Discretionary Peg™ Order
(Patent-Pending)

IEX offers a Discretionary Peg™ (D-Peg™) order type. D-Peg™ is a non-displayed order type that is priced at either the National Best Bid (NBB for buys) or National Best Offer (NBO for sells). D-Peg™ orders passively rest on the book while seeking to access liquidity at a more aggressive price up to Midpoint of the NBBO, except when IEX determines that the quote is transitioning to less aggressive prices.

Functionality

D-Peg™ combines elements of Midpoint Peg, Primary Peg, and traditional discretionary order types.

Information about slow and predictable changes in the NBBO are detected in IEX's Crumbling Quote Indicator and provides D-Peg™ orders with an instruction to stop seeking access to liquidity at a more aggressive price until the quote returns to a stable state.

Examples

Scenario 1: Quote Stability

D-Peg™ buy order booked on the NBBO Bid with 10.13 limit during a period of quote stability.

  • Example 1: Sell order with 10.09 limit crosses the spread and executes with D-Peg™ order on the Bid at 10.10
  • Example 2: Sell order with 10.11 limit expresses its full limit and D-Peg™ order uses $0.01 of discretion to achieve execution at 10.11
  • Example 3: D-Peg™ order uses $0.02 of discretion to achieve execution against the sell order pegged to the Midpoint
  • Example 4: D-Peg™ orders cannot execute at prices more aggressive than the Midpoint; no trade occurs

Scenario 2: Crumbling Quote

D-Peg™ buy order booked on the NBBO Bid with 10.13 limit during a crumbling quote.

  • Example 1: Sell order with 10.09 limit crosses the spread and executes with D-Peg™ order on the Bid at 10.10
  • Example 2: Sell order with 10.11 limit expresses its full limit to 10.11, but D-Peg™ order does not use discretion; no trade occurs
  • Example 3: D-Peg™ order does not use discretion; no trade occurs

Crumbling Quote Indicator (CQI)

The Crumbling Quote Indicator (CQI) is a mathematical calculation, derived through a proprietary model, that makes a prediction about whether a given quote is "in transition." When the signal is "on," D-Peg™ orders behave less aggressively in order to protect orders from trading in unstable conditions.