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Order Imbalance (Imbalance of Orders)

Moneyzine Editor
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Moneyzine Editor
1 mins
September 20th, 2023
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Definition

The term order imbalance refers to a situation where there are surplus buy or sell orders for an equity security. Order imbalances can occur when a company makes an announcement that will materially affect the price of their stock.

Explanation

Order imbalance, also referred to as an imbalance of orders, occurs when there are not enough matching transactions for a specific security; this can result in an excess of buy or sell market orders. If the imbalance occurs before the market opens, then trading in the stock is typically delayed. If the imbalance occurs during the trading session, then the specialist has the option of suspending trading. It would be unusual for an imbalance to last more than several hours. Once enough matching orders are placed, trading will resume.

An imbalance of orders can happen when there is an announcement that may materially affect the value of a company's stock. For example, the company might be the target of a takeover, which can result in a surplus of buy orders. Alternatively, legislation might be passed that can significantly limit the company's business operations, which can result in an excess of sell orders.

Related Terms

Do Not Reduce orders, Not-Held orders, order book, Small-Order Execution System, switch orders, on-floor order, held orders, fractional discretion orders

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