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Business News/ News / India/  Zerodha introduces iceberg orders for investors to reduce impact costs. How it works
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Zerodha introduces iceberg orders for investors to reduce impact costs. How it works

Zerodha's iceberg orders is an order type that slices orders of larger quantities into smaller orders

Photo: iStockPremium
Photo: iStock

Traders lose more to impact costs than to brokerage and taxes when trading large quantities, therefore online brokerage firm Zerodha has introduced Iceberg orders which aims to help reduce impact costs.

Citing an example, Zerodha in a tweet explained that a market order of 1000 shares placed when the stock was trading at 100, and executed at 100.5, leads to 500 in impact cost.

Iceberg is an order type that slices orders of larger quantities into smaller orders. Each order is sent to the exchange only after the previous order is filled, which will be helpful in dealing with quantity freeze limits when trading F&O, the brokerage said.

An Iceberg order is divided into smaller orders or legs, and only the first leg is placed on the exchange at first, revealing just the tip of the iceberg. Once this leg is executed, the next leg of the main order is placed, and so on, until the desired quantity is executed, it further explained.

“You can 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," the Bengaluru-based brokerage firm said in a series of tweets.

Users can follow these steps to place an Iceberg order on Zerodha's platform: Click on Iceberg on the order window, select Intraday or Overnight, enter quantity and the price, select market or limit, enter the number of legs and click on Buy or Sell, the maximum number of legs per Iceberg is 10.

Exchanges have a maximum order limit set for equity derivative contracts. With Zerodha's iceberg orders, investors can place an order to buy 10000 quantity or 200 lots of Nifty or more at the same time which will not only mean not having to place multiple orders in case of a large order but also help reduce impact costs, the company explained further.

Iceberg orders are available for NSE equity, F&O, currency, and BSE equity only. Icebergs can not be used in the case of 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, said Zerodha.

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Published: 07 Jun 2022, 12:56 PM IST
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