A large order sitting in the book is a target. Everyone can see it, everyone can trade around it, and the trader who placed it pays for that visibility in worse fills. So large orders are often not shown whole. The exchange lets an order display a small slice and hold the rest back, refilling the slice each time it is taken. That order type is called an iceberg, and it leaves a mark on the tape that a careful reader can find.
How the order works
On CME Globex the attribute is called display quantity. A trader enters a total of, say, 200 contracts with a display of 10. The book shows 10 at that price. When those 10 are filled, the exchange places the next 10 at the same price, and it goes to the back of the queue at that level because it is a new order. This repeats until the 200 are done or the order is pulled. Other venues have their own names for the same mechanism, and the behaviour is the same: the visible size understates the real size at that price.
What it looks like on the tape
The book shows 10. The tape prints 10, then 10, then 10, then 10 at that price, and the book still shows 10. Volume traded at the level climbs past anything the book ever displayed. That gap between what traded and what was ever shown is the signature. A footprint chart makes it easy to see, because the cell at that price fills with volume while price stays put.
Why it holds price
Every aggressive order that hits the level is absorbed by a refill rather than by the next price. As long as the refills keep coming, the market cannot move through that price without first exhausting the hidden total. That is why price can sit on a level for minutes with heavy volume and no progress. When the iceberg finishes, or is pulled, the same aggression that could not move price suddenly can, and the move away is often fast.
What it is not
- It is not a guarantee of direction. An iceberg bid can be a buyer who is done at the size they wanted, after which nothing holds the level.
- It is not visible in the book. By design, the book shows the slice. Only the tape and the volume-at-price tell you it was there.
- It is not the same as a large resting order that is shown whole. A shown order can be pulled before it trades; an iceberg has already traded, repeatedly.
What to actually do with it
- Watch a level where price stalls, and compare volume traded at that price with the size the book ever displayed there.
- Treat the level as held while the refills keep printing, and treat the first move away after they stop as the information.
- Do not trade the first stall. Icebergs are more common than reversals; most are somebody finishing a job.