Order Backlog

An order backlog occurs when the rate of incoming orders exceeds the rate at which the matching engine can process them. This leads to a queue of pending orders that are waiting to be executed, which creates significant uncertainty for traders.

During periods of high market activity, an order backlog can cause massive slippage as prices move while orders are still stuck in the queue. This situation can trigger a cascade of liquidations in derivatives markets, as traders are unable to exit positions in time.

Exchanges often implement rate limits to manage incoming traffic and prevent the backlog from becoming unmanageable. It is a clear indicator of system stress and a major risk factor for market participants.