Public Book (Of Orders)

The public book (of orders) is an electronic list containing all of the buy and sell orders for a specific security that is placed by the public. The public book is kept by an order book official or other market specialist.

The public book (of orders) is considered closed and is only accessible to the order book official or specialist. The book's keeper is the only person who knows the details of the public orders, such as what price or quantity has been entered. However, market makers are allowed access to the highest bid and lowest offer to facilitate trading.

More fundamentally, an order book is an electronic list of buy and sell orders for a specific security or financial instrument, organized by price level. An order book lists the number of shares being bid or offered at each price point, or market depth. It also identifies the market participants behind the buy and sell orders, although some choose to remain anonymous.

When a transaction occurs on an organized exchange such as the New York Stock Exchange or the Nasdaq for a publicly traded equity security, it is said to occur in the "public." This is because these national stock markets are highly regulated and offer a great deal of transparency surrounding their activities and transaction volumes.

Whereas, when two counterparties engage in a transaction for a privately held stock, it is regarded as a private market transaction. Although there are many differences between public and private markets, one signature feature is the difference in market sophistication between market participants. Most anyone can participate in public markets, such as the NYSE; however, private market transactions are generally reserved for 'qualified investors.' That is, regulators try to limit more complicated private market transactions to investors with a combination of more investor knowledge and the means to absorb any potential capital loss.

Thus, for public markets, market makers keep a public book of orders to help facilitate transactions, thereby making customers happy and market more efficient. For private markets, no universal list exists, although dark pools offer some of the features of a public order book. This creates market friction and market opportunity for savvy investors.