PegDifference - Signed or Unsigned?

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Imported from previous forum

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[ original email was from Ryan Pierce - rpierce@taltrade.com ]
Is PegDifference always a positive number, or is it signed?

In other words, is the direction of the pegged price assumed based on whether the peg is a Market peg or a Primary peg, and whether the order is a buy or sell? Is it valid for a buy order to do both a Primary peg of bid + 1/16 and a Primary peg of bid - 1/16? In a market with a best offer of 50, would a sell order with a Primary peg and PegDifference=1/8 mean the pegged price is 50 1/8 or 49 7/8?

I am thinking that this is something which needs to be clarified in FIX 4.2.

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The "float" field, as PegDifference is defined in 4.1, is capable of being signed. We have other fields such as LastForwardPoints for F/X which can be negative.

> Is PegDifference always a positive number, or is it signed?
>
> In other words, is the direction of the pegged price assumed based on whether the peg is a Market peg or a Primary peg, and whether the order is a buy or sell? Is it valid for a buy order to do both a Primary peg of bid + 1/16 and a Primary peg of bid - 1/16? In a market with a best offer of 50, would a sell order with a Primary peg and PegDifference=1/8 mean the pegged price is 50 1/8 or 49 7/8?
>
> I am thinking that this is something which needs to be clarified in FIX 4.2.
>
>

4

[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> The "float" field, as PegDifference is defined in 4.1, is capable of being signed. We have other fields such as LastForwardPoints for F/X which can be negative.

While I understand that the field technically can hold a signed value, my question is that in common practice, is the direction of the peg assumed (and if so what exactly are the rules?) or is it signed and added to the price of the bid, offer, midpoint, or last trade to which the order is pegged?

5

[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> Is PegDifference always a positive number, or is it signed?
>
> In other words, is the direction of the pegged price assumed based on whether the peg is a Market peg or a Primary peg, and whether the order is a buy or sell? Is it valid for a buy order to do both a Primary peg of bid + 1/16 and a Primary peg of bid - 1/16? In a market with a best offer of 50, would a sell order with a Primary peg and PegDifference=1/8 mean the pegged price is 50 1/8 or 49 7/8?
>
> I am thinking that this is something which needs to be clarified in FIX 4.2.
>

This was clarified in FIX 4.2.

PegDifference is of type PriceOffset in FIX 4.2, which is a signed number that is in all cases arithmetically added to the price. So a primary peg to sell at 1/8 less than the best offer would have PegDifference=-0.125

Note that this is true only of FIX 4.2. FIX 4.1 (where PegDifference was introduced) remains ambiguous on what the sign of PegDifference means and whether it should be added or subtracted in what circumstances, hence its meaning must be bilaterally agreed upon between parties.