Order book versus brokerage
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
On a brokerage the operator is your counterparty: it is simple to use, but the gap between its buy and sell quotes — the spread — is your real cost. On an order book you trade against other users, can place limit orders, and generally pay less. The same asset at the same operator costs a different total depending on which screen you use.
Key points
- On a brokerage your counterparty is the operator; on an order book it is other users
- The brokerage's main cost is the spread; the order book's is the trading fee
- Order books allow limit orders, but a limit order may never fill
- Brokerages usually list more assets; order books often cover only the majors
Definition
A brokerage trades with you directly at prices it quotes; an order book lists users' orders by price and matches them. Japanese operators commonly offer both under one roof.
A brokerage screen shows a buy price and a sell price up front. Enter an amount, confirm, and the operator sells to you at that price. There is no order size to fine-tune and no book to read, which makes it the easiest thing to operate. But the buy and sell quotes at any given moment differ, and that gap is the spread: buy and immediately sell back and you are down by it, even with a flat market. 'Zero commission' labels do not change this — the cost is inside the spread.
An order book shows buy and sell orders sorted by price. You add your own and it fills when it meets a matching order. Each fill carries a trading fee; the rate varies by operator and, in most designs, by whether your order rested on the book or took an existing one. Rates change, so check the operator's official site.
The order types differ too. A book lets you place a limit order — 'buy if it comes down to this price' — at the cost of possibly never filling. A brokerage fills essentially at once but does not let you choose the price. Which you want depends on whether certainty or cost matters more for that particular trade.
Listings differ as well. At most Japanese operators the brokerage covers more assets while the order book is limited to the liquid majors. It is entirely normal to find that the asset you want is only available through the brokerage, at which point you have to judge for yourself whether the spread is worth paying.
In practice many people start on the brokerage to learn the flow and move to the order book as they get comfortable. Neither is simply better; understanding what you are actually paying in each is enough to choose well. 'How to compare fees' sets out the process.
Watch out for
- · Do not read 'zero trading fees' as cheap. On a brokerage the spread is the cost
- · Spreads widen in volatile markets and on thinly traded assets, and they compound if you trade in and out repeatedly
- · Even on an order book, a thin book can fill you at a worse price than you expected. Look at the depth before you order
Frequently asked questions
Which is cheaper, the spread or the trading fee?
It depends on the asset, the time and the operator, so there is no blanket answer — though for the same asset at the same operator, the order book is generally the cheaper route. The practical way to see the difference is to compare both screens at the same moment.
Which format do recurring-buy services use?
It varies by operator. Many are executed through the brokerage, but the specification is set out in each product's own documentation. Check how the execution price is determined and what it costs before you subscribe.