Can your broker follow you if you get good results?

justrading said:
I think your post is misleading. According to official records and declarations, IB does not engage in prop trading. See III.

https://www.interactivebrokers.com/download/IBLLC_RiskDisclosure.pdf
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IB is not going to copy your strategy. They have built a global trading system that has been there for years. And,yes, IB has another broker dealer called Timber Hill that only does prop trading. In fact, they probable take the other side of many of your option orders.

1245
 
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justrading said:
I think your post is misleading. According to official records and declarations, IB does not engage in prop trading. See III.

https://www.interactivebrokers.com/download/IBLLC_RiskDisclosure.pdf
More...

Correct de jure, but wrong de facto. IB's complex parent structure, in addition to the retail broker/dealer, owns a massive proprietary trading and HFT operation. It is called Timber Hill, and its ability to capture customer flow for Timber Hill to trade against is likely the main reason IB was created in the first place.

"To the extent permissible under exchange rules, IB may direct customer stock, option, futures, or security futures orders to its market making affiliate Timber Hill LLC, or to another affiliate, for execution. In such cases IB's affiliate may act as principal in the resulting transaction and may earn a profit or incur a loss in connection with the transaction. The source and nature of any compensation received by IB in connection with any transaction is available upon written request of the customer."

https://www.interactivebrokers.com/en/software/reportguide/reportguide/noteslegalnotes.htm
 
Occam said:
Correct de jure, but wrong de facto. IB's complex parent structure, in addition to the retail broker/dealer, owns a massive proprietary trading and HFT operation. It is called Timber Hill, and its ability to capture customer flow for Timber Hill to trade against is likely the main reason IB was created in the first place.

"To the extent permissible under exchange rules, IB may direct customer stock, option, futures, or security futures orders to its market making affiliate Timber Hill LLC, or to another affiliate, for execution. In such cases IB's affiliate may act as principal in the resulting transaction and may earn a profit or incur a loss in connection with the transaction. The source and nature of any compensation received by IB in connection with any transaction is available upon written request of the customer."

https://www.interactivebrokers.com/en/software/reportguide/reportguide/noteslegalnotes.htm
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I'm curious, would the transmission be in the form of individual orders with associated customer account details, or would it be amalgamated? I always thought they'd match internally what they could, then route whatever else to MMs. If they don't route streams of small orders, but amalgamate, then TH can't know what's coming from the very successful traders.

Of course beyond a certain size there'd be no need to amalgamate, but we hear that big players spread orders around to avoid attracting too much attention.
 
anders888 said:
I'm not new to trading, but new to day-trading, especially with small cap stocks with relatively thin volume. Something just occured to me... Can your stock broker (such as Interactive brokers or E-trade) copy their successful client's trades? thus rendering a successful strategy useless?

Your online brokers can screen for client's trading history to find the few with consistent successful trades over a period of time, then they start to copy your trades. They would fill their trades before filling your order, result is you end up with higher buying price, and lower selling prices, reducing the effectiveness of your previous successful strategy.

This would work especially nice with day trader clients because high number of trades make statistically screening possible.
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This is precisely what I've been saying about MetaTrader software. The traders get the software "for free" and the brokers pay for it. But the software doesn't work until the trader connects to his broker. So all the broker has to do is wait for a trader with a good track record to come along, then bam, your MT strategy becomes your broker's MT strategy. Traders who trust MetaQuotes are fools imo.
 
It's what I'd do if I ran a broker, feed the best traders to a off shoot account and copy the trades, but that delay wouldn't make it front running and even if it was, there is a enough liquidity to not make it a huge issue, unless there like trading with a multi Million $ account ofcourse.

Also in the don't worry about it, if you worry about everything you'll go MAD!!
 
anders888 said:
They don't need to reverse engineer, they just have to front run your trade. If your strategy has been 90% for 2 weeks, and showed up on their rador. Say next time you enter a buy order of 200 shares, they will put through their order 1000 shares buy first, then execute your order, so you will end up higher price. similarly with sell order.

I can totally see IB scan their day-trading clients, and pick the top 5% winners, and follow their trades. After a while, those 5% starts to lose money, and thinks their strategy run out of luck.
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Then don't use passive orders if you are so suspicious.
 
This is not something 99% of traders should worry about. The few good ones could use two or three brokers and distribute trades.
 
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