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Pending SEC approval, the EDGX ExchangeSM (EDGX®) will modify the behavior of Hide Not Slide (HNS) and Price Adjust orders entered with a Post Only instruction. The Exchange will also be eliminating the Single Re-Price order instruction.
Under the new behavior, HNS Post Only and Price Adjust Post Only orders will execute as removers of liquidity when:
- The orders can be price improved relative to their limit prices; AND
- It is in the economic best interest of the customer, net of transaction costs or rebates.
In addition, the Post Only instruction will now be ignored on HNS and Price Adjust orders for all securities that trade under $1.00.
Hide Not Slide Post Only
Currently, a HNS Post Only order on EDGX will execute as a remover of liquidity when it can be price improved by contra side orders resting in between the NBBO, but it does not execute as a remover of liquidity at the NBBO when the limit price of the HNS order is more aggressive than the locking price. Under the new behavior it will now execute as a remover of liquidity at the NBBO when the limit price of the order is more aggressive than the locking price (see Example 1).
Price Adjust Post Only
Currently, a Price Adjust Post Only order on EDGX will never execute as a remover of liquidity. Under the new behavior, a Price Adjust Post Only order will now execute as a remover of liquidity whenever it is in the economic best interest of the customer, net of transaction costs or rebates. Assuming the current EDGX fee structure, a Price Adjust Post Only order will execute as a remover of liquidity when it can receive $0.01 or more of price improvement relative to its limit price (see Examples 1-3).
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Example 1: |
HNS Post Only or Price Adjust Post Only executes when it receives $0.01 of Price Improvement |
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NBBO: |
$10.00 x $10.01 |
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Order 1: |
Sell 100 @ $10.01 |
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Order 2: |
Buy 100 @ $10.02 HNS Post Only or Price Adjust Post Only |
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Result: |
Order 2 trades with Order 1 at $10.01. The execution at $10.01 plus the remover charge ($10.01 + $.0030 = $10.013) is economically better than if the order had posted and executed at $10.02 and received the liquidity provider rebate ($10.02 - $0.0030 = $10.017). |
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Example 2: |
Price Adjust Post Only executes at the Midpoint when it receives $0.01 of Price Improvement |
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NBBO: |
$10.00 x $10.02 |
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Order 1: |
Sell 100 @ $10.01 Midpoint Match (Hidden and Ranked at 10.01) |
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Order 2: |
Buy 100 @ $10.02 Price Adjust Post Only |
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Result: |
Order 2 trades with Order 1 at $10.01. The execution at $10.01 plus the remover charge ($10.01 + $0.0030 = $10.013) is economically better than if the order had posted and executed at $10.02 and received the liquidity provider rebate ($10.02 - $0.0030 = $10.017). |
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Example 3: |
Price Adjust Post Only does not execute at the Midpoint when Price Improvement is less than $0.01 |
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NBBO: |
$10.00 x $10.01 |
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Order 1: |
Sell 100 @ $10.00 Midpoint Match (Hidden and Ranked at $10.005) |
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Order 2: |
Buy 100 @ $10.01 Price Adjust Post Only |
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Result: |
Order 2 does not trade with Order 1 because an execution at $10.005 plus the remover charge ($10.005 + $.0030 = $10.008) is not enough to compensate for the loss of the rebate combined with an execution at $0.01 ($10.01 - $0.0030 = $10.007). |
Single Re-Price
The Single Re-Price order instruction will no longer be supported.
FIX orders entered with Tag 9202=R or XPRS orders entered with an R in the Special Order Type field will be rejected.
Implementation Dates
Direct Edge anticipates that the changes described in this notice will be in production by October 2014, pending SEC approval. When an exact date has been determined, a rollout schedule will be released to members.
More Information
- Refer to EDGX Rule Filing SR-EDGX-2014-18.
