IBUSOPT Pegged-to-Midpoint

Similar to the standard Pegged-to-Midpoint order, the IBUSOPT Pegged-to-Midpoint (w/optional offsets) seeks to fill by resting liquidity at the midpoint of the National Best Bid and Offer (NBBO). But the IBUSOPT order type also lets you compete for liquidity by applying offsets to the mid-price. Additionally, commissions on filled orders may be more favorable than commissions on Pegged-to-Midpoint orders on other exchanges.

If you elect to use an offset, to ensure that your order complies with the minimum tick rule, 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.

Orders that use an offset also include an automatic price cap at the opposite side of the NBBO minus/plus 1 tick to help keep the order price from becoming too aggressive and ending up on the bid or ask. For a buy order, the opposite side is the offer; for a sell, it's the bid. For example, for a buy order with a Bid/Ask or $10.10 - $10.14 and a primary offset of $0.02, the midpoint of $10.12 minus the offset of $0.02 results in an order price of $10.10 which is equal to the bid. Instead, we cap the order at the opposite side of the NBO ($10.14) minus 0.01 to get an order price of $10.13.