Published Date : 11/29/2012
Direct Edge Trading Notice #12-55: Route Peg Order Functionality
Please be advised that EDGA Exchange, Inc. ("EDGA
®") and EDGX Exchange, Inc. ("EDGX®", and together with EDGA, “the Exchanges”) have discovered a discrepancy between their rules that describe the operation of the Route Peg Order — EDGA Rule 11.5(c)(14) and EDGX Rule 11.5(c)(17) (together, the “Route Peg Rules”) — and the actual manner in which the Route Peg Order operates on the Exchanges’ Systems. This discrepancy has existed since the inception of the Route Peg Order types on the Exchanges on September 7, 2012.
The Route Peg Rules state, in part, that a Route Peg Order is a non-displayed limit order that posts to the EDGA/EDGX Book, and thereafter is eligible for execution at the national best bid for buy orders and national best offer for sell orders against routable orders that are equal to or less than the size of the Route Peg Order. Route Peg Orders are further described as passive, resting orders that do not take liquidity.
EDGX has discovered that, in certain circumstances, Route Peg Orders have executed at the mid-point of the national best bid and offer against contra-side, mid-point eligible orders (such as Mid-Point Match Orders) that are not routable. These executions received the applicable mid-point charge on Members’ monthly bills for September and October 2012.
This same error has not been observed on EDGA. However, EDGA believes that analogous circumstances may exist in the System such that a similar error could also occur.
Direct Edge continues to work on a change to the Exchanges’ Systems to resolve this issue so that the order type behaves precisely as set forth in the Route Peg Rules. To ensure it is properly coded and thoroughly tested, we will not be implementing any changes this week and will provide an updated implementation date as soon as it becomes available.
In the meantime, Route Peg Orders have been disabled on both EDGA and EDGX until such change has been formally implemented.
A separate Trading Notice will be issued when the System change has been fully implemented and prior to when Route Peg Orders are again enabled on the Exchanges.
Please contact the
Direct Edge Sales Team at 866.472.5267 if you have any questions. We sincerely regret any inconvenience that this discrepancy may have caused for you and your customers.