Can't buy and sell same contract (IB)
- Thread starter TraderSU
- Start date
This all was covered in another thread previously and I don't remember the end result, but I'm pretty sure we found that to be inaccurate. I've had an open buy and sell order on the same contract on a few different brokers in the past. The only time I've ever heard people mention this problem is with IB.
The regs do change from time to time; however, I believe this restriction is still alive and well. CBOE recently amended this rule in May to lift the prohibition for certain classes of professionals. Using multiple accounts with the same benefucal owner is also restricted (tough to enforce). As one of the RAES bandits in the late 90s, I am painfully aware of each and every one of these rules used to keep the market makers from getting creamed daily by high tech retail customers.
From the CBOE rule book;
Rule 6.8C. Prohibition Against Members Functioning as Market-Makers
(a) Members may neither enter nor permit the entry of customer orders into the Exchange's electronic Order Routing System if (i) the orders are limit orders for the account or accounts of the same beneficial owner(s) and (ii) the limit orders are entered in such a manner that the beneficial owner(s) effectively is operating as a market maker by holding itself out as willing to buy and sell such securities on a regular or continuous basis.
(b) In determining whether a beneficial owner effectively is operating as a market maker, the Exchange will consider, among other things, the simultaneous or near simultaneous entry of limit orders to buy and sell the same security and the entry of multiple limit orders at different prices in the same security.
Approved May 4, 2001 (2001-20); amended April 2, 2009 (09-009).
From the CBOE rule book;
Rule 6.8C. Prohibition Against Members Functioning as Market-Makers
(a) Members may neither enter nor permit the entry of customer orders into the Exchange's electronic Order Routing System if (i) the orders are limit orders for the account or accounts of the same beneficial owner(s) and (ii) the limit orders are entered in such a manner that the beneficial owner(s) effectively is operating as a market maker by holding itself out as willing to buy and sell such securities on a regular or continuous basis.
(b) In determining whether a beneficial owner effectively is operating as a market maker, the Exchange will consider, among other things, the simultaneous or near simultaneous entry of limit orders to buy and sell the same security and the entry of multiple limit orders at different prices in the same security.
Approved May 4, 2001 (2001-20); amended April 2, 2009 (09-009).
Thanks DT, Very informative.
@SF - IB has a cancel fee, so I leave the order to expire. If I was with any other broker, I would have happily canceled the first order and continued with the second order. Hence no issue.
It's good to know the boundaries and limitations.
Thanks guys.
Good luck trading.
OK, I forgot that.
However, there might be some tricks to avoid this. For instance, when you submit a SMART "pegged to stock" order with a delta 0 (which is essentially just a limit order) then TWS always route to 2 exchanges (I think the 2 which have the low modify fee, i.e. PSE and BOX).
http://individuals.interactivebrokers.com/en/p.php?f=otherFees
However, there might be some tricks to avoid this. For instance, when you submit a SMART "pegged to stock" order with a delta 0 (which is essentially just a limit order) then TWS always route to 2 exchanges (I think the 2 which have the low modify fee, i.e. PSE and BOX).
http://individuals.interactivebrokers.com/en/p.php?f=otherFees