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, 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.
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.
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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.
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