> For the complete documentation index, see [llms.txt](https://initiativ.gitbook.io/initiativ/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://initiativ.gitbook.io/initiativ/mm_internal/4.-trading-mechanisms/4.2-order-book-trading.md). # 4.2 Order Book Trading #### Introduction The central order book is the Exchange’s primary trading mechanism: an order-driven, anonymous market in which Members submit orders that are matched automatically against one another. At launch, the order book opens each trading day with an opening auction, followed by continuous trading until the close (Section 3.7). Matching follows price-time priority with no preferential treatment for any participant category. The process is deterministic and automated under normal market conditions. Manual or voice-brokered orders are not accepted on the order book; bilaterally negotiated trades are registered through Block Clear (Section 4.4). #### Structure and display The order book is organised by price level, with buy orders (bids) ranked from highest to lowest price and sell orders (offers) ranked from lowest to highest. It displays visible orders and their aggregate quantities at each price level. The order book shows the best bid and offer, the aggregate displayed quantity at each visible price level, and the last trade price and volume. Members also have access to their own order and execution history for audit and reconciliation. The market data behind this view, and the transparency obligations that apply to it, are described in chapter 8. ## Opening At launch, the order book for every product opens each trading day with an opening auction: orders are collected in pre-open without matching, then executed together at a single price in the uncross, after which continuous trading starts (Section 3.7). ## Price-time priority and matching Under price priority, the best-priced orders are matched first, regardless of size or participant type: the highest bid and the lowest offer have priority. Under time priority, among orders at the same price the one entered earliest is matched first, established at the moment an order becomes active in the book. Order size confers no advantage: a smaller order at a better price, or entered earlier at the same price, is matched ahead of a larger one. In continuous trading, when two orders match, the trade executes at the price of the resting order, and an incoming order may fill in part across several price levels until it is complete or the available liquidity is exhausted. No participant category, including Market Maker Members, receives preferential matching priority. Some order types interact with time priority in particular ways, notably the refresh of an Iceberg order and the activation of a Stop or Stop-Limit order; these are described with the order types below. ## Order types The order book supports the following order types. No fixed maximum order size applies: every order is bounded by the Member’s Trading Limit and the order value checks in chapter 6. ### Market An instruction to buy or sell immediately at the best available price. It prioritises speed over price certainty and fills across available price levels until complete or until liquidity is exhausted. It cannot rest in the book: it is Immediate-or-Cancel by default, or Fill-or-Kill. It is not accepted in pre-open. The price collar and the maximum order value check bound how far a Market order can execute (chapter 6). For spot, a Market buy order is checked against the Member’s Spot Trading Limit as it fills, one price level at a time: the cash for each level is booked as that level executes, and any remainder the available cash does not cover is cancelled, with a reason. A Fill-or-Kill Market buy order executes only if the available cash covers the whole fill; otherwise it is rejected. ### Limit An instruction to buy or sell at a specified price or better, resting in the book until executed, cancelled or expired. It is DAY unless the Member chooses another time in force. ### Stop An instruction that becomes active when the market reaches a specified stop price, at which point it converts to a Market order. Before activation it is not visible and does not participate in matching; on activation it takes a new timestamp based on the activation time rather than its original submission, and joins the book accordingly. It guarantees execution but not price. It is Immediate-or-Cancel by default, or Fill-or-Kill. Use it for stop-loss protection or momentum entry. For example, a holder at 100 sets a stop to sell at 95; if the market reaches 95 the order triggers and sells at the best available price. ### Stop-Limit As a Stop order, but on activation it converts to a Limit order at a specified limit price and executes only at that price or better, taking a new activation timestamp for priority in the same way. It adds price protection at the cost of the execution guarantee: if the market moves through the limit before the order fills, it may remain unfilled. It is DAY by default, and can be GTC, Immediate-or-Cancel or Fill-or-Kill. ### Iceberg A Limit order of which only a part, the displayed quantity, is visible at any time. When the displayed part has executed, the next part is released from the hidden remainder. Each released part takes a new timestamp and joins the back of the queue at its price level, so the hidden remainder does not keep the original time priority. Nothing executes against the hidden remainder until it is released. An Iceberg order requires a limit price, and its displayed quantity must meet a minimum set by a rule per instrument (Section 3.1). It is DAY by default, or GTC. An Iceberg order uses the Member’s Trading Limit for its full quantity when it is entered, in the same way as a Limit order of the same size. Released parts are not checked again. ### Order types not offered The Exchange does not offer separate spread or strip order types: spreads trade through implied pricing (below). There are no auction-only order types. ## Time in force Time in force sets how long an order remains valid. * **DAY:** the order rests until executed or cancelled, and expires at the end of the trading day (Section 3.7). The default for Limit, Stop-Limit and Iceberg orders. * **Good-Till-Cancelled (GTC):** the order rests until executed or cancelled and carries over from one Business Day to the next. * **Immediate-or-Cancel (IOC):** the order executes immediately in whole or in part, and any unexecuted balance is cancelled rather than rested. * **Fill-or-Kill (FOK):** the order executes in full immediately or is cancelled in full, with no partial fills. Good-Till-Date is not offered. ## Spreads and implied pricing Calendar spreads trade on the order book through implied pricing: the Exchange derives a spread price from the prices in the two leg books. When a Member executes against it, both legs execute at once under an all-or-nothing condition, so both fill or neither does, giving the Member a guaranteed differential. ## What every order carries The Exchange keeps a record of every order, for the period MiFID II requires. Each order record holds: * the order’s terms: instrument, side, quantity, price where it has one, order type and time in force; * the Trading Account the order is entered under, which identifies its Clearing Arrangement (Section 2.4); * the identification of the client, of the person or algorithm that took the investment decision, and of the person or algorithm that executed the order, as MiFID II requires; * two flags: the trading capacity (dealing on own account, matched principal, or any other capacity), and whether the order is part of liquidity provision; * timestamps, an order identifier and, for each trade, a trading venue transaction identification code. The Member provides the first four with the order; the Exchange adds the last.