The raison d'etre of the SMART router is to either internalize the order(timber hill), or to sell the order to a third party. That's why they charge $1.05 more per option if you, yourself route directly to the exchange. They get no order flow payments that way. So, there's no way IB would stop...
You're better off just trading the stock for long term trades. The options just aren't traded very often the further out you go in time. Hence, the spreads stay wide. If you're looking for long dated leverage, maybe check out Single Stock Futures.
Payment for Order Flow - Options: IB receives order flow payments in varying amounts (from 65 cents to 75 cents per eligible contract as of July 2007) from U.S. option exchanges, specialists and/or market makers pursuant to the mandatory marketing fee programs that have been adopted by the...
If you're looking for an option sale, the SBUX puts are a blazing sale. Feb's 60%, Apr's @ 50%. Someone lifted the offer on both tenors, several times. I should know, I sold some to them. :(
Call OX back and demand to speak to a supervisor/managing director, and give him your case. In all likelihood he/she will see you have the supporting docs and they will have the clearing firm eat the trade. If they still deny your claim, only then should you talk to a lawyer and pursue...