Iceberg order

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An iceberg order (also iceberg order , English iceberg order ) is a limited buy or sell order on a computer exchange , in which the actual volume in the open order book is not visible, but only a small fraction of it. Particularly institutional investors (eg. As banks and insurance companies) make use of this instrument, because it will avoid a deterrent to other market participants and reduce the risk of sharp price movement.

Working principle

For example, if a trader on behalf of his bank 100,000 shares of the company U want to sell for the price of 65, but will make only a maximum volume of 1,000 shares in the order book visible, it provides an iceberg order over the 100,000 units with sales limit 65 and a maximum of visible order size 1,000 pieces a. The first partial order of his iceberg order is visible in the order book as “1,000 pieces of 65 money”. If, for example, another market participant receives a buy order for 2,500 units with a limit of 70 (in the order book: “2,500 units of 70 letters”), this purchase can be carried out immediately. A partial order “1,000 pieces 65 money” then remains in the order book until the entire volume of the iceberg order has been processed. The last partial order can be for a number between 1 and 1,000, depending on the remaining volume that has not been traded.

Regulatory classification

The German futures exchange Eurex strictly classifies iceberg orders as (algorithmic) high-frequency trading that is subject to labeling and takes action against traders who place iceberg orders or iceberg trading systems without a corresponding notification in accordance with Section 80 (2) WpHG or BaFin permit in accordance with Section 1 (1a) No. Use 4d KWG. Other exchanges explicitly do not classify iceberg orders as (algorithmic) high-frequency trading.

In the legal specialist literature, the question of the regulatory classification of iceberg orders has not yet been finally clarified.

However, there are individual voices from literature and practice who see the regulation of (algorithmic) high-frequency trading by the European and German legislators as an excessively strict and impractical supervisory framework. As a result of a corresponding, less strict interpretation, iceberg orders should then no longer fall within the scope of (algorithmic) high-frequency trading.

Others

It is hardly possible for German private investors to expose such an iceberg order on the Xetra computer exchange , since they do not have direct access to Xetra and cannot observe the market as intensively as institutional investors.

literature

  • Cene Erdal: Professional stock exchange trading: Recognize connections, cope with losses, make solid profits . FinanzBook Verlag, 2013, p. 276–278 ( limited preview in Google Book search).

Individual evidence

  1. ↑ Deutsche Börse, Crash Market T7 Release 6.0, September 29, 2017, p. 11.
  2. ↑ https://service.hessen.de/xbcr/0458_SE_az_2015-005_24-06-2015.pdf .
  3. ^ For example, the Leipzig European Exchange (EEX).
  4. ↑ FIA, Reply on ESMA Consultation Paper on MiFID II / MiFIR, May 22, 2014, p. 35.
  5. ↑ Volker Baas and Mert Kilic: “The regulatory classification of the Iceberg Order.” In: Zeitschrift für Bank und Kapitalmarktrecht (BKR) 2020, p. 394 ff. (With further references).