Adaptive Algo Orders

The Adaptive algo order type combines IB's Smartrouting capabilities with user-defined priority settings in an effort to achieve further cost efficiency at the point of execution. Using the Adaptive algo leads to better execution prices on average than for regular limit or market orders.

This algo can be used with a limit or market order and is designed to ensure that both market and aggressive limit orders trade between the spread. You can specify how urgently you want the order to fill using the "priority/urgency" selector in the algo window. This algo order type is most useful to an investor when the spread is wide, but is also helpful when the spread is only one tick.

A regular market order would go straight to the ask price, while the logic for an Adaptive market order differs. In the case of a buy, the order starts at the bid and incrementally checks prices from the bid to the ask prices to fill the desired quantity at a price better than the prevailing offer. The time taken to scan for better prices is determined by the priority setting selected by the user. The 'critical' setting scans only briefly, while the 'patient' scan works more slowly and has a higher chance of achieving a better overall fill for your order. There is a risk (mostly with patient) that during the scanning time, the price of the security moves away from the original price.

For Adaptive limit orders set to fill within the bid/ask spread the algo will attempt to execute at favorable prices in the same way as above, and will not fill at a worse price than your specified price but may likely fill at a better price.

To Create an Adaptive Algo in Mosaic Set up the order in the Mosaic Order Entry panel. Create a buy or sell order:

Step 1 – Enter quantity to trade Step 2 - From the LMT type field select IBALGO and then select Adaptive.

Step 3 – In the price field, modify the limit price (to use a limit order), or use the price wand to select the MARKET price (to use a market order).

Step 4 – In order to specify the urgency, open the Advanced panel by clicking on the red 'x' button. Step 5 – From the drop down menu choose from the selection of priority/urgency parameters. Step 6 – Click Submit to send the order.

To Create an Adaptive Algo in Classic TWS: Step 1 – For an order to purchase, click on the Ask price of the security. Step 2 – In the Quantity field, input the number of shares to be bought. Step 3 – In the order row, locate the Destination column and Step 4 – Click on SMART to reveal a list of possible venues – select IBALGO, which creates a variety of algo order types.