Avoid sub-penny front runners on IEX?

[Maverick2608]

Interactive Brokers has opened up access to Investors Exchange (IEX) – the exchange described in Michael Lewis’ new book Flash Boys.

Can I avoid being front run by sub-penny orders by directing my limit orders to IEX?

 

[trom]

Given that when IEX becomes a lit exchange it will become just another quote that can set the NBBO, I don't think it will make a difference. Most subpenny fills are brokers internalizing orders or selling their flow. All they're required to do is provide price improvement on the NBBO. IEX won't offer some type of "trade at" rule or anything to prevent subpennying.

 

[Maverick2608]

I agree that it will change when it becomes an ECN.

But as long as it remains a dark pool, HFTs and brokers cannot see my limit order. They have to ping IEX with 100 lot orders to see my limit order.

My thought was that as long as IEX operates as a dark pool and I only post small limit orders, I cannot be front run by sub-penny orders.

 

[trom]

You notice that you get subpennied when you trade in dark pools? I haven't noticed that problem. When I think of subpennying I think of trades going off 1/100th of cent inside my posted, lit limit orders.

 

[Maverick2608]

Banks/brokers sell access to their dark pools to HFTs - i.e. dark pools are lit for HFTs paying for access. HTFs can then front run using sub penny orders.

 

[trom]

Banks/brokers sell access to their dark pools to HFTs - i.e. dark pools are lit for HFTs paying for access. HTFs can then front run using sub penny orders.

Ehhh... I route a lot of my orders to Citadel, Knight/Getco, etc and haven't noticed problems being subpennied. If you're sending orders to a broker that's using an algo that's getting gamed... stop routing there. Most subpennying is the larger market makers trading against retail flow - which you have no chance of interacting with anyway.

 

[Pippi436]

I think you guys need to look up the meaning of the term "frontrunning"

 

[trom]

I agree it isn't front running. There is no breach of fiduciary duty to a client. But, at this point the cat's out of the bag and people use the term for pretty much everything. Call it whatever you want...

 

[Maverick2608]

Front running: the practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers.

Some brokers let HFTs do the dirty job and split the loot through access fees.

To me: same same

To the Attorney General: ? http://www.bloomberg.com/news/2014-03-18/high-speed-trading-said-to-face-n-y-probe-into-fairness.html

 

[Rum Runner]

Can I avoid being front run by sub-penny orders by directing my limit orders to IEX?

No need for IEX, you can simply avoid sub penny orders by sending your orders to an exchange. Sub pennying is not allowed there (except for mid point orders).