/ Oct 26, 2020
Adam Inzirillo, Head of North American Equities at Cboe, joins Ronan and JR to talk about the state of displayed liquidity, the challenges and benefits of remote work, and why being innovative as an exchange matters (recorded October 6).
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 Exchange 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 this three-part blog series, we will focus on demonstrating how IEX Exchange's various order types and functionality deliver price improvement and strong markouts to traders, covering D-Peg, IOC orders, and D-Limit.
+++
The innovative D-Limit order type was designed to improve displayed liquidity for all market participants. Two years after its October 2020 launch the proof is in the pudding: D-Limit keeps clients returning to find more and new ways to integrate it into their trading strategies.
We have explored the mechanics of D-Limit in prior blog posts, including some of the ways D-Limit's unique functionality drives performance as measured in markouts and savings by avoiding adverse selection, and pre-trade price improvement through re-pricing. In this post, we will dive deeper into how and when firms using D-Limit on IEX Exchange get pre-trade price improvement.
D-Limit operates like a standard limit order, but when IEX Exchange’s Signal fires and predicts[1] a quote is about to move, the exchange automatically re-prices or "restates" the D-Limit order one tick outside the NBBO. This means that any trades that occur on a D-Limit order post-restatement are at a price that is better than the client's original limit price.
While D-Limit can provide PI for symbols with varying characteristics, there are clear trends in which ones are more likely to be price improved, and how much PI they typically get.
Most notably, higher-priced names tend to receive price improvement more often: 32% of D-Limit volume in symbols priced over $250 receives PI, compared to 4-5% for symbols priced between $1-10.
This is likely due the fact that higher-priced names typically have wider spreads and thinner quotes, so when price changes do happen, subsequent trades occur more frequently.
However, it’s not just the percentage of volume that receives PI – it’s the amount of PI as well. For shares that receive PI, we’re talking nearly 400 mils on average for symbols priced over $250, compared to 107 mils on average for stocks priced $1-5. This is logical given that higher priced symbols have wider spreads, and the price improvement reflects that.
“Receiving price improvement with D-Limit typically means trading after the order has been restated to a less aggressive price. But after restatement, how long do you need to wait to get those fills?”
Said by John Doe
Receiving price improvement with D-Limit typically means trading after the order has been restated to a less aggressive price. But after restatement, how long do you need to wait to get those fills?
While nearly a third of restated orders rest less than a second after being restated (and receive 138 mils/share in savings on average!), waiting longer can mean far more PI. This is because by waiting longer, you have the chance to capture the savings from the D-Limit order being restated multiple times in a row. In fact, for the 6% of restated orders that rest more than a minute after a first restatement, the savings is 474 mils per share: that’s buying almost 5 cents below the bid or selling almost 5 cents above the offer!
While the amount of PI is higher for higher-priced stocks, when the PI occurs tells a different story.
For less expensive symbols, a higher portion of price-improved volume comes from orders which rested longer after initially being restated. For example, 18% of D-Limit orders in symbols priced between $1 and $5 rest on IEX Exchange for more than a minute after a restatement.
This is likely because lower-priced stocks tend to have thicker queues and fewer price changes. Therefore, it requires more time – and patience – to capture price improvement once your order is restated.
Our hope is to help traders optimize their strategies by incorporating data about price improvement on IEX Exchange. We hope this data helps firms optimize resting times to achieve optimal price improvement. And if you have questions about the price improvement dynamics of your current D-Limit volume, please reach out to your IEX Exchange contact.
Whether you are adding or removing liquidity, trading dark or lit, IEX Exchange is able to deliver durable price improvement in a wide variety of situations. From its inception, IEX has always been focused on performance. We have built an exchange and order types that deliver performance rather than rebates, allowing traders to achieve their trading objectives regardless of their size or speed.
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 Exchange 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 this three-part blog series, we will focus on demonstrating how IEX Exchange's various order types and functionality deliver price improvement and strong markouts to traders, covering D-Peg, IOC orders, and D-Limit.
+++
The innovative D-Limit order type was designed to improve displayed liquidity for all market participants. Two years after its October 2020 launch the proof is in the pudding: D-Limit keeps clients returning to find more and new ways to integrate it into their trading strategies.
We have explored the mechanics of D-Limit in prior blog posts, including some of the ways D-Limit's unique functionality drives performance as measured in markouts and savings by avoiding adverse selection, and pre-trade price improvement through re-pricing. In this post, we will dive deeper into how and when firms using D-Limit on IEX Exchange get pre-trade price improvement.
D-Limit operates like a standard limit order, but when IEX Exchange’s Signal fires and predicts[1] a quote is about to move, the exchange automatically re-prices or "restates" the D-Limit order one tick outside the NBBO. This means that any trades that occur on a D-Limit order post-restatement are at a price that is better than the client's original limit price.
While D-Limit can provide PI for symbols with varying characteristics, there are clear trends in which ones are more likely to be price improved, and how much PI they typically get.
Most notably, higher-priced names tend to receive price improvement more often: 32% of D-Limit volume in symbols priced over $250 receives PI, compared to 4-5% for symbols priced between $1-10.
This is likely due the fact that higher-priced names typically have wider spreads and thinner quotes, so when price changes do happen, subsequent trades occur more frequently.
However, it’s not just the percentage of volume that receives PI – it’s the amount of PI as well. For shares that receive PI, we’re talking nearly 400 mils on average for symbols priced over $250, compared to 107 mils on average for stocks priced $1-5. This is logical given that higher priced symbols have wider spreads, and the price improvement reflects that.
“Receiving price improvement with D-Limit typically means trading after the order has been restated to a less aggressive price. But after restatement, how long do you need to wait to get those fills?”
Said by John Doe
Receiving price improvement with D-Limit typically means trading after the order has been restated to a less aggressive price. But after restatement, how long do you need to wait to get those fills?
While nearly a third of restated orders rest less than a second after being restated (and receive 138 mils/share in savings on average!), waiting longer can mean far more PI. This is because by waiting longer, you have the chance to capture the savings from the D-Limit order being restated multiple times in a row. In fact, for the 6% of restated orders that rest more than a minute after a first restatement, the savings is 474 mils per share: that’s buying almost 5 cents below the bid or selling almost 5 cents above the offer!
While the amount of PI is higher for higher-priced stocks, when the PI occurs tells a different story.
For less expensive symbols, a higher portion of price-improved volume comes from orders which rested longer after initially being restated. For example, 18% of D-Limit orders in symbols priced between $1 and $5 rest on IEX Exchange for more than a minute after a restatement.
This is likely because lower-priced stocks tend to have thicker queues and fewer price changes. Therefore, it requires more time – and patience – to capture price improvement once your order is restated.
Our hope is to help traders optimize their strategies by incorporating data about price improvement on IEX Exchange. We hope this data helps firms optimize resting times to achieve optimal price improvement. And if you have questions about the price improvement dynamics of your current D-Limit volume, please reach out to your IEX Exchange contact.
Whether you are adding or removing liquidity, trading dark or lit, IEX Exchange is able to deliver durable price improvement in a wide variety of situations. From its inception, IEX has always been focused on performance. We have built an exchange and order types that deliver performance rather than rebates, allowing traders to achieve their trading objectives regardless of their size or speed.
[1] As a probabilistic model, the IEX Signal can make both "correct" and "incorrect" predictions. In March 2022, 78% of Signal predictions correctly predicted the direction of the next change to the National Bid and Best Offer (NBBO) in the volume-weighted average symbol.
/ May 13, 2025
