. The order is canceled when there are too few shares to fill out the entire order.
How AON Orders Work
AON orders are considered contingent orders when the trader fields out instructions to a broker on how the order is filled, affecting the duration of the order’s active status. Any AON order that at the time of submission cannot yet be executed will remain active during trading hours up until they are either filled or canceled. Partials fills then are prevented which can be essential with thinly traded securities transactions. But since AON orders have required specifications, they have a longer duration before execution compared to normal orders. A Fill-or Kill (FOK) order is an order combining AON and Immediate-or-Cancel (IOC). Whereas a FOK order becomes an AON order with limited duration. Most of the large AON orders can be found in illiquid markets which are harder to fill since the order contains more shares that are daily traded.
Take the case of an investor that placed an AON order to buy 300 shares of Tesla common stock at $100 per share. It simply means that the order cannot be filled until all the 300 shares are bought at $100. The investor used an AON order that specified the number of shares and the required price needed to fill the order. With the trading volume of Tesla, it is highly probable that the order can be completed once shares are traded at $100 during trading hours. Even while Tesla trades at $100 per share, it would be harder to buy 200,000 shares at $100 via AON order than buying 300 shares.
The use of technical analysis, that is, scrutinizing price patterns and trade volumes, may require the use of an AON order to exit or enter the market. If the market price is trading above or below the trading range, it is indicative of a future trend.
Fundamental analysis may also be used, which, in other words, is the study of the financial statements and financial ratios of a company compared to other companies belonging to the same industry. Fundamental analysis helps in buying or selling a company’s shares. Placing an AON order based on fundamental analysis can aid in buying or selling shares.
AON orders are made on a financial exchange to sell or buy a set of assets at a specific price. Instructions accompany AON orders on how it is to be filled not like other types of orders such as market orders or limit orders. Once placed, an AON order must entirely be filled or not at all. This gives buyers and sellers the fixed price execution of the volume in its entirety, thus, preventing the partial filling of orders. AON orders are used in algorithmic trading to measure the trending directions of a market. It prevents partial fillings which are possible when the market is highly volatile but with low volumes, like flash crashes.
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