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IEX Announces: IEX Displayed Book Functionality and TOPS Connectivity Information

IEX Trading Alert #2014 - 029

Please Route To: Business, Market Data Technology, Router Technology, and Trade Support

What you need to know:

  • In response to industry feedback, IEX is adjusting the release date for its Displayed Book to February 27, 2015 from January 30, 2015.  This covers both displayed order acceptance and TOPS availability for all symbols.
  • Other target release dates:
    • Displayed order acceptance in IEX Certification environment at a date to be announced.
    • Displayed order acceptance and TOPS availability in the IEX Production Trading environment for the following test symbols only beginning January 12, 2015:
      CBO, CBX, ZBZX, ZJZZT, ZTEST, ZVV, ZVZZT, ZWZZT, ZXZZT.
  • Updates to the IEX Limit Order Book (the "Order Book") and the IEX Smart Order Router (the "SOR") in support of Displayed and Reserve Orders.
  • Multicast connection addresses for TOPS now available in the TOPS Spec.
  • See prior Trading Alerts regarding Displayed Orders and IEX's Non-Protected Top of Book Quote Feed, TOPS:

Why is IEX adjusting the live date of the Displayed Order Book?

In response to industry feedback, IEX is adjusting the deployment date of its Displayed Order Book to February 27 from January 30 to provide additional time for testing and adoption.

What does "non-protected" mean in practice?

The aggregated IEX displayed top of book interest (TOPS) is not a protected quotation (as defined under Role 600 of Regulation NMS). The IEX TOPS feed will not be disseminated through a National Market System Plan Securities Information Processor (SIP) because it will not be published by IEX to a national securities exchange or a national securities dealer association system. The IEX top of book will only be available through the IEX TOPS data feed.

This means that the best bid and the best offer in each security on IEX's displayed limit order book does not enjoy trade-through protection under the Role 611 of Regulation NMS, the Order Protection Role. Other Market Centers and Market Participants are not required to satisfy the IEX quote before trading at an inferior price. Therefore, subscribing to the IEX top of book data feed is optional.

Please note that IEX has policies and procedures in place which are reasonably designed to prevent the TOPS feed from locking or crossing any protected National Market System Quotation. This is accomplished by the System's implementation of price sliding, detailed below.

What new order functionality will be supported on IEX?

Reserve Orders are limit orders that have a displayed quantity; the displayed portion of a reserve order, which is equal to or greater than one full unit of trading (round lot or mixed lot) and no larger than the order size, is identified by the MaxFloor field (FIX tag 111).  Both the displayed and non-displayed (“reserve”) portions of a Reserve Order are available for potential execution against incoming orders.  If the displayed portion of a Reserve Order is reduced to less than one round lot, the System will replenish the display portion from reserve up to at least a whole round-lot amount. Each time the displayed portion of the order is replenished from reserve, that portion is prioritized behind other existing displayed portions; the hidden portion, however, retains queue priority at its price based on the original entry time.

Displayed Orders are limit orders whose full order quantity is displayed, identified either by omitting MaxFloor field (FIX tag 111) or by setting MaxFloor equal to the full order size.  When the order quantity is reduced to a value less than a single round-lot amount, the order will no longer be displayed and will be prioritized as a Non-Displayed Order.

In general, whenever the order size of a Displayed or Reserve Order is reduced to less than one full unit of trading (an odd lot), the remainder of the order is treated as a Hidden Order.

Displayed Orders and Reserve Orders will be supported beginning January 12th for test symbols (namely, CBO, CBX, ZBZX, ZJZZT, ZTEST, ZVV, ZVZZT, ZWZZT, and ZXZZT) and February 27 for non-test symbols.

How is the Order Book priority changing with the introduction of Displayed Orders?

All orders are matched according to Price-Display-Time, with Broker Priority for Non-Displayed Orders, including reserve portions of Orders.  The Book Priority can best be outlined as:

  1. Best Price;
    • ↳Displayed;
      • ↳Time.
    • ↳Non-Displayed;
      • ↳Broker's own orders;
        • ↳Agency/Riskless Principal;
          • ↳Time.
        • ↳Principal;
          • ↳Time.
      • ↳Other brokers' orders;
        • ↳Time.

    2. The Displayed Order Book includes:

    • Orders not marked Hidden or Reserve,
    • Displayed portions of Reserve Orders.

    The Non-Displayed Book includes:

    • Orders marked Hidden,
    • Hidden portions of Reserve Orders,
    • Primary, Midpoint, and Discretionary Peg™ Orders,
    • Minimum Quantity Orders,
    • Odd Lots.

    For determining time in Book Priority, the ATS manages order timestamps as described below:

    • Displayed Original Time Stamp (“OTS”) preserved on Displayed Orders until:
      • Incremented by the Subscriber,
      • Re-priced by the Subscriber,
      • Replenished from Reserve by the System,
      • Re-priced by the System, or
      • Returned to the Order Book by the System (e.g. after routing).
    • Non-Displayed OTS preserved on Non-Displayed Orders until:
      • Incremented by the Subscriber,
      • Re-priced by the Subscriber,
      • Minimum Quantity changed by the Subscriber,
      • Incremented by the System,
      • Re-priced by the System, or
      • Returned to the Order Book by the System (e.g. after routing).

    How will Displayed Orders be priced on the Order Book? ("Price sliding")

    Displayed Orders and the displayed portion of Reserve Orders will follow the Midpoint Price Constraint paradigm on the Order Book; adjusted for whole Minimum Price Variants ("MPV").  That is, Displayed Orders posting to the Order Book at prices equal to or more aggressive than the midpoint price of the NBBO (“Midpoint Price”) will be booked at a whole-MPV price level based on the Midpoint Price, rounding towards a less aggressive price level in the case where the Midpoint Price is at a half-Tick. Price sliding will be affected by Regulation SHO price restrictions only during locked and crossed markets.

    • Example 1:
      • NBBO: $.10 x $.16
      • Displayed buy order with a limit of $.15 enters the Order Book
      • The System will book the order at $.13
    • Example 2:
      • NBBO: $.10 x $.15
      • Displayed buy order with a limit of $.15 enters the Order Book
      • The System will book the order at $.12

    Please note that IEX does not consider its own quote for calculating the NBBO for pricing Peg Orders, since IEX's quote will not be protected, as described above.

    How will Displayed Orders behave in locked markets?

    Displayed Orders and the displayed portion of Reserve Orders, will join a locked quote, but will never independently lock the NBBO.  

    The Midpoint Price Constraint behavior of the Order Book will prevent Displayed Orders from resting at a price more aggressive that the Midpoint Price.  Therefore, resting orders will only lock the opposite side of the market when at the same price level as the NBBO.  However, if IEX's quote would lock the market alone, Displayed Orders will be slid to a price level no more aggressive than the Midpoint Price; this price level will thus be at least one MPV away from the opposite side of the market.

    How will Displayed Orders behave in crossed markets?

    Displayed Orders and the displayed portion of Reserve Orders will never independently cross the NBBO. However, during crossed markets, Displayed Orders will be slid to a price level no more aggressive than the opposite side of the market. Specifically, aggressive Displayed buy orders will be slid to the crossed NBO, and aggressive Displayed sell orders will be slid to the crossed NBB.

    How will Book Recheck interact with Displayed Orders?

    Resting Non-Displayed Orders and the hidden portions of Reserve Orders are eligible to initiate a Book Recheck.  Book Recheck is executed according to the Book Priority of each resting order.  Orders executing a Book Recheck on the Order Book will not trade through Protected Quotations.

    Displayed Orders are not eligible to initiate a Book Recheck, but may trade against a Non-Displayed Order executing a Book Recheck.

    How will Anti-Internalization work with Displayed Orders?

    Anti-Internalization is a broker-level (or MPID-level) setting which prevents self-matching two orders from the same broker on the Order Book, as identified by an Anti-Internalization Group ID (AGID), discussed in more detail in the Subscriber Manual. In situations when two orders subject to Anti-Internalization would match, the older of the orders is canceled.  This functionality will apply to Displayed and Reserve Orders as well.

    Will amendments be supported for MaxFloor (FIX tag 111)?

    At the onset of supporting displayed functionality, Subscribers will not be permitted to amend MaxFloor values or add the MaxFloor tag to an existing order, and the MaxFloor tag will be unsupported in an amendment message.  Any other fields changed as part of an amendment message will be honored as if the MaxFloor field were not included.

    Will Displayed Orders have access to new routing functionality in the IEX SOR?

    Existing routing strategies ("Route To Take" and "Route To Take with Re-sweep") may now be entered as Displayed or Reserve orders.  After checking the Order Book and clearing the Reg-NMS protected market centers of all available liquidity within the order's limit, the balance will be posted on the Order Book in accordance with the order's display instructions.


    Additionally, two new routing strategies will now be available: "Route To Rest" and "Route To Rest with Re-sweep."  These orders behave identically to "Route To Take" and "Route To Take with Re-sweep," respectively, with one difference: when resting, displayed and reserve orders rest a portion of the display size on one external Reg-NMS protected venue in addition to posting on the Order Book.  The additional protected venue is selected based on a combination of present market conditions and the System Routing Table with the objective of maximizing the likelihood of receiving an execution.  The reserve portion of the order, if any, will rest on the Order Book and will be used to replenish the lit portions of the order as necessary.  Once the reserve quantity is exhausted, shares may be reallocated between the Order Book and the external venue.

    What are the multicast addresses for consuming TOPS at the IEX POP?

    TOPS will be provided via the following multicast addresses beginning January 12th.  The packet capture output provided on IEX's website contains the same data a Data Subscriber would consume from the connection below starting January 12th.:

    • Primary XC
      • TOPS Group A: 233.215.21.1
      • TOPS Port A: 16641
      • TOPS Source A: 23.226.155.132
    • Secondary XC
      • TOPS Group B: 233.215.21.129
      • TOPS Port B: 16641
      • TOPS Source B: 23.226.155.196

    The TOPS Spec has been updated with details above as well as the Disaster Recovery connectivity details.

    Where can I learn more?

    About IEX

    Dedicated to institutionalizing fairness in the markets, IEX provides a more balanced marketplace via simplified market structure design and cutting-edge technology. IEX operates a fair-access platform accessible by any qualified broker dealer. IEX is driven by a team of cross-industry experts with backgrounds spanning market venues, electronic trading, and broker-dealers. IEX is the first equity trading venue seeded exclusively by a consortium of buy-side investors, including mutual funds, hedge funds, and family offices. Learn more at: iextrading.com.