I have a strategy that involves being first in the order queue in a tight market where the tick can change from bid to ask or ask to bid by one tick. I am looking at pegged orders so when the bid changes to ask or the otherway around i want to be first position on that tick change. I was wondering if that is possible with pegged orders?
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Pegged NBBO/MidPoint orders, each exchange has algo check documentation or contact them about time/price/Fifo and most importantly pro-rata allocations for peggged orders.
Here is a doc from NYSE to have a look at: https://www.nyse.com/publicdocs/nyse/markets/nyse/Pillar_Differences.pdf
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On nasdaq, their pegged orders do not operate inside the exchange matching engine as you would expect.. they have some undocumented method that does not gaurantee fifo order is conserved when the order stack moves from one level to another, the re-reinsertion is random at best and they are secrely letting other people jump the queue at worst. IEX does this inside the matching engine, and they actually have specific order types to mitigate against adverse selection due to sub-millisecond latency arbitrage by other market particpants. Specifally, the D-Peg and D-limit order types you may want to look into .
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$\begingroup$ > "IEX does this inside the matching engine". Interesting... do you have a source for this? Their rule book is non-committal with respect to time priority: '... Due to the way in which the Exchange processes re-pricing, orders’ relative time priority is generally preserved.' I decode this as 'best efforts' which is comparable with other venues. $\endgroup$ – Sergei Rodionov Mar 21 at 20:13
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$\begingroup$ @SergeiRodionov yes, myself, by talking to iex and nasdaq via phone and email and reading the specs of each $\endgroup$ – crowlogic Mar 22 at 22:06
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$\begingroup$ This is important, but it's better to verify repricing priority with a full order log. I would use two orders with same limits but different display sizes and check if their priority is maintained. Or spot anonymous orders with fairly unique display sizes and see if they keep their relative priority. $\endgroup$ – Sergei Rodionov Mar 23 at 14:24
