A public ledger is a list of orders to buy or sell securities, maintained by an order book officer. It contains limit orders, which can make it difficult to fulfill an order. Market makers have access to the highest bids and lowest selling prices on the public book to facilitate deals. The public ledger provides information on currently unfulfilled orders.
A public ledger is a complete list of orders placed by the public to buy or sell securities. The name is a bit misleading, because the book itself is closed. The “public” is a reference to the fact that it contains orders from the public, not to the public availability of the content. Some stock exchanges may use different terminology to refer to the public ledger. At the Chicago Board of Options Exchange (CBOE), for example, the public ledger is known as the official order book.
Commonly, a public ledger contains limit orders. Limit orders are orders with strict parameters; Placing a limit order allows someone to specify a maximum buy price and a minimum sell price for a given security. These limits prevent people from suffering losses. However, they can also make it more difficult to fulfill an order. If someone is asking too much or offering too little, an order may go unfilled until the market changes or the investor agrees to change the limits to facilitate a deal.
This listing is maintained by a specialist or staff member known as the order book officer, not to be confused with the alternate name of the public book used at the CBOE. When members of the public submit orders, the specialist looks at the order size and specifications. This information is used to fill orders, and once filled, an order is removed from the public ledger.
Market makers who facilitate order filling have access to the highest bids and lowest selling prices on the public book. This allows them to have information that they can use to make deals, connecting people who want to buy securities with people who want to sell them and vice versa. However, details such as the size of the orders and the number of orders in the public ledger are closed and available only to the member of staff who maintains the ledger.
At any time, the public ledger provides information on currently unfulfilled orders. When the market is moving quickly, orders can move quickly through the book as people quickly find buyers and sellers. In a slow market, orders can stay on the book while the specialist works to find a taker. The market maker can play a key role in this process by matching and selling orders and facilitating deals to keep the market moving.
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