Iceberg is an order type that slices orders of larger quantity (or value) into smaller orders, where each small order, or leg, is sent to the exchange only after the previous order is filled. Iceberg order only allows Limit and Stoploss Limit (SL-L) order types. This helps reduce the impact cost while keeping large orders hidden from market-depth bids and offers.
However, limit orders can be used as market orders. When a buy limit order is placed above the current market price, it functions as a market order, offering market protection at the specified limit price. Similarly, when a sell limit order is set below the current market price, it also functions like a market order. During execution, if the market price rises above the limit price for a buy order, some legs of the order may remain pending. Similarly, for a sell order, if the market price drops below the limit price during execution, certain legs may remain pending.
What is impact cost?
Impact cost represents the difference in the actual traded price compared to the instrument's price when the order was placed. For example, if a market order to buy 1000 shares was placed when the stock was trading at ₹100, and if the actual execution price was ₹100.5, this ₹0.5 x 1000 = ₹500 would be the impact cost for the order. Similarly, if a limit order to buy 1000 shares was placed at ₹100 when the stock was trading at ₹100 and later modified to 100.3 to get a fill, 0.3 x 1000 = ₹300 is technically the impact cost.
As the size of the order increases, the impact cost goes up as well. Traders with large order values end up losing a lot more money to impact costs as compared to all other charges combined (STT, Brokerage, exchange transaction, etc).
How do Icebergs work?
As the name suggests, when a large order is placed, it is divided into smaller orders or legs, and only the first leg is placed on the exchange at first, revealing only the tip of the iceberg. Once this leg is executed, the next leg of the main order is placed, and so on, until the desired quantity is traded. The number of legs is decided by the client.
Follow these steps to place an Iceberg order:
- Click on Iceberg on the order window.
- Select Intraday or Overnight.
- Enter Quantity and the Price.
- Select Limit.
- Enter the Number of legs and click on Buy or Sell . The maximum number of legs per Iceberg is 10.
Example scenario
An order for Nifty CE of 3000 quantity (60 lots) can be divided into 5 orders of 600 each by selecting the number of legs. This way, every subsequent order of 600 will be executed only once the previous orders are executed.
Did you know?
- Since each leg is a separate order, the brokerage is charged separately. For instance, if the order is split into 5 legs, then the brokerage will be applicable for 5 executed orders individually.
- In a Stop Loss Limit (SL-L) order, once the trigger price is crossed, each leg is placed and executed sequentially as a limit order, with the next leg sent to the exchange only after the prior leg's execution.
- If any leg of an Iceberg is cancelled, all the remaining pending legs that are yet to be placed will be automatically cancelled. Similarly, if the price of any leg of the Iceberg is modified, the new price will automatically be applied to all the pending legs.
- The minimum order value is ₹1,00,000 for equity and 5 lots for F&O.
- Iceberg orders are available for NSE equity, NFO (NSE F&O), CDS (NSE currency segment), BSE equity and BFO (BSE F&O) only. Iceberg order type is not available for MCX and BCD yet.
- Icebergs can’t be used in the case of market and SL-M orders.
- Iceberg orders and minute validity are not supported during pre-open & post-market sessions.
- The disclosed quantity feature can be used for equity trades which will work very similar to Icebergs, and the disclosed quantity feature doesn’t create multiple orders and hence won't have any additional costs. Disclosed quantity feature isn’t available for F&O trades.
Order validity in minutes
Along with DAY (valid for the whole trading day until filled) and IOC (Immediate or Cancel) orders, Zerodha is introducing a new minute validity feature. An order can be set to auto-cancel if it does not complete in a given period of time, and this period is set in minutes. Iceberg orders can be placed with validity in minutes, along with regular orders.
Icebergs to overcome order freeze limits
Exchanges have a maximum order limit set for equity derivative contracts. The exchanges define the maximum number of contracts that can be bought or sold in a single order as freeze limits. This is an inconvenience to traders who want to execute larger quantities, requiring them to place multiple orders. With Iceberg orders, an order to buy 10000 or 200 lots of Nifty or more can be placed at the same time. This will not only mean not having to place multiple orders in case of a large order but also help reduce impact costs. Freeze quantity limits can be checked under Volume Freeze Quantity on the NSE website (WEB).
FAQs
In the case of an iceberg order, the visible portion of an order is executed first. The hidden portion of an order is executed only after it becomes visible in the order book. If traders have already placed orders similar to the iceberg order, then they are executed after the visible portion of an iceberg order.
Are iceberg orders illegal? ›
Are iceberg orders illegal? These orders are not deemed illegal. As a result, investors, market makers, and traders can participate in trading with this order type. They may also engage in all related investment strategies.
How do you identify iceberg orders? ›
The only way to detect Iceberg orders is by tracking the dynamics of market data. The key for successful Iceberg detection is finding the differences in the sequence of events, comparing it when a regular limit order gets executed vs those when an Iceberg order gets executed.
What are the benefits of iceberg orders? ›
Uses of iceberg order
- Concealing trading intentions: Institutional investors can use iceberg orders to execute large buy/sell trades without disclosing the actual size and intention of the trade. ...
- Lower impact cost: Large buy/sell orders can lead to panic selling or hoarding, affecting the impact cost of the security.
As the name suggests, when a large order is placed, it is divided into smaller orders or legs, and only the first leg is placed on the exchange at first, revealing only the tip of the iceberg. Once this leg is executed, the next leg of the main order is placed, and so on, until the desired quantity is traded.
What are the disadvantages of iceberg orders? ›
Disadvantages: One of the main disadvantages of an iceberg order is that it can be more expensive than a regular order. This is because iceberg orders often require multiple transactions to execute, which can result in higher trading fees.
What is the difference between iceberg order and basket order? ›
While a basket order is used for placing multiple orders at once, an iceberg order is used for splitting a large order into smaller pieces to conceal its full size. In Zerodha, traders can place both basket orders and iceberg orders, and the process of placing these orders is different.
What are iceberg order options? ›
An iceberg order type splits up a large order, displaying a piece of it on the limit book, while holding back a large undisplayed reserve. As the smaller order is executed, another is pulled from the reserve and appears on the book.
How does iceberg work? ›
Iceberg tracks individual data files in a table instead of in directories. This way, writers can create data files in place (files are not moved or changed). Also, writers can only add files to the table in an explicit commit.
How to exit iceberg orders? ›
Iceberg order how to exit
- On Iceberg orders, you can place orders with Market or Limit price as defined by you. Dhan allows you to slice orders instantly in upto 99 legs.
- Once you take a position, you can exit it in single-tap. Go to positions, tap on the position that has your position and tap on Exit Position.
Example of an Iceberg Order
If you are an institutional investor who wants to exit a company in which you own 5 million shares, for example. If the price of the share is Rs 100 each, ideally you should get Rs 500 million.
What is the iceberg rule? ›
Hemingway said that only the tip of the iceberg showed in fiction—your reader will see only what is above the water—but the knowledge that you have about your character that never makes it into the story acts as the bulk of the iceberg. And that is what gives your story weight and gravitas.
What is the difference between regular amo and iceberg? ›
AMO orders are allowed for all product types (CNC/MIS/NRML) except for CO. An Iceberg is an order type that slices orders of larger quantity (or value) into smaller orders, where each small order, or leg, is sent to the exchange only after the previous order is filled. This is only used for orders with huge volumes.
How does the iceberg model work? ›
Models such as this are designed to help us understand and work with that increased complexity. The Iceberg Model is a simple, accessible systems thinking tool which uses the metaphor of an iceberg to illustrate how the surface-level events we react to are underpinned by less visible patterns, structures, and beliefs.
What is the process of an iceberg? ›
Icebergs are large chunks of ice that break off from glaciers. This process is called calving. Icebergs float in the ocean, but are made of frozen freshwater, not saltwater. Most icebergs in the Northern Hemisphere break off from glaciers in Greenland, an autonomous territory of Denmark.
What happens after a ship hits an iceberg? ›
In the unfortunate event that your cruise ship collides with an iceberg, the extent of the damage will depend on the iceberg's speed and impact location. If the ship had struck an iceberg, the ship's hull would have sustained a deadly blow. Depending on the ship's speed, everything is OK if the hull is not breached.
