An iceberg order displays a peak while holding reserve quantity undisplayed. Follow a 1,000-share refresh ledger and separate visibility, order identity and queue priority.
Iceberg order
An iceberg order, also called a reserve order, is an order that displays only part of its remaining quantity while keeping an additional quantity undisplayed. The displayed portion can be replenished from the reserve according to the venue's rules and the order's instructions. It lets a trader offer executable liquidity without showing the whole intended size at once—but does not guarantee secrecy, priority or completion.
The practical consequence is that the order book can show less quantity than is actually available to trade. A small displayed offer need not mean a small seller. Conversely, a trader cannot assume that hidden reserve exists simply because a price level keeps trading.
Total size and peak size are different instructions
Remaining total: the shares still unexecuted in that order.
Displayed quantity: the shares currently shown to other participants.
Undisplayed reserve: the remaining shares withheld from that display.
Peak: the intended displayed slice under the chosen refresh instructions. It is not an additional order quantity.
A fully hidden order has no displayed portion. An iceberg combines displayed and undisplayed interest. Both differ from a fully displayed order, whose remaining size is visible. An iceberg is a way of controlling disclosure; it is not a different definition of the limit price.
Venue terminology and order handling vary. In particular, do not treat the displayed peak as a universal cap on how much an incoming order may execute: some venues make reserve interest directly accessible under their matching rules.
Follow the shares through a refresh
Consider an original synthetic reserve sell order for 1,000 shares, initially displaying 100 and holding 900 in reserve. Assume that the displayed peak trades in full, then the next peak of up to 100 shares is replenished. There are no cancellations or amendments. This is an accounting model, not a named exchange's message sequence or allocation rule.
Accounting state
Cumulative executed
Displayed
Undisplayed reserve
Remaining total
Initially resting
0
100
900
1,000
After the first peak executes, before refresh
100
0
900
900
After the stipulated refresh
100
100
800
900
Replenishment is a transfer, not a new commitment. After the first 100 execute, total remaining quantity falls to 900. Moving 100 of those shares into display leaves 800 undisplayed. The displayed size returns to its earlier level even though the order has become smaller.
A synthetic 1,000-share order initially has 100 displayed and 900 in reserve. After 100 execute, 900 remain. Refresh displays 100 of those shares and leaves 800 in reserve. Executed plus remaining quantity stays 1,000.
Original synthetic ledger; all sizes are shares. The middle state separates execution from replenishment for explanation and does not assert a publicly observable interval or feed-message sequence.
Let R be remaining total, D displayed quantity and H undisplayed reserve. At every accounting state,
R=D+H.
With initial quantity Q0 and cumulative executed quantity F, the no-cancellation ledger also satisfies
Q0=F+R.
In the simple full-peak refresh model, a peak instruction P>0 gives D=min(P,R) and H=R−D immediately after replenishment. If fewer than a peak's shares remain, the final display is smaller; when the order is fully filled, both remaining quantities are zero. Actual systems may use different refresh triggers or randomised display sizes.
Replenishment has a queue cost
A refreshed peak does not automatically inherit the original displayed slice's place in the queue. Under Nasdaq Equity Rule 4703(h), replenishment enters new displayed interest with a new timestamp; the non-displayed interest retains its timestamp. Nasdaq's reserve interest can itself participate in executions. Those provisions are more specific than “wait for each visible slice to fill, then go to the back.” Consult the applicable order type and current rules before modelling a fill.
A persistent identifier is not proof of preserved priority either. CME's Market by Order documentation says a native, exchange-held iceberg retains its OrderID when refreshed, while its PriorityID may change. It distinguishes synthetic icebergs managed outside the exchange: their refreshed quantities arrive as new orders with new OrderIDs. The native-versus-synthetic distinction changes what the exchange holds and what a feed observer can link together.
For the surrounding mechanics, Order Books develops queue allocation, cancellation ambiguity and the limits of snapshot fill models. The lesson has a public preview; the full lesson requires membership.
Less disclosure is not invisibility
A trader may choose an iceberg to reduce the immediate size information revealed to competitors and limit the response to a large displayed order. That is a motive for controlling market impact, not a promise that impact disappears. A smaller peak may also make execution slower or expose refreshed interest to a less favourable queue position.
Repeated replenishment and executed volume can reveal clues about reserve interest. Yet replenishment at one price can also come from separate traders adding fresh orders. Detection depends on the feed, identifiers and venue mechanics; visible price-level totals alone do not uniquely identify the hidden order or its remaining size.
For a quant, the modelling discipline is to keep observed displayed depth, inferred reserve and confirmed fills separate. A replay that treats the visible book as all available liquidity misses potential reserve; one that credits unlimited hidden liquidity invents fills. An iceberg explains why displayed depth is incomplete, without making the missing quantity knowable.
Sources
Rishi K. Narang, Inside the Black Box: A Simple Guide to Quantitative and High-Frequency Trading, second edition, Wiley (2013), Chapter 7, “Other Order Types,” pp. 124–125 — grounding for disclosure, hidden orders and iceberging. The ledger and figure here are original.
