Let's say ARCA is on the offer @30.00 for 1K shares with a discretion offset of 0.10 (29.90). If somebody were to hit the posted 30.00 ARCA offer using ARCA, would the fill come in at 29.90 or 30.00?
30.00 The minimum amount of discretion gets used. Hard to tell from their description at: http://usequities.nyx.com/markets/nyse-arca-equities/order-types But the hint is in the wording: "When a bid or offer appears in the Book at or within your discretionary price range, it will be executed against the Book" If the inbound buy is 30.00, it just hits the resting limit. If the inbound buy is 29.99, it misses the inbound limit, "goes on the book" and triggers the discretionary order to come get it. Since the 30.00 buy is now on the book, its limit price gets used.
The price you are filled at is your buy limit price. So the arca order is posted at 30.00 but the discretionary price is 29.90. Then if you execute you order for say 29.95 that is your fill. You wont get price improvement. This type of order is like a hidden order. It is only advantageous for the person posting this type of order. I can think of a few scenarios that this would be beneficial. If you want to penny the bid/offer and someone keeps posting their order ahead of yours. Say you want to buy at 30.00 and someone keeps getting in front of you at 30.01. Then you use this order. Set your display price at 30.00 and discretionary price at 30.02. That way you get filled at 30.02 ahead of the order at 30.01.