Order book

The record of what is resting rather than what has traded. Buy orders are ranked from the highest price down, sell orders from the lowest price up, and the best of each meet at the top to form the quoted two way price. Beside every price sits the quantity available there. Matching follows the venue's published rules, conventionally by price first and, among orders at the same price, by the order in which they arrived.

How much of the book is visible varies. Aggregated by price level, it is what vendors sell as level two data or display as market depth; order by order, it is a full book, which few retail feeds carry. In a market dealt over the counter there is no single central book at all. What a platform shows there is depth assembled from the liquidity providers that firm deals with, which is an accurate view of one firm's available liquidity and not a view of the market.

A book shows intentions, not commitments, and that is where it misleads. Resting orders can be withdrawn in the time it takes an incoming order to reach them, so displayed size is not liquidity that is certain to be there. It also cannot show what has not been sent: a large participant working an order in small slices leaves almost no trace in it. Practitioners disagree about how much information a visible book carries for exactly this reason, since the incentive to display size that will never be honoured is well understood and, in its deliberate form, is market abuse that venues monitor for.