What is order book?

The list of open buy and sell orders on an exchange at various prices.

Exchanges with deep order books have better liquidity and tighter spreads. The book is the market: there is no separate price somewhere else, only the highest price someone will currently pay and the lowest price someone will currently accept, with everything else stacked behind them.

The idea people arrive with, that an exchange sets the price, is worth discarding early. The exchange operates the matching engine and takes a fee. The price comes from the orders participants place, which is why the same asset can trade a little differently on two venues at the same moment.

How it works

The book has two sides. Bids are orders to buy, sorted highest first. Asks, also called offers, are orders to sell, sorted lowest first. The highest bid and the lowest ask are the top of the book, and the gap between them is the spread. The midpoint between them is the mid price, which is what most charts and depth measurements reference.

Matching follows price-time priority. A better price is filled first, and among orders at the same price, the one placed earlier is filled first. That rule is why a resting order's position in the queue has value, and why cancelling and replacing an order sends it to the back.

Two order types drive everything. A limit order joins the book at a price you set and waits. A market order crosses the spread and consumes resting orders until it is filled. The first adds liquidity and is charged the maker rate, the second removes it and is charged the taker rate.

Most interfaces aggregate the display, grouping orders into price buckets so a book with thousands of entries fits on a screen. Changing the grouping changes how the book looks without changing anything about the market.

Example

Illustrative top of book on a single pair.

A market buy of 10 units fills entirely at $250.60. A market buy of 15 units takes all 10 there and 5 at $250.90, for an average of $250.70. A limit buy at $250.00 joins the existing 8 units and waits behind them.

Why it matters when you buy

The book determines what your order actually costs, which is a separate question from what the exchange charges. On a deep pair the difference between a market and a limit order is small. On a thin one it is the dominant cost. RampAtlas measures real books rather than quoting published figures, and the results are on the liquidity pages alongside the fee columns at the fee comparison.

Related terms

• market depth — the sizes behind the top
• spread — the gap between the two sides
• limit order — the order that joins the book
• market order — the order that consumes it
• time in force — how long an order rests
• slippage — the cost of walking down the levels

Questions

Why do two exchanges show different prices?

Because each has its own book and its own participants. Arbitrage keeps them close on major pairs, but never identical, and gaps widen on thin pairs and during volatility.

Can I see the whole order book?

Most venues publish a large portion of it through their interface and public data feeds. Hidden and iceberg orders are not fully displayed, so what you see understates real interest.

Does an order book exist on a decentralized exchange?

Some run order books, but the common design uses an automated market maker instead, quoting from a formula over a pool of assets rather than matching individual orders.