Imported from previous forum
[ original email was from Jeff Gay - jgay@tradingscreen.co.jp ]
Can someone explain the differences between these two order types, and their intended use?
Thanks
[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> Can someone explain the differences between these two order types, and their intended use?
A Market order is an extremely common, widely implemented type of order. It is generally an order which guarantees an execution, but not a price.
A Market Peg order is something which has a very specific definition. It acts very much like a limit order, where the limit price changes to match the best offer if buying, or best bid if selling. Often this will have an effect similar to a Market order.
In general, most people wanting a guaranteed execution want a Market order, not a Market Peg order. Market orders are much more widely supported than Pegged orders.
One significant feature is that Market Peg orders can be specified with a PegDifference. For instance, a Market Peg order to buy, with PegDifference = -0.125, means that you’re effectively posting a limit order that will at all times remain 1/8 less than the best offer.
[ original email was from Jeff Gay - jgay@tradingscreen.co.jp ]
> > Can someone explain the differences between these two order types, and their intended use?
>
> A Market order is an extremely common, widely implemented type of order. It is generally an order which guarantees an execution, but not a price.
>
> A Market Peg order is something which has a very specific definition. It acts very much like a limit order, where the limit price changes to match the best offer if buying, or best bid if selling. Often this will have an effect similar to a Market order.
>
> In general, most people wanting a guaranteed execution want a Market order, not a Market Peg order. Market orders are much more widely supported than Pegged orders.
>
> One significant feature is that Market Peg orders can be specified with a PegDifference. For instance, a Market Peg order to buy, with PegDifference = -0.125, means that you’re effectively posting a limit order that will at all times remain 1/8 less than the best offer.
>
>
Hmm… I thought that Primary Pegged ® orders move with the market to buy at bid and sell at offer. There’s also Fixed to Best (T) orders that move with the market at the best bid and offer. So… how are Market Pegged § orders different from these?
[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> Hmm… I thought that Primary Pegged ® orders move with the market to buy at bid and sell at offer. There’s also Fixed to Best (T) orders that move with the market at the best bid and offer. So… how are Market Pegged § orders different from these?
As I said, Market Pegs are pegged to buy at the offer, or sell at the bid. As you said, Primary Pegs are pegged to buy at the bid, or sell at the offer. The only difference between the two is that they are pegged to opposite sides of the market.
T is defined as “Fixed Peg to Local best bid or offer at time of order” This is something which Instinet does. I don’t know if they use it for pegging, but I believe it was added to the spec for discretion, and it didn’t make sense to use a DiscretionInst that was not already an ExecType. It acts like a Primary peg, only with two unique aspects:
Local - meaning that this refers to the BBO on Instinet (or the local ECN/Exchange) only, NOT the national/global marketplace.
Fixed - meaning that the value is chipped in stone as soon as the order is placed, and does not move with the market.
In other words, it is a shortcut for entering a limit order.
So if the national market is 50, 50 1/4, and the ECN to which you send an order is 49 7/8, 50 3/8, a Pegged order to buy with ExecInst=T would be identical to a normal limit order placed at 49 7/8.