Combo orders

[akivak]

I noticed this week that after placing an order at IB to, say, purchase a straddle at mid, my bid was not appearing outside of IB as the new highest bid. Thus no non-IB trader could match my bid.

I called IB and spoke to a rep. He told me that this is new as of couple weeks ago. He explained that the exchanges have added a new fee for holding orders so IB is now going to hold a traders order until it becomes marketable. In the past IB has held orders when there was no chance of the order's being executed. But now IB will hold orders even when the order is clearly marketable.

Basically what it means is that IB will now hold your order until it knows for sure that it will be filled immediately.

Is someone aware of this change?

 

[ktm]

This doesn't sound right.

I do a lot of these orders as well via optiontrader and I haven't noticed the same thing...maybe I need to look closer, although my fills have been solid lately...at or near mid and a few the other day at better than mid.

 

[akivak]

Quote from ktm:

This doesn't sound right.

I do a lot of these orders as well via optiontrader and I haven't noticed the same thing...maybe I need to look closer, although my fills have been solid lately...at or near mid and a few the other day at better than mid.

I had decent fills as well - but those fills may have been internal where IB matches you with another IB trader.

IB confirmed twice that something has changed since last Friday and that they are getting a lot of calls (complaints) about it. If they indeed don't send orders to the exchange unless the order is marketable - this is a HUGE change and makes their whole SmartRouting worthless.

 

[1245]

Quote from akivak:

I noticed this week that after placing an order at IB to, say, purchase a straddle at mid, my bid was not appearing outside of IB as the new highest bid. Thus no non-IB trader could match my bid.

I called IB and spoke to a rep. He told me that this is new as of couple weeks ago. He explained that the exchanges have added a new fee for holding orders so IB is now going to hold a traders order until it becomes marketable. In the past IB has held orders when there was no chance of the order's being executed. But now IB will hold orders even when the order is clearly marketable.

Basically what it means is that IB will now hold your order until it knows for sure that it will be filled immediately.

Is someone aware of this change?

I left IB after the summer when they made it clear to me that my complex orders never go on the COB on the exchanges until they are marketable. I wanted my order available to other public order flow, not just Timber Hill.

 

[akivak]

Quote from 1245:

I left IB after the summer when they made it clear to me that my complex orders never go on the COB on the exchanges until they are marketable. I wanted my order available to other public order flow, not just Timber Hill.

So you are saying that this was always the case? I got an impression from the IB rep that this is something new. How does it work with other brokers? I always was under impression that IB fills are among the best.

 

[1245]

Quote from akivak:

So you are saying that this was always the case? I got an impression from the IB rep that this is something new. How does it work with other brokers? I always was under impression that IB fills are among the best.

I don't believe there has been any changes. I noticed there was an issue when I was charged for taking liquidity, two hours after entering a vertical spread. They told me my order stays in the system until one or more sides make the spread marketable. To me what he was saying is that if Timber Hill can do one or both sides of the spread, I can get done. Otherwise no one knows my spread is there except other IB customers. I believe the NBBO they show on spreads includes your order, not the COB on the CBOE or ISE.

 

[ktm]

I think we'd need to hear from someone more informed than your basic phone rep to determine if anything has really changed.

With regard to marketability and the like, I kinda thought that most of the combo fills we get are based on the IB computer continuously scanning the individual legs to determine when it can fire off all the legs at once and get the limit price.

Am I wrong about this?

 

[1245]

Quote from ktm:

I think we'd need to hear from someone more informed than your basic phone rep to determine if anything has really changed.

With regard to marketability and the like, I kinda thought that most of the combo fills we get are based on the IB computer continuously scanning the individual legs to determine when it can fire off all the legs at once and get the limit price.

Am I wrong about this?

That is not correct. If you enter a spread, it will be executed as a spread at most firms without legging risk. Your order should go to the COB at an exchange. IB does not do that, which is fine, That is their policy. The only way you will receive an execution on a two way spread with two other traders is if IB is doing one side of the spread,so that side has no leg risk, and the balance can be done in the open market. This is possible. It's hard to tell if IB does that. I assume they do which from time to time will give you an execution when others might not get one. I would like my order to side on the COB for the world to trade with.

1245

 

[IBsoft]

Quote from 1245:

That is not correct. If you enter a spread, it will be executed as a spread at most firms without legging risk. Your order should go to the COB at an exchange. IB does not do that, which is fine, That is their policy. The only way you will receive an execution on a two way spread with two other traders is if IB is doing one side of the spread,so that side has no leg risk, and the balance can be done in the open market. This is possible. It's hard to tell if IB does that. I assume they do which from time to time will give you an execution when others might not get one. I would like my order to side on the COB for the world to trade with.

1245

The combination orders have been and still are routed natively to the option exchanges.

 

[1245]

Quote from IBsoft:

The combination orders have been and still are routed natively to the option exchanges.

So if the NBBO in a spread is 3.00/3.50 and I bid 3.10 through your smart route, my order will sit on the COB of one of the option exchanges? That was NOT the way it was explained to me by both your customer service and trade desk. And, if you're correct, how did I take liquidity on a spread that was entered over an hour earlier?

1245