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To execute large orders under minimum price impact or to hide a market view, trading systems sometimes utilize special order execution algorithms or order types.

One example is an iceberg order, which only shows a small piece of the existing order.

What other order execution strategies or order types exist?

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    $\begingroup$ I would not describe Iceberg Orders as an algorithm but as an order which certain exchanges allow (along Limit Order, Market Order, etc.). The investor sends a single order to the exchange, specifying the price, the quantity and the "visible quantity" which is smaller than the quantity. The order then sits in the Exchange's computers much like a limit order except that the amount shown to observers is the "visible quantity" and not the actual quantity that you are willing to buy or sell. So it is a way to (partially) hide what you are doing, not a way to break a trade up into multiple orders. $\endgroup$
    – Alex C
    Aug 9, 2015 at 23:58
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    $\begingroup$ @AlexC your comment adds no value to the question. $\endgroup$
    – emcor
    Aug 11, 2015 at 21:42
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    $\begingroup$ @emcor yes his comment does and they are correct. $\endgroup$
    – user997112
    Dec 2, 2017 at 15:36

2 Answers 2

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Most of the big players offer a suite of execution algorithms for big orders, as seen in this listing from Credit Suisse.

Very generally speaking, the algorithms will have a pedigree going back to volume weighted average pricing schedules, or perhaps to the famous paper by Almgren and Chriss. They have various modifications, including use of "unusual" order types, trades in dark pools etc., etc., along with parameters exposed to Credit Suisse's customers to allow control of timing, aggressiveness and so on.

Alex C. explained in the comments how this differs from iceberg orders, which are generally used as part of an algorithmically generated set of trades.

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  • $\begingroup$ The Credit Suisse link broke $\endgroup$
    – Joseph Garvin
    Aug 22, 2019 at 7:34
  • $\begingroup$ Paper link broke too $\endgroup$
    – Joseph Garvin
    Aug 22, 2019 at 7:35
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To slice up an order you can use several execution strategies.

  • TWAP which will execute small slices of your order over a time period

  • VWAP which will spread your order over time and try to minimize slippage against the vwap benchmark for a given instrument

  • POV which will split your order up into smaller chunks and attempt to keep your order filled as a certain percentage of the total instruments volume.

You can also use various order types, like iceberg as mentioned, to show only a small part of the order. Fill or Kill (FOK) and Immediate or Cancel(IOC) are order types that are often used with the above algos to either search for dark liquidity between the bid and ask or to attempt to get an entire slice filled for a given order.

You can target a dark pool where your order will be hidden from the lit order book.

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