A midpoint peg is a pegged order that uses the current mid-point price as its reference price. The mid-point is the average of the best bid and best offer across relevant market centers (the NBBO in U.S. markets).
As market quotes update, the pegged order’s reference price shifts to reflect the new mid-point, so the order stays centered around the prevailing mid-price and can trade against resting or incoming interest at or near that price. This type of order is typically passive and adjusts automatically instead of committing to the best bid or offer.
Midpoint peg orders are offered on many U.S. equities and ETF venues as a way to participate in price discovery with reduced exposure to the spread. They can help manage the risk of adverse selection and minimize the amount of price improvement needed to trade, though execution is not guaranteed and depends on available liquidity at the mid-point and on routing and venue rules. In fast or thin markets, the mid-point may move without a matching trade, and the order may rest in the book or be re-priced as quotes update. Availability and exact behavior can vary by venue and instrument.
A midpoint peg order is placed on a U.S. equity venue; as the NBBO updates, the order’s reference price moves with the mid-point and may trade at that price if a counterparty is available.
Pegged order · National Best Bid and Offer (NBBO) · Mid-price · Best bid and offer · Order routing · Price improvement