Icebergs are receiving a lot of play and thus a lot of attention. I also see where these icebergs are increasingly frustrating traders.

 

For you screen traders…..ever wonder why the market shows only a ten lot offer, and while the market trades at that level that 10 lot keeps reappearing? It may be because an iceberg order is being used. Essentially an iceberg is a hidden order. Like a true iceberg in the ocean you see it, but you only see the portion which appears on the surface. Thus an iceberg order is an order that only shows a portion of itself at one time on the screen, allowing the bulk to be hidden below the surface. 

 

Here is an example. Say you have an order to sell 500 KCN, but you don’t want to tip your hand. You can employ the use of an iceberg. You can set things up so that you can offer 500 at a limit price, but only show little as 10 at a time. (the rule as I understand it allows for 50 to 1 ratio on an iceberg). That way the screen only shows an offer of 10 of your sell order at a time. Then, once those 10 are filled, it will show another 10, and so forth until the entire order is filled. 

 

There are a few additional caveats that need to be known, such as non iceberg orders having precedence over what is not being shown, and that when the screen gets swept it doesn’t fill the iceberg, using instead the seen orders, but I think you get the point. Essentially we are seeing icebergs employed in the soft markets with increasing frequency. In other words, what you see isn’t necessarily what is really there.  And this can work both ways, or even more than that as more and more large traders use iceberg orders.