Oct 19, 2022

October 19, 2022

Performance Files: How IEX Delivers Price Improvement on IOCs with Hidden Liquidity

As an exchange focused on execution quality, performance is at the heart of everything we do. Of course, “performance” is often in the eye of the beholder, and industry participants can have varying approaches to measuring it.

IEX is designed to deliver performance regardless of how you measure it. This includes both markouts, a common metric that compares the price at which a trade occurs to what happens in the market shortly afterwards, and a less frequently considered metric, price improvement. Price improvement (“PI”) measures the price you traded at compared to the price you were targeting.

In part two of this three-part blog series, we will focus on demonstrating how IEX’s various order types and functionality deliver price improvement and strong markouts to traders, covering D-Peg, IOC orders, and D-Limit. Check out parts one and three.


IEX Exchange is best known in the industry for the performance it offers resting orders, especially through our signature D-Peg and D-Limit order types. However, resting orders aren’t the only ones to benefit. Perhaps less appreciated is how our overall design creates a trading ecosystem that benefits liquidity-taking orders, allowing them to achieve price improvement (“PI”) when compared to their target price.

  • Spread crossing on IEX Exchange receives an average of 25 mils/share of price improvement (“PI”).
  • Mid Pinging IOC buy orders are paying almost 4 mils less than the midpoint, while sellers are trading at a price ~4 mils higher.

Thanks to the protections that the IEX Speed Bump and IEX Signal provide for liquidity adders, IEX Exchange has robust dark liquidity inside the spread that IOC orders can interact with.

Most of this resting interest is at midpoint, but much of it exists at other price points inside the spread as well. This creates a huge opportunity for more aggressive orders to execute at a better price than they expected, whether they are crossing the spread or checking the midpoint.

Spread Crossing Price Improvement

When an order is sent with instructions to cross the spread, the expectation is that it will either buy at the offer or sell at the bid. But sometimes, there’s something special in store: non-displayed liquidity at a better price than the bid/offer.

So how often does this really happen on IEX Exchange?  Actually, pretty often.

Since Q4 of 2020, between 10-15% of spread-crossing volume on IEX Exchange and around 25% of notional volume has received price improvement (“PI”). And that PI adds up.

Source: IEX Market Data

In that same period, when the price improvement happens, the spread-crossing order saves an average of 2.5 cents. This blends out to over 25 mils/share every time a spread-crossing order executes a trade on IEX.

Source: IEX Market Data

Midpoint Pinging Price Improvement

While the performance for spread-crossing orders is impressive, Immediate-or-Cancel (IOC) orders today don’t have to cross the spread to get PI at IEX Exchange.

Midpoint IOC orders, also called “midpoint pinging,” is a fairly common practice on IEX Exchange, given our deep liquidity at the midpoint. But sometimes these orders can get an even better price than the midpoint they are aiming for.

In June 2022, IEX Exchange removed its midpoint price constraint, allowing dark limit orders to rest, for the first time, between the midpoint and the far side. For example, if the market is 10 x 20 and a non-displayed buy order with a limit of 17 came to rest on IEX, before the removal this order was constrained to the midpoint of 15, but since the removal it can now rest at its full limit of 17. While this creates an opportunity for resting orders to rest at a more aggressive price, it also made it possible for midpoint IOCs to get a price better than the midpoint.

Now, you may assume that this is an edge case. Why would someone want to rest more aggressively than the midpoint?

You’d be surprised: before we removed the midpoint price constraint, only 0.1% of midpoint pinging volume, or 0.2% notional value traded, received PI. Since the change, that’s grown to 1.5% of volume and 4.2% notionally.

Source: IEX Market Data, April-September 2022

And how much PI are we talking about? The average PI per share for those midpoint pinging orders is now 249 mils, which comes out to a blended PI rate of 3.7 mils/share. In other words, midpoint IOC buy orders are paying almost 4 mils less than the midpoint, while sellers are trading at a price ~4 mils higher.

Source: IEX Market Data, April-September 2022

Resting and Taking, Together at Last

Resting orders don’t operate in a vacuum, and IEX’s performance for resting orders are only one side of the performance story here. By designing a venue where investors and traders are confident that their resting orders are protected, we’ve created an ecosystem where traders can also find liquidity at great prices, even better than the prices they are targeting, when they have more urgency.

Want to see more data about the performance of your IOCs on IEX Exchange? Reach out to your IEX contact for more.