Pegged Order
A pegged order is a dynamic limit order whose price is automatically adjusted to track a reference benchmark — most commonly the national best bid, national best offer, or midpoint — so that the order remains competitive without requiring manual repricing by the submitting party.
Unlike a static limit order that sits at a fixed price until cancelled or executed, a pegged order continuously updates its displayed or non-displayed price in real time as the reference benchmark moves. The most common peg types available on U.S. equity exchanges include primary peg (tracks the same-side best quote), midpoint peg (tracks the midpoint of the NBBO), and market peg (tracks the opposite-side best quote, keeping the order just inside the spread).
A primary peg buy order, for example, will always price itself at the national best bid. As that bid rises or falls, the order reprices automatically, ensuring the submitting party always occupies the top of the same-side queue without lifting offers. A midpoint peg buy order anchors to the midpoint between the best bid and best offer, which is particularly useful for traders seeking price improvement — execution at a price better than the displayed best bid — without the latency cost of manually chasing quotes.
Pegged orders are heavily used by broker-dealers operating smart order routing systems and by buy-side institutions running algorithmic execution strategies focused on minimizing implementation shortfall. Because midpoint orders typically execute inside the spread, they can substantially reduce transaction costs over large portfolios relative to simply hitting the posted bid or offer.
The SEC and FINRA require broker-dealers to maintain policies governing best execution, which includes considering whether pegged or other dynamic order types are appropriate for customer orders given the security, size, and prevailing market conditions. Rule 605 and Rule 606 disclosures from broker-dealers provide statistical data on execution quality, including price improvement rates, which partly reflect how effectively pegged orders are deployed on behalf of customers.
One nuance investors should understand is that midpoint peg orders may receive less regulatory protection under Reg NMS because they are non-displayed. They will not be treated as protected quotes and therefore do not benefit from the Trade-Through Rule in the same way fully displayed limit orders do. In illiquid securities with wide spreads, the midpoint peg can be especially advantageous; in highly liquid, tight-spread securities, the benefit is more modest.