The National Stock Exchange has filed an application with the Securities and Exchange Commission to immediately create a new order type that allows limit orders to match against undisplayed orders pegged to the midpoint between the national best bid and offer, in subpenny increments.
Here’s a snapshot.
NAME: Mid-Point Seeking Order
FILING NUMBER: SR-NSX-2013-07
COMING TO: National Stock Exchange
WHEN: Began February 28, 2013.
AIMED AT: Agency broker or other market participant
GIST: This limit order will probe for undisplayed orders priced equal to or better than the midpoint between the national best bid or offer on protected markets or better. The order would execute in whole or in part immediately, or be canceled.
HOW IT WOULD WORK: The agency broker (or other participant) submits a limit order seeking the midpoint between the national best bid or offer for a given symbol on a matching undisplayed order, according to NSX chief operating officer David Reed.
That order then would seek matches with undisplayed orders that include a “Zero Display Reserve,’’ meaning no quantity is displayed at a given limit price; a “Market Peg Zero Display Reserve Order,’’ meaning no quantity is displayed and the order will execute at the market price; or a “Midpoint Peg Zero Display Reserve Order,’’ where no quantity is displayed and the order will execute at the midpoint between the best bid and offer.
A member seeking an execution at the midpoint can include a price cap beyond which the order cannot execute.
Under no circumstances will the order execute against a displayed order or an order that is at a price which is inferior to the midpoint between the Protected BBO.
REQUIREMENT: This order will execute in $0.005 increments if the security is priced at or above $1 and $0.0001 increments if the security is priced below $1.
LIMITS: Midpoint-Seeker Order will never be routed to an away market. A Midpoint-Seeker Order will be treated as cancelled when the best bid and offer are the same (locked) or crossed (the bid is higher than the offer). A Midpoint-Seeker Order cannot be combined with any other order type or order type modifier offered by the exchange.
