IBKR Desktop Relative Order

The Relative order type is designed to seek a more aggressive price than the National Best Bid and Offer, also known as the NBBO, without showing their hand to the market, by using an offset amount. In doing so, this order type increases the odds of filling an order.

Entering a Relative order may help investors in higher priced stocks where the bid/ask spread is wider, or in less liquid markets, where bids and offers are thin, while quotes are automatically adjusted as the markets move, to remain aggressive.

Creating a Relative Order in IBKR Desktop

The order panel in IBKR Desktop can be populated by either clicking on a symbol in the Portfolio or Watchlist screens or typing in a symbol in the search bar. Once the symbol is selected the investor can click “Buy” or “Sell” to create an order window. In this example the investor chooses to create a “Buy” order and can select the quantity in shares. Note that fractional shares are not supported by the Relative order type.

Directly below are three order types; Limit, Market, and Stop. To access the Relative order type the investor clicks on “Stop” and scrolls in the drop-down box to “Relative”

The investor first sets a limit price to an amount above which they do not want the order to execute. Next, they enter an offset amount, in this example five cents. This means that the order to buy will be pegged to the National Best Bid as it moves plus the five-cent value of the offset, which makes it more aggressive than the market, so more likely to fill.

Should the market fall away, this order will remain pegged to the bid and may fall. But should the market increase, so too will the order bid price, exceeding the value of competing bids by the five-cent offset. However, the order will not execute above the chosen limit price should the price rise above it.

For a sell Relative order, the offset is subtracted from the National Best Offer making the offer more aggressive. The Sell order works the same way as a Buy order but in the opposite direction and won’t execute below the limit price.

The investor can set the Time-in-force by clicking on the box. They can select Day or Good ‘Till Cancelled, known as GTC. For more information on these terms please see the IBKR Traders’ Glossary.

Submitting a Relative order in IBKR Desktop

When the investor is satisfied with the order inputs, they can either click on “Preview” to see a breakdown of the order as well as its effect on margin, “Save” to save the order to be transmitted later, or “Submit Buy Order” to send the order. The investor chooses “Submit Buy Order” and the Order Confirmation window appears. Once satisfied they click “Transmit” to send the order. Once sent if not filled, the investor can view trades, modify the order, cancel order from the Order Confirmation screen. If the investor clicks on the three dots next to Cancel order they can Pause execution, Duplicate the order, or create the opposite order ticket.

A Relative order provides a means to seek a more aggressive price than the National Best Bid and Offer. By becoming liquidity providers and placing bids or offers into the book that are more aggressive than what is currently quoted, investors increase their odds of execution.