What are pegged orders and how do they work?

A pegged order is a stock market order type that automatically adjusts its limit price as the market moves, instead of staying fixed at one number. You set it to track the best bid or best ask, and the exchange updates your limit price every time that reference price changes.

Think of it as a regular limit order with a leash. The leash is tied to the live order book, and the order moves with the leash without you touching the screen.

How a Pegged Order Works in Practice

Every pegged order has three inputs:

• A reference price — the bid, the ask, or the mid-quote
• An offset — how far above or below the reference your order sits
• A cap or floor — the worst price you are willing to accept if the market keeps moving against you

Suppose a share has a best bid of 502 and a best ask of 503. You want to buy without crossing the spread. You place a buy order pegged to the best bid with zero offset. Your displayed bid becomes 502. If the best bid moves to 503, your order moves to 503. If the bid drops to 500, your order drops to 500.

That single rule keeps your order at the top of the queue without forcing you to keep editing the price.

The Three Pegging Reference Points

Most exchanges support three flavours of pegged orders:

• Primary peg. Buys peg to the bid, sells peg to the ask. Useful when you want to wait passively.
• Market peg. Buys peg to the ask, sells peg to the bid. Useful when you want to take liquidity quickly.
• Midpoint peg. Both sides peg to the midpoint of the bid and ask. Useful for dark pools and large institutional orders.

Indian retail platforms mostly expose primary pegs through their pro-trading terminals. Midpoint pegs sit on the institutional side, often via direct market access.

Why Traders Use Pegged Orders

Three real-world advantages explain the popularity of pegged orders.

• Hands-off price discovery. You set the rule once. The order keeps pace with the market without you watching the screen.
• Better queue position. A peg that tracks the bid stays at the front of the queue. Time-priority rules then work in your favour.
• Spread capture for market makers. Algorithmic traders use double-sided pegs to earn the spread while staying out of toxic flow.

For a long-term investor, the gain is small. For an active trader or an institution placing 5,000-share blocks, the saved spread adds up to real money over a year.

The Limits of Pegged Orders Among Other Stock Market Order Types

Pegging is not a silver bullet. Compared with other stock market order types, it has clear weaknesses:

• Slippage during fast moves. When the bid jumps in a thinly traded stock, your pegged order chases the move and may fill at a worse price than you expected.
• Cap and floor are mandatory. Without a hard cap, a runaway market can drag a buy peg into a price you never wanted to pay.
• Not every venue supports them. The peg rules can differ between the National Stock Exchange and the Bombay Stock Exchange. Read your broker's order help page before depending on them.

For background on the basic order types every Indian trader should know, the official investor education portal of SEBI publishes a clean reference.

A Side-by-Side Look at Pegged Orders and Other Order Types

To place pegged orders in the right context, compare them with the orders most retail investors already use.

• Market order: fills now at whatever price is available. Best for liquidity, worst for control.
• Limit order: fills at your price or better. Best for control, worst when the price never reaches your level.
• Pegged order: fills at a moving price tied to the book. Best for staying near the top of the queue without manual updates.
• Stop-limit order: stays dormant until a trigger price, then becomes a limit order. Best for risk control.

Pegged orders fit between limit and stop-limit on the active-management spectrum.

When Not to Use a Pegged Order

Avoid pegged orders in these situations:

• You are placing a small order in a liquid large-cap. A plain limit order at the bid does the same job with simpler rules.
• You are trading the open or the close. Spreads are wider and reference prices flicker, which leads to overfills and underfills.
• You are buying or selling near a known event like a quarterly result. Prices move in big steps; a peg cannot keep up with that kind of gap.

In all three cases, a regular limit or a stop-limit order gives you firmer control.

Frequently Asked Questions

Are pegged orders allowed for retail traders in India? Yes, on most large brokers' professional terminals. The exact reference points and caps vary by venue. Check your broker's order help page for the supported pegs.

Do pegged orders cost more in brokerage? They are charged at the same rate as a regular limit order on most platforms. Some institutional venues add a small per-order fee for midpoint pegs.

Can a pegged order be partly executed? Yes. If only part of the size matches at the current pegged price, the rest stays in the book at the updated reference price.

Are pegged orders riskier than limit orders? Not by themselves. The risk comes when you forget to set the cap. Always pair a peg with a hard upper or lower price limit.