IEX Announces: Enhancements to IEX Order Collar
IEX Trading Alert #2015 - 016
Please Route To: Business, Trading, Trade Support, and Technology
What you need to know:
-
IEX will enhance Order Collar functionality to further reduce the risk of receiving erroneous executions:
- Effective Monday, August 3, IEX is introducing the IEX Router Constraint as an enhancement to the IEX Order Collar for routable orders.
- Effective Friday, August 7, the IEX Order Collar will be enhanced to update each time the reference price of a security is updated, including Pre-Market and Post-Market trading sessions.
How is the IEX Order Collar changing?
Beginning Friday, August 7, the IEX Order Collar will be enhanced to update the Collar each time the reference price of a security is updated, including Pre-Market and Post-Market Sessions.
The IEX Order Collar prevents any order on the Order Book, including those marked ISO, from executing at prices outside the Order Collar price range. The Order Collar price range is defined as the range of prices from the Order Collar Price (defined below) for buy orders to the Order Collar price for sell orders for the security. Executions are permitted at prices within the Order Collar price range, inclusive of the boundaries (collar prices). Any portion of a market order that would execute at a price beyond the Order Collar is canceled. Any remainder of a limit order is posted to the Order Book or canceled as per Subscriber TIF instructions. Both displayed and non-displayed orders may post on the Order Book at the Order Collar, but never more aggressive. Such orders may be re-priced, depending on changing market conditions and the order’s limit price.
IEX calculates the Order Collar for a security by applying the appropriate Numerical Guideline for the market session and reference price (see table below) to the latest Order Collar Reference Price. The Numerical Guideline is added to the latest Order Collar Reference Price to determine the Order Collar Price for buy orders, while the Numerical Guideline is subtracted from the latest Order Collar Reference Price to determine the Order Collar Price for sell orders. The appropriate Order Collar Price is assigned to all orders upon entry and enforced throughout the life of an order; the Order Collar Price is updated each time the Order Collar Reference Price is updated by the System.
The Order Collar Reference Price is equal to the most current of the following:
- Consolidated last sale price disseminated during the Regular Market Session on trade date.
- Last trade price disseminated outside of the Regular Market Session (Form T) on trade date which other than for the Form T designation would have been considered a valid last sale price.
- Prior day’s Official Closing Price from the listing exchange, adjusted to account for corporate actions, news events, etc.
In the absence of a valid Order Collar Reference Price, the ATS will either prevent trading in the security (by rejecting orders for the security) or suspend the Order Collar function, whichever is deemed to be in the best interest of maintaining a fair and orderly market in the impacted security.
The Numerical Guideline used in the Order Collar Price calculation is based on the table below:
| Order Collar Reference Price |
Regular Market Session Numerical Guidelines |
Pre-Market and Post-Market Sessions Numerical Guidelines |
|---|---|---|
| Greater than $0.00 up to and including $25.00 | 10% | 20% |
| Greater than $25.00 up to and including $50.00 | 5% | 10% |
| Greater than $50.00 | 3% | 6% |
The above percentages are based upon the numerical guidelines for clearly erroneous executions under the IEX Clearly Erroneous Transactions Policy.
What is the IEX Router Constraint?
The IEX Router Constraint prevents any order from routing to prices outside the Router Constraint price range. The Router Constraint price range is defined as the range of prices from the Midpoint Price to the Router Constraint Price (defined below). Orders are permitted to route to prices within the Router Constraint price range, inclusive of the boundary. Any portion of an order that would have executed at a price beyond the Router Constraint is canceled back to the Subscriber. While resting on the Order Book, routable orders are subject to the Order Collar.
IEX calculates the Router Constraint Price for a routable order by applying the appropriate Numerical Guideline, for the market session and reference price (see table below), to the latest Router Constraint Reference Price. The Numerical Guideline is added to the latest Router Constraint Reference Price to determine the Router Constraint Price for buy orders, while the Numerical Guideline is subtracted from the latest Router Constraint Reference Price to determine the Router Constraint Price for sell orders. The Router Constraint Price is calculated at the start of a routing action and remains unchanged until the order posts on the Order Book or is canceled as per Subscriber’s instructions. Any time a routable order re-sweeps the market, a new Router Constraint Price is calculated and assigned to the order.
Once a routable order executes against the full displayed size of all Protected Quotations at each price level for the security at away markets from the NBBO to the Router Constraint Price, if the order’s limit price is superior to the Router Constraint Price, instead of continuing to route, it is canceled back to the Member.
The Router Constraint Reference Price is equal to the most current of the following:
- Consolidated last sale price disseminated during the Regular Market Session on trade date.
- Last trade price disseminated outside of the Regular Market Session (Form T) on trade date which other than for the Form T designation would have been considered a valid last sale price.
- Prior day’s Official Closing Price from the listing exchange, adjusted to account for corporate actions, news events, etc.
In the absence of a valid Router Constraint Reference Price, the ATS will reject any routable orders for the security.
The Numerical Guideline used in the Router Constraint Price calculation is based on the table below:
| Router Constraint Reference Price |
Regular Market Session Numerical Guidelines |
Pre-Market and Post-Market Sessions Numerical Guidelines |
|---|---|---|
| Greater than $0.00 up to and including $25.00 | 10% | 20% |
| Greater than $25.00 up to and including $50.00 | 5% | 10% |
| Greater than $50.00 | 3% | 6% |
The above percentages are based upon the numerical guidelines for clearly erroneous executions under the IEX Clearly Erroneous Transactions Policy .
What do I need to do?
No action is required from Subscribers to take advantage of enhanced Order Collar functionality.
Where can I learn more?
- IEX FIX Specification.
- IEX TOPS Specification.
- IEX Subscriber Manual.
- Contact IEX Sales at 646.343.2100 or subscriber@iextrading.com.
- Contact IEX Market Operations at 646.343.2300 or marketops@iextrading.com.
- Become an IEX Subscriber.
- IEX Frequently Asked Questions.
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.