Pegged-to-Best, an order type unique to IBKR, allows clients to direct liquidity-adding orders to IBUSOPT that compete not only with the near side NBBO, but with other same side liquidity adding orders resting in IBUSOPT.
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 IBUSOPT, up to the NBBO midpoint minus (for a buy) or plus (for a sell) a user-defined number of increments, providing a high probability of trading with IBKR client Smart Routed orders on the opposite side.
Like all other pegged orders available in IBUSOPT, 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 IBUSOPT, 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 1 contract.
If you choose to set the "Compete again best bid/ask Offset" field to "Up to Mid," we provide two additional fields that allow you to set an offset OFF THE MIDPOINT that will be applied to the order.
If you elect to use an offset, to ensure that your order complies with the minimum tick rule, we require two offset values:
For orders where the midpoint falls on the penny, the primary offset is added to (for SELL orders) or subtracted from (for BUY orders) the midpoint to get the order price (i.e., positive offsets make the order less aggressive, negative offsets make it more aggressive). For example, for a buy order with a Bid/Ask of $10.10 - $10.18 and a primary offset of $0.02, the midpoint of $10.14 minus the offset of $0.02 results in an effective order price of $10.12.
In cases where the midpoint falls on the half-cent, the secondary offset (set by default to $0.005 from the primary offset) is automatically used. For example, for a buy order with a Bid/Ask of $10.10 - $10.17 and an offset of $0.01 and a secondary offset of $0.005, the midpoint of $10.135 minus the secondary offset of $0.005 results in an effective order price of $10.13.
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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.