stock numbersA day trading guide on stock order types is a dynamic volume, as new order types are continuously proposed, revoked or falsely justified.  As Nasdaq continues to develop, propose, then either revoke or justify new stock order types that continually benefit the select few, let’s review some of these recent order proposals and how they impact investors.

Nasdaq’s Proposal of the Extended Life Priority Order

Nasdaq proposed in November of 2016 a new order type they call the Extended Life Priority Order (ELO).  This was shortly after the SEC gave approval for IEX to become the 13th US Stock Exchange.  The ELO order type has been incorrectly compared to utilizing a time delay similar to IEX’s “speed bump”.  

The time delay is utilized by IEX to create a level playing field and prevent information leakage to HFT firms, whereas the ELO feature of holding an order with priority, are two totally different things.  It’s no secret that Nasdaq opposed the time delay implemented by IEX, which is universal and in no way identifies particular trades or their origination.

In contrast, the ELO order is an order type that is optional, and should not be confused with a universal speed bump.  With the ELO, only certain customers will have access, specifically retail order flow, although the plan is to include institutional investors in the future.  The objective is to reward investors that agree to not cancel their order for at least 1 second by moving them to the front of the line.  This order is given priority over non-ELO orders, and is identified as one that will not change or cancel within the specified time frame.

ELO Flagged Order = Information Leak

No day trading guide is needed to know that the fact that the order is flagged, and displayed as an order that will not cancel or change, is evidence enough that this is major information leakage.  There has been some false justification implying that this is a way to beat the HFTs and your order will be filled, but at what price to investors?

These orders, containing a unique identifier, will be quickly seen and identified by the HFT firms and any broker or trader with a prop data feed.  This is valuable information!  This leakage of information can and does sway the NBBO, altering the price for all non-ELO orders or any trades executed on a slower platform.  Altering the NBBO with sneak peeks of pending trades is never good for investors, it’s altering the market.  

This type of order would only elicit more predatory trades, as opposed to the universal speed bump implemented by IEX, which is aimed at eliminating them.  

In a letter to the SEC dated March 2, 2017, John Ramsay, Chief Market Policy Officer at IEX, raised several good points to the SEC regarding this new ELO proposal.  First, by requiring that all ELO orders are identified only alerts predatory HFTs to better identify orders from institutional investors, which can be detrimental to those investors.  Prop data feed customers already use information provided by the electronic trading firms, now this mandatory identification of ELO orders will identify retail orders.

John Ramsay also points out that while Nasdaq references the Toronto Stock Exchange’s (TSX) use of “Long Life” orders, they fail to mention the fact that the TSX does not identify these orders, specifically to decrease possible information leakage.  

IEX is ultimately asking for the SEC to not approve this order Proposal unless Nasdaq removes the identification requirement.  They are also asking for a better explanation on their compliance mechanisms that would prevent misuse of the Extended Life Order.  While Nasdaq attempts to justify how they are rewarding participants and improving the market, it seems blatantly obvious that the ELO order is another mechanism to leak client information and identity.

Nasdaq Requested, then Withdrew their Retail Post-Only Order Proposal

In October of 2016 Nasdaq proposed to the SEC a change to adopt a new Retail Post-Only Order, or Post Only Order for Retail (POOR) as dubbed by some, including the group over at Themis Trading, LLC.

The Retail Post Only Order was basically designed to assist retail brokers with avoiding access fees.  It would have allowed for the order to be cancelled for any reason, rather than completing with an adjusted price.  Nasdaq views this ‘choice’ as ‘competition’ good for markets.  

We have to agree with Themis on this one and see this order proposal for what it was, another attempt by Nasdaq to give retail brokers avenues for avoiding undesirable retail flow execution, along with avoiding access fees.

Any day trading guide would clearly point out that this would violate a broker’s responsibility for best execution just by cancelling an order that would have otherwise been filled.  These types of orders contribute to distorted price movement, while hindering best execution.  Just by giving retail brokers strategies that could hurt their clients, the SEC is going against basic principles of protecting investors, both retail and institutional.  

The SEC decided to take more time to review this proposal, opening the door to comments in December of 2016.  We are pleased to know that Nasdaq withdrew their proposal for the rule change in January of this year, perhaps due to scrutiny placed by the Themis Trading Group.  

We are thankful to IEX and to Themis for taking the time to write the SEC with their findings on these order type proposals, and are equally thrilled that this proposal did not come to fruition in the marketplace.

Discretionary Peg (D-Peg®) Order Type by IEX – Predicting Price Changes


IEX, the newest stock market in the US, was founded by Brad Katsuyama and several colleagues who sought answers for questions others didn’t even know existed.  Brad and his crew were most recently depicted in the Best Seller by Michael Lewis, “Flash Boys”.  


IEX’s proprietary D-Peg order is designed to predict a change to the NBBO, protecting against a structural arbitrage.   HFTs know when the NBBO is about to change, as they can predict it by cobbling together the faster direct feeds from each exchange and building their own NBBO.  If you are trading on IEX and trying to get a fill at the midpoint of the NBBO, you don’t want to get a fill and then have the market move against you immediately. IEX’s proprietary signal tries to predict that NBBO change as well, and moves D-Peg orders out of the way.


For instance, if you have an order in to trade at the midpoint of the NBBO and the market is 33.95 x 33.96, a favorite HFT strategy is to see the quote changing to 33.94 x 33.95, and sell the midpoint to you at 33.955 just before that quote change happens, allowing them to buy it back immediately at 33.95 for a half-cent profit. To highlight how much this strategy is used, in January 2017 47% of all midpoint volume on EDGX executed within 2ms of an NBBO change.


Another way to look at it is how often there is no price movement after a trade at the midpoint, which is ideally what you would like to see.  On EDGX, there is no price movement within the following 1 second after a midpoint execution only 46% of the time.  IEX’s D-Peg orders are designed to keep you out of this predatory environment by moving you away from the midpoint if the NBBO is about to change. 78% of the time, there is no change in the NBBO 1 second after a midpoint execution on IEX.  And only 5% of IEX’s midpoint volume is done within 2ms of a change in the NBBO.

stocks trending up

This “crumbling quote indicator” in no way impedes regular trading, as it is only activated for a very short time period of five seconds per day, per symbol, on average volume basis.  Protecting resting orders during times of high HFT activity can make a huge difference to investors and provide higher trading quality on IEX.  


Great Point Capital offers and uses both D-Peg and Primary Peg Orders with IEX.  Contact Great Point Capital for collaboration of successful day trading strategies, and the ultimate day trading guide, experience.  


Great Point Capital has been serving the trading community since 2001 and our 100+ prop traders actively trade the firm’s capital, specializing in equities and equity options.  We are headquartered in Chicago with a location in Austin, TX.  Contact Great Point Capital LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results.  We are one of the very few firms able to offer access to Takion Software Platform, enhancing your online equity trading performance.