An anonymous investor coined the term AON order in Mena during a financial crisis.
At that time, many investors learned about their brokerage accounts being drained. People would use their credit cards to buy stocks.
They were eventually trapped with enormous interest rates due to their inability to make payments on other obligations if they were not making money or even losing money.
The economy collapsed again
Their stock market assets lost value because there was no investment growth and few capital gains for years ahead.
Not to mention that people were still paying interest on their credit cards which bought all those stocks at inflated prices before it went downhill.
They couldn’t afford to pay anymore, so they defaulted on their obligations, leaving them with damaged credit history.
The brokerage companies where they bought their stocks had no money to give back either because all the assets were already tied up in margin calls or bankruptcy claims, right before the whole market crashed.
Most financial advisors say that if you are not ready to risk losing your capital, you should not invest it. But how can one know what is going to happen?
That is why the AON order in Mena was created.
Putting an AON order on a stock purchase meant that the investor would only buy the stock if it dropped below a specific price level during trading hours.
Otherwise, they would not buy it at all. If this condition were met, the broker would buy the shares at the specific price level.
This way, investors won’t be stuck with stocks that can no longer trade, and they will not go into debt to purchase them.
How AON works
The AON order strategy was a good one for those involved in investing during times of economic collapse.
If you put an AON order on a stock purchase, it means that if the market conditions are right, you only have to pay a certain amount for your stock; otherwise, you do not have to purchase it at all.
It is a better alternative for those who cannot risk losing their capital but want some investment growth nevertheless.
An AON order is an abbreviation for All Or None. It is a type of instruction that specifies when the trade will be completed, either entirely or not at all.
It ensures that the client only executes the trade if 100% of it can be executed at their desired price.
If even one market maker out of 20 cannot fulfil this request, the entire order will not execute and remain open until it can be filled in full (or cancelled).
In conclusion
The AON option should always be explained before you get too deep into your orders to make sure you understand what you agree to get yourself into.
An AON order applies under two conditions:
- When using Good-Till-Cancelled (GTC) orders
- When using “not held” markets or limit orders
The AON Order is only used when the client wants to buy or sell securities at a specific price.
It’s generally not recommended to use an AON unless the client specifically asks for it.
However, knowing what it does can help you take steps to avoid getting yourself into trouble (i.e. let them know that they should add additional instructions to ensure that every portion of their order will get filled).
It implies that if you enter a GTC order, but set the AON, then the entire GTC order will be cancelled if it cannot execute in its entirety at once.
If you place a market or limit order and specify an AON, then it will not be executed unless all quantities are available at the desired price for you to purchase or sell.
If even one market maker does not have all of the quantity that has been requested, then the entire order will remain open until either:
- You cancel your limit or stop.
- The security price moves to your target price (in which case this is a standard limit order).
- Another trade causes your limit order to become available (in which case it finally executes).