Ever heard of the Iceberg Model? India’s leading online trading platform, Zerodha, is going full throttle with this buzz of a concept – and we decided to keep you abreast.
Online brokerage Zerodha’s founder and CEO Nithin Kamath announced that the platform has introduced ‘Iceberg orders’ on Kite, which is its flagship trading platform. As ‘cold’ and intriguing as it sounds, the stockbroker has decided to divide smaller orders into smaller ones, referred to as ‘legs.’
The Catch? All orders are sent to the exchange only after the successful execution of the preceding one. Zerodha will help users place multiple smaller orders in place of a larger one.
What’s in it for investors?
It reduces the cost of impact – to a great extent. So, do we have your attention already?
Say, if the market order of 1000 shares was placed when the stock was trading at Rs.100 and executed at Rs.100.5, it leads to Rs.500 in impact cost.
Each order is sent to the exchange only after the previous order is filled, which will help deal with quantity freeze limits, especially when it comes to trading F&O.
Investors also get to decide the number of legs to be placed in the order. Iceberg orders can also be placed with time limits. Such orders will be cancelled if not executed within a given period of time.
Tip of the Iceberg
The first leg is placed on the exchange first. Once this leg is executed, the next leg of the main order is placed, and so on, until the desired quantity is executed.
Iceberg orders are available for NSE Equity, F&O, currency, and BSE equity only. Icebergs can not be used in the case of the market and SL-M orders on BSE. Iceberg orders and minute validity will not be supported in the case of pre-open & post-market sessions.
Too long? Here’s a long-liner: Zerodha has introduced ‘iceberg orders,’ an order type that slices orders of larger quantities into smaller orders; there’s a ton more that investors should know about.