RPI Orders Can Keep API Traders From Reaching Retail Quotes

At one exchange, Retail Price Improvement (RPI) orders limit eligible traders and can make visible liquidity differ between website, app and API users.

In the setup, the orders are post-only, rank behind regular orders at equal prices and can match only with non-API users trading on that exchange's website or app. The restriction limits the pool of potential counterparties, giving market makers fewer chances to trade than with a fully open quote.

The design filters order flow by how it enters the venue. API orders, including automated arbitrage and high-frequency strategies, cannot execute against RPI quotes in that implementation. A maker may give up some executions in exchange for avoiding those specific counterparties.

The venue's display can also differ by access channel. In the example, RPI quotes appear on the website and app but are omitted from the ordinary API order book. Retail users may therefore see quotes that API traders cannot reach. A depth or slippage calculation built from the API view describes that access path rather than every order visible to customers on the venue. That distinction matters when interpreting order-book depth, since the amount visible can vary with the way a trader connects.

At one exchange, the matching engine repositions an RPI quote under a specific condition. When an API taker consumes regular Ask 1 orders, the engine moves an RPI quote to a new position without filling it. The mechanics differ by exchange.

One venue has an RPI maker fee or rebate schedule separate from ordinary account terms. That provides another potential reason for a market maker to place orders in the restricted book.

The broader case for RPI rests on the cost of adverse selection: a maker can lose when a better-informed trader buys just before prices rise or sells before they fall. Filtering out some API-originated flow can reduce that exposure. Larger displayed depth and narrower spreads for retail users are the intended benefits of the exchange's arrangement.

Depth alone does not reveal whether a maker profited. One test is to compare midprices after RPI fills with prices after regular maker fills at 100 milliseconds, one second and five seconds. This type of markout tracks price movement following a trade; comparing both groups would test whether the restricted order type faced less adverse movement after execution.