What Is ‘Iceberg’ Order Functionality and Why Is It Used to Prevent Price Impact?

An 'iceberg' order is a large limit order that is broken down into smaller, visible limit orders. Only a small fraction of the total order size is displayed in the order book at any given time, while the rest remains hidden.

It is used to prevent price impact and front-running because it conceals the true size of the institutional trade, thus preventing the market from reacting to the full volume and allowing the trader to execute a large order without significantly moving the price against themselves.