It can sit in the mid for a while. Sometimes 5-10 minutes. Changing the limit price constantly will eventually result in modification fees and doing it for many instruments at once is tiresome, if manually.
Do you know if the midpoint order shows up on the book where HFT can see it and move the price away? Or is this a hidden order type?
“To achieve the midpoint price or better, the MidPrice order is routed to the exchange with the highest probability of filling as a Pegged-to-Midpoint order, or in the case of IEX as a Discretionary Peg (D-Peg) order. If no such exchange is available, the MidPrice order is routed as either a native or simulated Relative order.”
Something I haven’t been able to figure out - I regularly use the IB midpoint order to trade thinly traded options, i.e. with wide spreads. Contrary to my expectation, I usually get filled within the spread quite quickly. For example, the spread showing at IB (NBBO?) will be USD 0.70/1.00, I‘ll place an order to buy at the midprice, USD 0.85, get filled after a couple of minutes at USD 0.85 but the spread stays the same. Is my order being filled by hidden orders taking the opposite side of my order?
That’s different from midprice discussion above. This topic was about midprice orders when trading stocks. For options everything works differently and your orders are usually auctioned, so any computers can make bids during the initial auction and fill your order. Or if no one takes it then it gets to exchange(s) and any other computers can decide to trade/match your order, without a need for hidden orders. They can first check if they can hedge your order or place a series of hedged orders with various hedges applied to your order, and see which one may go through. And there is really no need for anyone to expose themselves to risks and place orders to get options that they don’t need, because no one really needs the options you’re selling or buying. Only after a retail trader like you places an order then everyone else can take time and decide if they want it or not, so they can place an order matching your price whenever they like (again, usually when they can hedge their risk), so there is no need to place any hidden orders. In fact, hidden orders don’t apply to options, except when a broker supports these internally and doesn’t send option orders to exchanges until there is a good chance of filling them.
Sometimes a cigar is just a cigar. You may have simply filled at the midpoint. There is preferenced, hidden liquidity in options, but generally, it relates to the depth of the market. IB traditionally wasn't a participant in preferenced liquidity, but that may have changed.
Not really, we can see our own orders lit on the exchange for a few minutes before being filled. Of course not all will be filled, some never, some immediately, business as usual.
"Not really, we can see our own orders lit on the exchange for a few minutes before being filled. Of course, not all will be filled, some never, some immediately, business as usual." Again liquidity, not orders.