Order Book Limits, Trader Controls, and Price Protections
Summary
The document discusses whether exchanges cap the total number of resting orders in an order book. Its main answer is that limits are often applied at the trader or participant level, such as constraints on the number of open orders or the rate at which orders may be submitted. It also describes price collars that reject orders placed too far from a market reference price, including the current bid or offer or a prior closing price.
These controls can indirectly constrain how many orders accumulate, even when there is no general cap on entries at a particular limit price. The document includes examples of venue-specific distance checks, but they should be read as historical illustrations rather than current universal rules. A second respondent asserts that books may hold very large numbers of orders at one price, underscoring that policies differ by venue. The discussion provides no comprehensive exchange survey or current rulebook citations, so operational decisions require checking the applicable venue's rules.
Key ideas
- Trading venues may limit open orders or order submission rates by trader identity.
- Price collars can reject orders that are too far from a reference price.
- Such controls can indirectly limit book size without imposing a universal per-price order cap.
- Order capacity and price-check rules vary by venue and should be verified against current rules.
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Full text
# Order book size limit # Order book size limit I am trying to find out if exchanges impose limits on the total number of orders which can be in an order book at any one time. Does anyone know of examples of these order book size limit policies. If they exist how are orders which violate that limit handled? Do they ignore new orders, or evict orders from the book based on price/time? ## Answer by lehalle (score 6) https://quant.stackexchange.com/a/21152 I am not aware on any rules preventing a too high number of entries at a limit price. Nevertheless you usually have controls for each trader id. A trader cannot have too many orders in the book or send them at a too high frequency. [EDIT] Moreover, on most trading platforms you cannot have orders too far away from the mid (or a reference price like the previous close). See for instance the 2014Q4 convergex traders guide p4 > Hong Kong, for instance, will reject a limit order that is more than 24 ticks away from the current bid or offer. During its pre-opening period, Tel Aviv will not allow a limit order that is more than 35% from the previous day's closing price. In the US, NYSE Arca uses percentage price checks: • If the price is USD 0.01-25.00, your order must be within 10% of the price. • If the price is USD 25.01-50.00, your order must be within 5% of the price. • If the price is higher than USD 50.00, your order must be within 3% of the price. It more or less controls the number of orders in the book. ## Answer by RONALD (score 0) https://quant.stackexchange.com/a/21256 No, there is no limit. You could have millions of bids and asks at the same price. Think about very liquid stocks, there are very many orders at the same price.
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