Iceberg Order

What is an ‘Iceberg Order’

An iceberg order is a huge single order that has been split into smaller lots, generally via the use of an automated computer, with the goal of concealing the true size of the order placed on the system.

Explaining ‘Iceberg Order’

As with the ‘tip of the iceberg’, large participants, such as institutional investors, who need to buy and sell significant amounts of securities for their portfolios, can divide large orders into smaller parts so that only a small portion of the order is visible at any given time. This is analogous to how a large body of water is only visible at the tip of an iceberg. The iceberg order, by concealing its massive size, helps to limit the price fluctuations induced by significant changes in a stock’s supply and demand conditions.

Iceberg Order FAQ

How do you identify an iceberg order?

Traders may spot iceberg orders by searching for a sequence of limit orders that seem to be originating from a single market maker and that appear to be reappearing on a regular basis. Example: An institutional investor may divide an order to acquire one million shares into ten separate orders to buy 100,000 shares each, for a total of one million shares. Investors and traders must pay careful attention to the market in order to detect patterns and realize that orders are being completed in real time.

How do iceberg orders work?

When you place an Iceberg order, it divides a huge amount into smaller revealed orders. When one revealed section is completely filled, the next disclosed piece is placed on the market. This procedure will continue until the order has been completed completely. The variance % may be configured such that the amount of each revealed component is different from the others.

Further Reading