Choosing Pegged or Cancel-and-Replace Orders in Dealer Forex

Summary

The document compares pegged orders with a cancel-and-replace approach for trading through a private forex dealer. Its answer frames the choice around how often the strategy updates orders: frequent repricing and cancellation may favor sending market orders, while a lower-frequency strategy that leaves orders in place may use pegged orders, described here as limit orders. The proposed rationale is to avoid excessive order-message frequency to the provider.

The answer also contrasts execution control. A limit order can specify a price, though the fill may differ because of slippage, while a market order may execute at the provider’s market or result in a displayed bid or offer that could remain unfilled until cancellation. These are broad observations rather than a measured comparison: the document gives no execution data, latency analysis, venue-specific pegging rules, or details about how a particular dealer handles orders. The suitability of either approach therefore depends on provider behavior and the strategy’s order-update needs.

Key ideas

• The suggested choice between pegged and cancel-and-replace orders depends partly on how frequently the strategy updates orders.
• Pegged orders are presented as a possible fit for lower-frequency strategies that leave orders in place.
• Limit orders allow a specified execution price, while fills and slippage remain uncertain.
• Private dealer practices and order handling can affect which approach is suitable.

Tags

# Pegged orders vs Cancel/Replace


# Pegged orders vs Cancel/Replace












Anyone with real experience between these two types? Trying to use Pegged orders for an hft strategy (on forex) and wanted to know if someone could tell me advantages / disadvantages to use them instead of the common cancel / Replace

## Answer by rupweb (score 1)

https://quant.stackexchange.com/a/31769

I would say that generally it depends on the frequency of the orders you intend to send to your providers. If you have a cancel strategy to cancel market orders that aren't filled, as the market moves, then use market orders. If you have a lower frequency strategy where you don't intend to cancel orders, then use pegged orders, which are basically limit orders. This is to keep your providers happy with order frequencies.

Other than that I suppose a limit order allows you to specify an execution price - barring slippage - anywhere, as opposed to a market order which is either executed at market by your provider, or a bid / offer is put in the book (basically like a limit order) which may or may not be executed before you cancel.

Since a private dealer isn't legally required to make a market, then you aren't required to submit market orders... which could be an advantage depending on what your trading strategy is.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.