An order book is the list of orders

Order (exchange)

An order in a market such as a stock market, bond market, commodity market or financial derivative market is an instruction from customers to brokers to buy or sell on the exchange.These instructions can be simple or complicated...

 (manually and now electronically) that a trading venue (in particular stock exchange

Stock exchange

A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

s) uses to record the interest of buyers and sellers in a particular financial instrument. A trading engine uses the book to determine which orders can be fulfilled i.e. what trades can be made.

Order book in securities trading

In securities trading an order book contains the list of interested buyers and the list of interested sellers. For each entry it must keep among others, some form of identifying the party (even if this identification is obscured, as in a dark pool), the number of shares and the price that the buyer or seller are asking/bidding for the particular security.

Price levels

When several orders contain the same price, they are referred as a price level, meaning that if say, a bid comes at that price level, all the orders on that price level could be potentially fulfill that bid.

Crossed book

When the order book is part of a matching engine, orders are matched as the interest of buyers and sellers can be satisfied. When there are orders where the bid price is higher than the lowest ask, those orders can be immediately fulfilled and will not be part of the open orders book. If this situation remains, due to an error or a condition of the market, the order book is said to be crossed.

Top of the book

The highest bid and the lowest ask are referred as the top of the book. They are interesting because they signal the prevalent market and the bid and ask price that would be needed to get an order fulfilled. The difference between the highest bid and the lowest ask is called the bid-offer spread

Bid-offer spread

The bid–offer spread for securities is the difference between the prices quoted for an immediate sale and an immediate purchase...

.

Book depth

The book depth refers simply to the number of price levels available at a particular time in the book. Sometimes the book is represented to a fixed depth, and orders beyond that depth are ignored or rejected, and in other cases the book can contain unlimited levels