diff --git a/src/buddies/src/bd/strmxor.cc b/src/buddies/src/bd/strmxor.cc
index 9bd72e860..de1f265e4 100644
--- a/src/buddies/src/bd/strmxor.cc
+++ b/src/buddies/src/bd/strmxor.cc
@@ -680,13 +680,17 @@ bool run_tiled_xor (const XORData &xor_data)
       if (ll->second.first < 0) {
         proc.input (in_a, db::RecursiveShapeIterator ());
       } else {
-        proc.input (in_a, db::RecursiveShapeIterator (*xor_data.layout_a, xor_data.layout_a->cell (xor_data.cell_a), ll->second.first));
+        db::RecursiveShapeIterator si (*xor_data.layout_a, xor_data.layout_a->cell (xor_data.cell_a), ll->second.first);
+        si.set_for_merged_input (true);
+        proc.input (in_a, si);
       }
 
       if (ll->second.second < 0) {
         proc.input (in_b, db::RecursiveShapeIterator ());
       } else {
-        proc.input (in_b, db::RecursiveShapeIterator (*xor_data.layout_b, xor_data.layout_b->cell (xor_data.cell_b), ll->second.second));
+        db::RecursiveShapeIterator si (*xor_data.layout_b, xor_data.layout_b->cell (xor_data.cell_b), ll->second.second);
+        si.set_for_merged_input (true);
+        proc.input (in_b, si);
       }
 
       std::string expr = "var x=" + in_a + "^" + in_b + "; ";
@@ -805,10 +809,12 @@ bool run_deep_xor (const XORData &xor_data)
 
       if (ll->second.first >= 0) {
         ri_a = db::RecursiveShapeIterator (*xor_data.layout_a, xor_data.layout_a->cell (xor_data.cell_a), ll->second.first);
+        ri_a.set_for_merged_input (true);
       }
 
       if (ll->second.second >= 0) {
         ri_b = db::RecursiveShapeIterator (*xor_data.layout_b, xor_data.layout_b->cell (xor_data.cell_b), ll->second.second);
+        ri_b.set_for_merged_input (true);
       }
 
       db::Region in_a (ri_a, dss, db::ICplxTrans (xor_data.layout_a->dbu () / dbu));
diff --git a/src/db/db/dbRecursiveShapeIterator.cc b/src/db/db/dbRecursiveShapeIterator.cc
index c918068ff..b86f5d010 100644
--- a/src/db/db/dbRecursiveShapeIterator.cc
+++ b/src/db/db/dbRecursiveShapeIterator.cc
@@ -933,35 +933,6 @@ RecursiveShapeIterator::new_cell (RecursiveShapeReceiver *receiver) const
 
   new_layer ();
 
-  //  try some optimization - only consider optimizing by dropping the shape-covered area under certain circumstances:
-  //  - single layer
-  //  - at least one shape to consider and it is a box
-  //  - that box clips the region entirely on one side
-  //
-  //  NOTE that this implementation can modify the search box on the box stack
-  //  because we did "new_layer()" already and this function is not going to
-  //  be called, because we do so only for single layers.
-
-  if (m_for_merged_input && (! m_has_layers || m_layers.size () == 1) && ! m_shape.at_end ()) {
-
-    box_type box = m_shape->rectangle ();
-    if (! box.empty ()) {
-
-      //  Need to enlarge the empty area somewhat so we really exclude instances
-      //  entirely enclosed by the shape - also the ones at the border.
-      if (! m_overlapping) {
-        box.enlarge (box_type::vector_type (1, 1));
-      }
-
-      const box_type &region = m_local_region_stack.back ();
-      unsigned int l = m_has_layers ? m_layers.front () : m_layer;
-      box = (cell ()->bbox (l) & region) - box;
-      m_local_region_stack.back () = box;
-
-    }
-
-  }
-
   if (m_overlapping) {
     m_inst = cell ()->begin_touching (m_local_region_stack.back ().enlarged (box_type::vector_type (-1, -1)));
   } else {
@@ -994,6 +965,33 @@ RecursiveShapeIterator::new_inst (RecursiveShapeReceiver *receiver) const
       }
     }
 
+    if (m_for_merged_input && (! m_has_layers || m_layers.size () == 1)) {
+
+      //  Try some optimization: if the instance we're looking at is entirely covered
+      //  by a rectangle (other objects are too expensive to check), then wil skip it
+      //
+      //  We check 10 shapes max.
+
+      unsigned int l = m_has_layers ? m_layers.front () : m_layer;
+      box_type inst_bx = m_inst->bbox (m_box_convert);
+      auto si = cell ()->shapes (l).begin_overlapping (inst_bx, m_shape_flags, mp_shape_prop_sel, m_shape_inv_prop_sel);
+      bool skip = false;
+      size_t nmax = 10;
+      while (! skip && ! si.at_end () && nmax-- > 0) {
+        if (inst_bx.inside (si->rectangle ())) {
+          skip = true;
+          break;
+        }
+        ++si;
+      }
+
+      if (skip) {
+        ++m_inst;
+        continue;
+      }
+
+    }
+
     bool all_of_instance = false;
     bool with_region = false;
 
diff --git a/src/db/unit_tests/dbRecursiveShapeIteratorTests.cc b/src/db/unit_tests/dbRecursiveShapeIteratorTests.cc
index 4dda034db..0e4a7430a 100644
--- a/src/db/unit_tests/dbRecursiveShapeIteratorTests.cc
+++ b/src/db/unit_tests/dbRecursiveShapeIteratorTests.cc
@@ -1683,7 +1683,7 @@ TEST(13_ForMergedPerformance)
       ++n;
     }
     tl::info << "Counted " << n << " shapes on 66/20";
-    EXPECT_EQ (n, size_t (1217072));
+    EXPECT_EQ (n, size_t (1212844));
   }
 
   {
@@ -1694,7 +1694,7 @@ TEST(13_ForMergedPerformance)
       ++n;
     }
     tl::info << "Counted " << n << " shapes on 235/4";
-    EXPECT_EQ (n, size_t (919));
+    EXPECT_EQ (n, size_t (10));
   }
 
   si1.set_for_merged_input (false);
@@ -1735,7 +1735,7 @@ TEST(13_ForMergedPerformance)
       ++n;
     }
     tl::info << "Counted " << n << " shapes on 66/20";
-    EXPECT_EQ (n, size_t (218736));
+    EXPECT_EQ (n, size_t (218552));
   }
 
   {
@@ -1746,7 +1746,7 @@ TEST(13_ForMergedPerformance)
       ++n;
     }
     tl::info << "Counted " << n << " shapes on 235/4";
-    EXPECT_EQ (n, size_t (1));
+    EXPECT_EQ (n, size_t (2));
   }
 
   {
@@ -1757,7 +1757,7 @@ TEST(13_ForMergedPerformance)
     db::Region r2 (si1);
 
     EXPECT_EQ (r1.count (), size_t (218823));
-    EXPECT_EQ (r2.count (), size_t (218736));
+    EXPECT_EQ (r2.count (), size_t (218552));
     EXPECT_EQ ((r1 ^ r2).count (), size_t (0));
   }
 
@@ -1769,7 +1769,7 @@ TEST(13_ForMergedPerformance)
     db::Region r2 (si2);
 
     EXPECT_EQ (r1.count (), size_t (2578));
-    EXPECT_EQ (r2.count (), size_t (1));
+    EXPECT_EQ (r2.count (), size_t (2));
     EXPECT_EQ ((r1 ^ r2).count (), size_t (0));
   }
 }