Hidden Liquidity: Icebergs and Reserve Orders
The visible book is not the whole book. How hidden and partially displayed orders work, and how their presence can be inferred from trades.
Large participants rarely want to show their full size. Displaying a large resting order invites others to trade ahead of it or to infer the participant’s intent. Many venues therefore support order types that hide some or all of an order’s quantity.
Types of hidden orders
- Iceberg or reserve orders: a visible portion is displayed and replenished from a hidden reserve as it fills.
- Fully hidden orders: no quantity is displayed, usually with lower time priority than displayed orders at the same price.
- Algorithmic slicing: not an order type, but achieves similar concealment by sending many small orders over time.
Inferring hidden size
Hidden liquidity leaves traces. When the executed quantity at a price level exceeds the quantity that was displayed there, the difference must have come from hidden orders. When a displayed level repeatedly refills to the same size immediately after trading, an iceberg is a likely explanation.
This publication is provided for informational purposes only and does not constitute investment, legal, or tax advice, or an offer or solicitation to buy or sell any asset. Live figures are computed from third-party public market data and may be delayed, incomplete, or inaccurate.
