If you have been into online trading for some time now, you may be familiar with the concept of order book and the trade book. When you operate your online trading account, you normally make it a point to check your order books and your trade books to see the status of execution. But a lot of traders and investors do not comprehensive the finer points of difference between an order book and a trade book. Let us here look at the difference between the order book and trade book and explore what this debate about trade book vs order book is all about. Let us start off by understanding what is order book and trade book.

What exactly is the Order Book?
As the name implies, the order book is an aggregation of all your orders placed in the system. For example, assume that you want to purchase 1000 shares of Tata Steel. You will then place an order to buy 500 shares at Rs.600 and another 500 shares at Rs.590, so that your averaging purchase cost comes down to Rs.595. The order will only be accepted if your trading account is sufficiently funded in case of delivery purchase. In case you are buying the stock for intraday trading purpose then your trading account must be funded to the extent of the margin requirement. You place both buy and sell orders in the system and once the order is accepted, the system assigns a unique Order Reference Number to that particular order. The Order Book in your trading account is the register of all orders placed by you be it for delivery, intraday, futures or options. The order can be either filtered by product or you can take a comprehensive view of all your orders.

How the Trade Book is different?
An order once placed in the system is not a guarantee that it will be executed. Let us take the above instance of Tata Steel. Suppose the price of Tata Steel in the market went down to Rs.593 and then bounced back to Rs.610. In this case, the order (500 at Rs.600) would have been executed but your second order (500 @ 590) will not have been executed. So your order book will still show an order of 1000 shares but 500 shares will show as "Executed " and the balance 500 shares will show as "Pending ". The Trade book, on the other hand, has nothing to do with pending orders. It only shows executed orders. In the about instance, the Trade Book will only show (500 @ Rs.600) as executed with the price at which it has been executed. The overall trade of 500 shares will be broken up into a series of smaller trades based on market volumes and each such trade will have a unique trade number. The Trade Book also shows the average price of execution.

Some unique points to note about Order Book and Trade Book
Having understood the unique aspects of the Order Book and the Trade Book, here are 5 points you need to be conscious of.
  • Your orders in the order book can be either cancelled or modified as per your choice till the time they are actually executed. Once the order is executed, it appears as a trade in the Trade Book and then you cannot make any changes to the order. It is executed and frozen for your purpose.
  • Both the order book and the trade book show an aggregation of all types of buy and sell orders on equities, futures and options. All orders of different types like intraday, delivery, IOC are all specifically categorized by unique and distinct keys to identify such orders separately.
  • An order once executed becomes a trade and it is this trade that shows up in your contract in the evening. Trades cannot be cancelled but trades in the trade book can be reversed. That means, if you have bought a stock, you can close out the position by selling the stock and closing out. The reverse applies when you have sold a stock.
  • All orders will be in your order book till the end of the trading session. Once the trading session will be automatically cancelled by the system and you begin the next day with clean order book. In the case of orders executed in the Trade Book, if they are not squared up by evening, they will go for delivery. If the full value of the purchase is paid, the broker will transfer the shares into your demat account on T+2 day. In case of sell trades, the funds will come into your bank account on T+2 day.
  • A comparison of order book with your trade book gives you a quick idea of the ratio of your orders that gets executed and you can modify your order placement strategy accordingly.