A pegged-to-market order is designed to maintain a purchase price relative to the national best offer (NBO) or a sale price relative to the national best bid (NBB). Depending on the width of the quote, this order may be passive or aggressive. The trader creates the order by entering a limit price which defines the worst limit price that they are willing to accept. Next, the trader enters an offset amount which computes the active limit price as follows:
Sell order price = Bid price + offset amount
Buy order price = Ask price - offset amount
The Reference Table to the upper right provides a general summary of the order type characteristics. The checked features are applicable in some combination, but do not necessarily work in conjunction with all other checked features. For example, if Options and Stocks, US and Non-US, and Smart and Directed are all checked, it does not follow that all US and Non-US Smart and direct-routed stocks support the order type. It may be the case that only Smart-routed US Stocks, direct-routed Non-US stocks and Smart-routed US Options are supported.
The current NBBO for shares of of XYZ stock is $17.87 - 17.89. You want to buy 100 shares at 0.01 below the Ask Price of $17.88 so you create a Pegged-to-Market order. You create a buy order by clicking the Ask price of XYZ, then select Island in the Destination field. Next you select the order type PEG MKT, enter 17.88 as the limit price and enter an Offset Amount of 0.01. You transmit the order.
Your pegged-to-market buy order is initially submitted at a limit price of $17.88 (which is the Ask Price of $17.89 minus the .01 offset amount).
Another trader submits a sell order at 17.88, which is the limit price for your buy order. Your order is filled.
|Order Type||PEG MKT|
|Market Price (NBBO) Range||17.87 - 17.89|
|Lmt Price (Ask Price – Offset Amount)||17.88|
In this alternate scenario, the NBBO rises to 17.90 – 17.91. Your limit price rises to 17.90, which is the Ask Price minus the offset of 0.01. You do not want your order filled at that price, so you cancel the order.
|Order Type||PEG MKT|
|Market Price (NBBO) Range||17.90 - 17.91|
|Lmt Price (Ask Price – Offset Amount)||17.90|