Sometimes trading more isn’t necessarily better. Many clients want to participate only when market conditions are stable, even if that means trading less, especially for highly passive strategies measured over longer time horizons.
IEX’s Ultra-Passive Signal is designed with that in mind. An optional and additive alternative to Signal v6 for IEX’s Discretionary Peg (D-Peg) and Primary Peg (P-Peg) orders, it detects periods of quote imbalance and engages only when those conditions resolve.
By concentrating trading activity in more stable moments, it brings a higher degree of selectivity to certain non-displayed order types. That selectivity can help reduce adverse price movement and improve overall execution outcomes. In testing, Ultra-Passive showed meaningfully improved markouts relative to Signal v6 under similar market conditions, reinforcing the impact of greater selectivity.
When the Ultra-Passive Signal is “on,” D-Peg and P-Peg orders are prevented from exercising price discretion.
Why Ultra-Passive Signal?
Passive trading strategies face a familiar challenge: sourcing liquidity that is less likely to result in adverse price movement. Many clients describe this as seeking “cleaner” interactions, meaning executions that are less exposed to adverse selection.
Ultra-Passive Signal is designed to pursue a similar objective: using a more sensitive and persistent signal to concentrate execution in stable market conditions through quote imbalance detection.
What the Ultra-Passive Signal Does
The Ultra-Passive Signal is designed to identify periods of quote imbalance, where available liquidity at the NBBO is disproportionately concentrated on one side of the market.
The Ultra-Passive Signal evaluates observable factors, including asymmetry in displayed liquidity and order flow at the NBBO, to determine when the quote is imbalanced, which warrants limiting price discretion.
The Ultra-Passive Signal, like Signal V6, continuously evaluates real-time market data, and is designed to respond to predicted quote imbalances. The major difference is in what follows next.
When Ultra-Passive is “on:”
• D-Peg and P-Peg orders do not exercise price discretion
• Orders wait until conditions normalize
• Designed to concentrate trading activity in more stable market conditions
Unlike Signal v6, which is designed to turn off after a brief duration, Ultra-Passive remains active for as long as imbalanced quote conditions are detected, turning off only when the market for that security returns to a balanced state.
How Ultra-Passive Differs From Signal v6
As indicated by its name, the Ultra-Passive Signal is designed to be used as part of a more passive trading strategy, and is not meant for every signal-enhanced order or every trading strategy. A major differentiator is that while Signal v6 is designed to protect D-Peg and P-Peg in specific instances of market instability by pausing discretion for 2ms, Ultra-Passive Signal is designed to pause discretion until the quote imbalance conditions are no longer detected, without a time limit.
What This Means For Performance
That difference in persistence is designed to affect execution outcomes. In testing, this approach resulted in improved markout performance relative to Signal v6 for highly passive strategies under similar market conditions.
A common way to measure execution performance is via a markout, or the direction and magnitude of a price change following a trade over a specified time frame.
By restricting discretion while imbalanced conditions persist, Ultra-Passive reduces the likelihood of executing during moments of instability. As a result, the subset of trades that remain eligible under Ultra-Passive logic exhibited improved markout behavior relative to the broader Signal v6 sample.
While this selectivity can result in fewer fills, the trades that do occur tend to align more closely with more positive trading outcomes.
Trading Less, With Purpose
Ultra-Passive Signal builds on the broader IEX execution toolkit, where different order types and functionalities are designed to support various objectives.
For example, M-Peg prioritizes midpoint interaction on exchange.
D-Peg and P-Peg offer discretionary functionality that can be paired with Signal v6 or Ultra-Passive, depending on the desired level of selectivity.
And, now, Ultra-Passive Signal is designed for clients seeking a more passive trading strategy.
If you want to learn more about Ultra-Passive Signal, contact your sales representative or drop us a line at sales@iextrading.com.
IEX Exchange