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IEX Announces: Upcoming Product Enhancements

IEX Trading Alert #2013 - 005

Please Route To: Trading and Trade Support

What you need to know:

  • IEX announces two new product features on its ATS:
    • IEX Unpriced Midpoint Peg (“UMP”) Orders – a variation of the IEX Midpoint Peg Order. Available Tuesday, December 17, 2013.
    • IEX Anti-Internalization – an elective broker setting to prevent self-match of Principal orders. Available Tuesday, January 14, 2014.

What are the new enhancements and how do they work?

IEX Unpriced Midpoint Peg ("UMP") is a change to the IEX Midpoint Peg Order to no longer require a Limit Price. Please note: Midpoint Peg Orders may still be entered with a Limit Price as well.

  • Orders designated as UMPs will rest on the IEX Book pegged to the midpoint of the NBBO as it shifts over time.
  • UMP Orders, as with all orders submitted to the IEX Book, are collared at order entry by the IEX Market and Limit Order Collars as described in IEX Form ATS.
  • How to handle these collars when the Midpoint of the NBBO makes a rational move beyond the original collar prices is the focus of IEX’s request for feedback in IEX PEP Talk #1 as discussed below.
  • Subscribers may price, or leave unpriced, Midpoint Peg Orders on an order by order basis.
  • UMP Orders may only be submitted via Subscriber FIX sessions configured for “Market Orders”.

Anti-Internalization is a broker-level setting preventing self-match of two Principal orders from the same Subscriber on the IEX book.

  • Anti-Internalization is elective. Subscribers must opt-in to utilize the function.
  • Anti-Internalization may be enforced either
    • by Subscriber (broker), across all MPIDs belonging to the Subscriber, or;
    • by MPID, for each MPID belonging to the Subscriber where Principal orders for a given MPID will not match with Principal orders from the same MPID, but will match with Principal orders from another MPID belonging to the Subscriber.
  • Resting orders from a Subscriber subject to Anti-Internalization will not be prioritized as part of IEX Broker Priority when an inbound Principal Order from that Subscriber is checking the IEX Book.
  • In situations when two Principal orders from a Subscriber subject to Anti-Internalization would match, the older of the orders is automatically cancelled.
  • Determination of "older" is based upon the time the order is received by the IEX Matching Engine, including by initial order entry, Subscriber revision (i.e. cancel/replace) or returning to the Book from routing.

Why is IEX making these enhancements?

IEX is making these enhancements in response to requests from Cash, Program, Risk Trading and Market Making Desks, and after discussion with a broad range of Subscribers. IEX believes collaboration with participants on product evolution is essential to IEX delivering the best possible market center model today and in the future.

  • UMPs are a tool to manage persistent resting interest on the IEX Book without requiring Subscribers to resubmit order instructions to readjust for a fluctuating NBBO over time.
  • Anti-Internalization is designed to prevent matching between two Principal orders from the same Subscriber, lowering the risk of Wash Sales.

What’s next?

As detailed in IEX Product Enhancement Proposal (IEX "PEP" Talk #1), distributed Monday, November 25th, 2013, UMPs will be introduced in two Phases.

  • Phase I functionality will be introduced Tuesday, December 17th, 2013.
  • IEX continues to solicit and welcome feedback on Phase II, specifically in regards to re-establishing IEX Order Collars.
  • For more detail see the IEX Product Enhancement Proposal (IEX "PEP" Talk #1).

Anti-Internalization will be available on January 14th, 2014.

What do I need to do?

Entry of IEX Unpriced Midpoint Pegs requires change to Subscriber order entry:

  • Exclude Price on order entry – Notify Market Ops to permit the exclusion of Price, FIX Tag 44, consistent with current requirements for unpriced orders (i.e. Market Orders) on IEX today. Please see the updated IEX FIX Specification.
  • Ensure intended FIX Session is enabled for Market Orders - Notify Market Ops to update IEX FIX Client Gateway settings to allow submission of Unpriced Midpoint Peg Orders, via the "Allow Market Orders" configuration option currently contained within the IEX FIX Client Gateway.
  • No change in procedure is required if you choose to submit Midpoint Peg Orders with a Limit Price.

IEX Anti-Internalization is an elective Subscriber setting which must be opted in.

  • If you wish to utilize Anti-Internalization contact IEX Market Operations.

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.