What does an All or None Order (AON) require?

What does an All or None Order (AON) require?

• A. Partial fills are acceptable
• B. The order must be executed completely
• C. Only the highest bidder receives execution
• D. Orders can be canceled at will

Answer: (B)

An All or None Order (AON) requires that the order must be executed completely. This means that the entire order must be filled at once or not at all. If the market cannot fulfill the full quantity specified in the order, it will remain unexecuted rather than being partially filled. This type of order is particularly useful for traders who want to ensure that they obtain their complete desired allocation of shares without risk of receiving a smaller amount, which might not meet their trading objectives. It reflects a strategic approach where a trader values the total quantity over a potentially suboptimal partial fill.

In contrast, partial fills are not acceptable for an AON order, which rules out the first option. The aspect of only the highest bidder receiving execution is irrelevant in this context as AON pertains to the quantity of the order rather than price priority, thus making the third option incorrect. Lastly, while canceling orders can occur in various trading situations, AON does not encapsulate the behavior of canceling orders at will, which excludes the fourth option.