Post-Only Order

4 min read

Pronunciation

[poʊst-ˈoʊn-li ˈɔr-dər]

Analogy

Think of a post-only order as a special reservation request at a restaurant that specifies you'll only take a table if you have to wait for one to become available—never if it means displacing current diners. Just as this hypothetical reservation would automatically cancel if it would require asking seated customers to leave, a post-only order automatically cancels if it would immediately match with existing orders. This is like insisting on being part of the restaurant's waiting list (the order book) rather than taking someone else's spot. Traders use this approach when they want to ensure they're adding to market liquidity (like expanding the restaurant's capacity) rather than consuming it (taking existing seats), often because the exchange rewards liquidity-adding "maker" behavior with lower compared to liquidity-taking "taker" actions, similar to how patient customers who join the waiting list might receive a discount compared to those demanding immediate seating.

Definition

A specialized trading order type that ensures a only executes if it adds liquidity to the order book rather than taking existing liquidity. -only orders allow traders to guarantee they receive maker rather than higher taker , while preventing unintentional market impact by automatically canceling if they would immediately match against existing orders.

Key Points Intro

-only orders serve several key functions in trading strategies.

Key Points

Fee optimization: Ensures trades qualify for lower maker fees rather than higher taker fees by guaranteeing liquidity provision.

Market impact reduction: Prevents unintentional price impact by avoiding immediate execution against existing orders.

Queue positioning: Secures priority position in the order book for potential future execution at desired price levels.

Passive execution: Enables patient trading strategies that wait for market to move to specified levels rather than aggressively taking liquidity.

Example

Sarah, an institutional trader, wants to accumulate 50 BTC for her fund while minimizing both trading costs and market impact. Current market conditions show trading at $46,325 with a between $46,300 and $46,350. If Sarah places a standard limit buy order at $46,350, it would immediately execute against existing sell orders (becoming a taker order) and incur the exchange's 0.1% taker fee, costing an additional $2,317 in trading . Instead, she uses a -only limit buy order at $46,320, positioned between the highest bid and lowest ask. The order doesn't execute immediately but enters the order book, improving the bid side liquidity. When other traders sell into her order over the next few hours, Sarah pays only the 0.02% maker fee, reducing her trading costs to $463. If market conditions had shifted and her $46,320 post-only order would have immediately matched against a new sell order at that price, the -only parameter would have automatically canceled her order rather than executing as a taker trade. This strategy allows Sarah to patiently accumulate her position while contributing to market liquidity and minimizing both explicit costs (fees) and implicit costs (market impact).

Technical Deep Dive

-only orders implement several technical mechanisms within exchange matching engines to ensure proper behavior and fee attribution. At the core level, the order placement process includes a pre-flight check phase that compares the incoming order price against the current order book to determine if it would cross with existing orders (becoming a taker). This evaluation incorporates both visible and hidden liquidity, including any iceberg orders with exposed portions that would match. If the pre-flight check indicates potential immediate , the order is rejected with a specific error code rather than being converted to a market or taker limit order. Implementation typically prioritizes atomicity—ensuring the order either enters the book as a maker or is completely rejected without partial . For time-priority queuing, -only orders receive standard -based sequencing within their price level, maintaining fairness with other makers at the same price. To prevent gaming behaviors, sophisticated exchanges implement additional checks for self-match prevention that detect and prevent potential wash trading through -only mechanics. Advanced exchanges offer modified -only variants including -only fill-or-kill (which requires the entire order quantity to be posted or none), -only immediate-or-cancel (allowing partial posting while canceling non-postable portions), and conditional -only orders that automatically adjust price to ensure posting based on configured parameters. For high-frequency trading operations, some exchanges implement specialized binary protocols with reduced paths for post-only order submission, recognizing their importance in market making strategies.

Security Warning

While -only orders provide fee benefits, they create uncertainty during volatile market conditions. Consider using standard limit orders for critical trading during high volatility, as -only orders may repeatedly cancel rather than execute when prices are moving rapidly.

Caveat

Despite their advantages, -only orders face several limitations including increased uncertainty, as they are more likely to remain unfilled during directional market movements when prices move away from the order before it can be matched. The guaranteed maker status comes at the cost of speed, potentially resulting in missed opportunities in fast-moving markets. For large orders, the visibility of -only orders in the public order book may telegraph trading intentions to other market participants, potentially resulting in adverse selection where orders are only filled when the market is moving against the trader's position. Additionally, during periods of high volatility or market stress, -only orders may repeatedly cancel and resubmit as the market oscillates around the order price, creating additional operational complexity and potential technical issues with API rate limits on some exchanges.

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