IBKR ATS Pegged-to-Best

Pegged-to-Best, an order type unique to IBKR, allows clients to direct liquidity-adding orders to the IBKR ATS that compete not only with the near side NBBO, but with other same side liquidity adding orders resting in the IBKR ATS.

The Pegged-to-Best order price will float such that it is always pegged to be one penny more aggressive than the better of the near side NBBO and the best-priced, same side resting liquidity-adding order in the IBKR ATS, up to the NBBO midpoint minus (for a buy) or plus (for a sell) a user-defined number of increments, providing a high probability of trading with IBKR client Smart Routed orders on the opposite side.

Like all other pegged orders available in the IBKR ATS, Pegged-to-Best orders may contain a limit price that specifies the most aggressive price at which the order may be priced.

Since the Pegged-to-Best order not only competes with the near side NBBO but also with other same-side liquidity-adding orders in the IBKR ATS, customers may specify the minimum cumulative size of those same side orders that are priced equal or better, at which the order is allowed to compete (Minimum Competing Size). This provides the customer with a level of protection against having their orders complete with smaller sized orders. Unless specified by the customer, the default value is 100 shares.

If you choose to set the "Compete again best bid/ask Offset" field to "Up to Mid," we provide two additional fields that allow you to set an offset OFF THE MIDPOINT that will be applied to the order.

If you elect to use an offset, to ensure that your order complies with the sub-penny pricing rule of Regulation NMS - which requires the price for orders over $1.00 to be submitted in increments of no smaller than one cent - we require two offset values:

• The primary offset that you define is applied when the spread is an even number of cents wide (and therefore the mid-price is a whole-penny price). This offset must be in whole-penny increments or zero.
• The secondary offset is automatically applied when the spread is an odd number of cents wide (and therefore the mid-price is a half-penny price). This offset must be in half-penny increments (so that when added to or subtracted from the half-penny midpoint price, the result is a whole-penny price).

For orders where the midpoint falls on the penny, the primary offset is added to (for SELL orders) or subtracted from (for BUY orders) the midpoint to get the order price (i.e., positive offsets make the order less aggressive, negative offsets make it more aggressive). For example, for a buy order with a Bid/Ask of $10.10 - $10.18 and a primary offset of $0.02, the midpoint of $10.14 minus the offset of $0.02 results in an effective order price of $10.12.

In cases where the midpoint falls on the half-cent, the secondary offset (set by default to $0.005 from the primary offset) is automatically used. For example, for a buy order with a Bid/Ask of $10.10 - $10.17 and an offset of $0.01 and a secondary offset of $0.005, the midpoint of $10.135 minus the secondary offset of $0.005 results in an effective order price of $10.13.

NBBO is $50 at $50.10

The Pegged-to-Best order in Example 1 specified a Minimum Competing Size of 200 shares, which means it will only compete at a matching or better price level that has at least 200 cumulative shares, which in this example $50.01.

NBBO is $50 at $50.09

Customers may also specify the maximum offset to be applied to the Pegged-to-Best order when competing against other same side Pegged-to-Best orders (Compete against best offer Offset). As illustrated in Example 2, that offset is applied against the better of the near side NBBO and the best-priced, same-side, resting liquidity-adding order in the IBKR ATS, excluding other Pegged-to-Best orders.