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What is an “iceberg order”?

Iceberg orders were introduced by the Toronto Stock Exchange (TSX) in early 2002. The automatic system allows investment firms to make large trades in small bites in an effort to conceal big buy or sell orders that could cause prices to swing. Such orders must trade in lots of at least 2,000 shares.

For example, a company wishing to sell 80,000 shares could program a trade that would parcel the stock into 20 lots of 4,000 shares each. Trading in smaller chunks means that firms have a better chance of receiving the price they want. The full extent of the order is never publicly disclosed. Prior to the introduction of the system, firms had to enter full trading orders with the TSX or manually split them into smaller trades.