IcebergOrders

Iceberg orders are a type of trading order used on many financial exchanges to conceal the full size of a large buy or sell order. The order is divided into a small visible portion, known as the display or tip, and a large hidden portion, called the reserve. The trading venue shows only the tip to market participants, while the remainder remains hidden until the tip is filled or the order is canceled.

Operation and behavior: When the visible quantity is executed, the system replenishes the display with more from the hidden reserve, up to the total size. The price or limit for the order typically remains the same, though some venues offer variations that adjust display size while preserving the overall limit. The display size parameter controls how much is shown at any moment.

Purpose and use: Iceberg orders aim to reduce market impact and signaling risk for large trades. By revealing only a fraction of the total size, they help institutional traders execute sizable positions without prompting adverse price moves or attracting front-running.

Variants: Fixed iceberg uses a constant tip size, while randomized or adaptive iceberg displays vary the tip to further mask intent. Some systems allow users to set minimum display sizes or automatic replenishment rules.

Pros and cons: Benefits include lower market impact and potentially better average execution prices. Downsides include the possibility of partial fills, operational complexity, and the potential for detection of replenishment patterns. Regulatory and venue-specific rules govern how iceberg orders are displayed and reported.

See also: order types, hidden orders, market impact.