Reserve and Iceberg Orders: Hidden Liquidity and Time Slicing
Summary
The document explains two ways traders can conceal order size from a public order book. A reserve order is hidden from view, so displayed depth understates the actual quantity at a price. An iceberg order displays only a small portion of a larger order; as displayed shares trade, more can be exposed from the hidden remainder. The examples illustrate how visible and hidden quantities combine to make true depth larger than the book suggests.
The text also describes time slicing, in which a venue delays displaying replacement quantity after a visible portion fills. The delay is presented as a way to make the hidden order harder to detect. Large investors may use these order types to reduce the visibility of their trading intentions, while high-frequency traders may try to infer or exploit them. The document introduces these concepts but provides no empirical evidence, venue-specific rules, or details of the later strategies it mentions. Actual order handling can vary by market and exchange.
Key ideas
- Reserve orders can conceal order quantity that does not appear in displayed book depth.
- Iceberg orders expose only a portion of a larger order and may replenish displayed quantity as it trades.
- Time slicing delays the display of replacement quantity to make an iceberg order harder to identify.
- Hidden order types can reduce the visibility of large traders' intentions, while also creating opportunities for detection.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.