Iceberg order on Kite

An iceberg order is an order type on Kite, Zerodha’s trading platform, that allows a trader to place a large total quantity while displaying only a small fraction of that quantity, the tranche size, in the public order book at any given time. As each visible tranche is filled, the next tranche is automatically submitted to the exchange, continuing until the entire order quantity is executed or cancelled.

The name derives from the analogy of an iceberg: a small portion is visible above the surface (the order book), while the much larger bulk remains hidden below. Iceberg orders are also known as reserve orders in international market terminology and are closely related to the disclosed quantity feature on Kite.

How an iceberg order works

When a trader places an iceberg order on Kite, the following parameters are required:

• Total quantity: The full number of shares or lots the trader wishes to buy or sell.
• Tranche size (legs): Kite asks the trader to specify the number of legs (tranches) into which the total order should be divided. The platform calculates the individual tranche size as total quantity divided by the number of legs.
• Price: The limit price at which each tranche is to be executed.
• Order type: Iceberg orders on Kite are limit-based.

The first tranche is submitted to the exchange immediately. As each tranche is filled, the next is submitted automatically by the Kite platform. The exchange and other market participants see only the current active tranche, not the remaining hidden quantity.

Example

A trader wants to buy 10,000 shares of a mid-cap stock at Rs 250 limit. Placing a single 10,000-share limit order would be visible in the market depth, potentially signalling the trader’s intent and causing sellers to raise their prices. Instead, the trader places an iceberg order with a total quantity of 10,000 and 10 legs. The platform sends 1,000 shares at a time. As each 1,000-share tranche is filled, the next appears in the order book, until all 10,000 shares are purchased.

Difference between iceberg orders and disclosed quantity

Both iceberg orders and disclosed quantity achieve the same end, hiding the true size of a large order, but through different mechanisms:

Disclosed quantity is an exchange-level order parameter; iceberg orders on Kite are implemented at the broker platform level. Both serve the same market-impact-reduction purpose, but the iceberg approach through Kite gives the trader automatic re-submission without the need to monitor and manually re-enter the order.

Market impact and rationale

Large orders, when displayed in full in the order book, can signal a major buyer or seller to other participants. High-frequency traders, market makers, and alert retail traders may adjust their quotes or consume the order strategically, resulting in price slippage against the large-order trader. By showing only small tranches, iceberg orders reduce this information leakage and market impact.

This is particularly relevant for:

• Institutional and high-net-worth investors accumulating or distributing large equity positions.
• Traders working large F&O positions in moderately liquid contracts.
• Arbitrageurs who need to fill both legs of a spread at consistent prices.

Segment and availability on Kite

Iceberg orders on Kite are available for:

• NSE and BSE equity (cash segment), both CNC and MIS.
• NSE and BSE equity F&O.
• Availability for currency and commodity segments should be verified with current Kite documentation.

Iceberg orders require a minimum tranche size that meets exchange-level lot size and tick-size requirements. A tranche that would be smaller than the exchange’s minimum order size is rejected.

Validity

Iceberg orders on Kite use DAY validity. If the total order is not completely filled by the end of the trading session, the remaining unfilled tranches and the pending tranche are cancelled. The order does not carry over to the next session.

Limitations and considerations

Price remains fixed across all tranches. An iceberg order is placed at a single limit price. If the market moves away from the limit price between tranches, subsequent tranches will not fill. Unlike a TWAP or VWAP algorithmic order, an iceberg order does not adapt to price movement, it simply waits for the market to return to the specified limit.

Latency between tranches. There is a brief interval between one tranche being filled and the next being submitted. In a fast-moving market, this gap could mean missing subsequent fills if the price moves away quickly.

Still partially visible. Although the full quantity is hidden, the fact that a tranche of a specific size keeps appearing at the same price level may alert sophisticated market participants that a large hidden order exists. Some HFT strategies specifically look for iceberg order patterns in the order flow.

No partial-fill handling across tranches. If a tranche is partially filled and the market moves away, the partially filled tranche may rest unfilled. The next tranche is submitted only after the current one is fully filled.

Common mistakes

Too few legs. Selecting 2 legs for a 10,000-share order means tranches of 5,000 shares each. This may still be large enough to signal intent in a moderately liquid stock. More legs reduce the visible footprint.

Limit price too far from market. An iceberg limit order at a price the market never reaches will never fill. The order will expire at session end without execution.

Using iceberg for F&O near expiry. Near-expiry F&O contracts often have thin order books. An iceberg order in these contracts may create artificial-looking order flow that other traders can detect.

Regulatory context

SEBI permits iceberg (reserve) orders as a standard order type on Indian exchanges. NSE’s market operations manual describes reserve orders as a facility for large trades. Exchanges are required to ensure that the order book depth shown to all participants is accurate at the displayed tranche level, and that the hidden portion does not represent a misleading market signal under SEBI’s market manipulation prevention framework.

References

1. NSE circular on reserve/iceberg orders, NSE/CMPT/2020 series.
2. Zerodha support article: “Iceberg orders on Kite”, support.zerodha.com.
3. SEBI master circular on market microstructure and order types, SEBI/HO/MRD/2023.
4. BSE operational notice on disclosed quantity and reserve orders, BSE/Notice/2020 series.
5. NSE Market Operations Handbook, Section 4, Special Order Types.