Currently neither relative orders nor pegged-to-primary orders roll back when the bid/ask price retreats. They only move at one direction. We need a true pegged order type that floats with inside bid or ask. A Pegged Order like TradeStation would be great.
I may well be wrong on this but I use the relative order with a zero offset quite frequently and I do think it sticks at a given price if the spread widens. I also think that it loses its place from time to time and you have to cancel and reenter it in order to get back in line. I use to think that this was a result of partial fills but I am not certain. Finally, I think the description in the user guide may be misleading (http://www.interactivebrokers.com/php/webhelp/Making_Trades/Create_Order_Types/relLogic.htm). It suggests that the limit price that you submit is irrelevant (which would be nice because then you could submit these orders from a basket without editing each order) but I do not think that is the case.
I am very glad you said this!!!!!!!!!!!!!!!!!!!!!!!!!!! I notice like yourself that the "relative" order doesn't always work and that you do have to reset it. I thought like yourself it was due to partial fills. This is 2008 and the problem still isn't corrected.
NSDQ, ARCA and BATS all offer pegged orders. Why don't you just peg it directly through the ECN, the latency will be much better. I don't use IB, so maybe IB's software doesn't let you peg orders through the ECN? If they do it should be a qualifier on the order entry such as MKT, Limit, IOC, DAY.
what brokerage do you use? also are there any provisions w/ "pegged orders" that one should be aware of. What I'm thinking of is w/ hidden orders, you order goes to the back of the line decreasing your chance of getting filled.