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October 12, 2012

Direct Edge Offers Anti-HFT Order Type

By Peter Chapman

Exchange operator Direct Edge will introduce a new order type aimed at customers who want to avoid interacting with professional traders.

Called "Route Peg," the order type was approved last week by the Securities and Exchange Commission. It will be available on both of Direct Edge's exchanges on an as-yet undisclosed date.

Route Peg is a hidden limit order priced at the market's best bid or offer. It only executes against orders that are being routed out from EDGA or EDGX to another exchange.

Those orders, according to Direct Edge's regulatory filing, are unlikely to belong to professional, or high-frequency, traders. Typically, professional traders submit orders that fill immediately or are canceled. They don't route out.

The Route Peg has been crafted to interact with orders that enter one of Direct Edge's exchanges, fail to execute and then are routed away. Just before it leaves Direct Edge, the order may match up with a Route Peg order.

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