Central Limit Order Book

Definition ∞ A Central Limit Order Book is an electronic record that matches buy and sell orders for a financial instrument. This system aggregates all outstanding limit orders for a particular asset, displaying them by price level, with bids arranged from highest to lowest and offers from lowest to highest. It provides a transparent view of market depth and liquidity, enabling participants to observe the supply and demand dynamics at various price points. Trades occur when a new order crosses an existing order on the book, facilitating price discovery and execution.
Context ∞ In crypto news, the Central Limit Order Book is fundamental to understanding the operation of centralized exchanges, which rely on this structure for trading digital assets. A key discussion point involves its contrast with automated market makers (AMMs) prevalent in decentralized finance, highlighting differences in liquidity provision and price formation. Its relevance often surfaces in debates concerning market efficiency, slippage, and the overall user experience on trading platforms.