Definition
An iceberg order is an advanced order type used to execute a large trade by breaking it into a series of smaller, sequentially displayed orders. Only a limited portion of the total order size is visible on the order book at any given time, while the remaining quantity stays hidden. As each visible portion is filled, a new portion is automatically revealed until the full intended size is executed or the order is canceled. This structure is designed to minimize information leakage and reduce the immediate impact of a large order on price formation.
On a CEX, an iceberg order is typically implemented as a specialized form of limit order, where the trader specifies both the total size and the visible “tip” size. The matching engine then manages the replenishment of the visible slices according to the specified parameters. Unlike a standard market order, which exposes the full demand or supply at once through aggressive execution, an iceberg order focuses on controlling displayed liquidity while still targeting a defined execution price. This makes it a tool for managing exposure to slippage and adverse price moves caused by revealing large interest.
Context and Usage
Iceberg orders are conceptually tied to order book microstructure on centralized trading venues and are most relevant where large participants operate alongside smaller, more frequent traders. By keeping most of the size hidden, they aim to reduce the signaling effect that a large visible order might have on other market participants. This can influence how quickly prices adjust and how other orders, including market and limit orders, respond to perceived liquidity. The hidden component of an iceberg order does not appear in the public depth, so observers only see the recurring smaller prints as the visible portions trade.
In crypto markets, iceberg orders interact with concepts such as slippage, since the gradual exposure of liquidity can affect how aggressively counterparties need to cross the spread to obtain size. On derivatives markets that use a funding rate mechanism, iceberg orders in the underlying or the perpetual contract can shape observed liquidity without clearly revealing the full directional interest behind them. Overall, an iceberg order is best understood as a structural concept within order types on a CEX, designed to separate the total economic size of a trade from the amount of liquidity that is publicly displayed at any moment.