Direct Access Brokers that will not sell your Order Flow to HFT

Quote from One:WTJ suggested several times to simply route directly if there are concerns, but the few times I have looked, I have not found that many brokers that seem to offer direct routing of say equity options. Is it the case that most brokers offer DMA and I have missed it?
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So your choice with that is to not use that broker. The lines get blurred when you start moving across asset classes. There are different rules for options vs. straight equities vs. futures vs. options on futures vs. options on equities.

Most retail customers initially choose their firms based on cost. It may be that you can direct options orders but only through a more expensive broker or through an account with higher level of permissions (more capital or more options approvals).

Even in the prop trading world choices for trading options start to get very limited.



As for the comments I made on internalization previously, I have always stated that I am generally against internalization. I disagree with a broker setting the price structure so that it is cost prohibitive to trade directed orders - but then again, that is the trader's choice. Also, in recent times now that banks are getting out of the proprietary trading business the whole market structure is changing so what applied and held true even a year ago is very much different today.
 
"the whole market structure is changing so what applied and held true even a year ago is very much different today.
would you please explain the differences and its effect on the trader?
 
Quote from WinstonTJ:

So your choice with that is to not use that broker. The lines get blurred when you start moving across asset classes. There are different rules for options vs. straight equities vs. futures vs. options on futures vs. options on equities.

Most retail customers initially choose their firms based on cost. It may be that you can direct options orders but only through a more expensive broker or through an account with higher level of permissions (more capital or more options approvals).

Even in the prop trading world choices for trading options start to get very limited.



As for the comments I made on internalization previously, I have always stated that I am generally against internalization. I disagree with a broker setting the price structure so that it is cost prohibitive to trade directed orders - but then again, that is the trader's choice. Also, in recent times now that banks are getting out of the proprietary trading business the whole market structure is changing so what applied and held true even a year ago is very much different today.
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So then, why are you commenting on a thread that was specifically created to discuss retail brokers that provide DMA platforms?

First, you were justifying PFOF/Internalization policies, and now that you have been exposed as a hypocrite, you are moderating your position. So, tell us, why did you go to such great lengths to discuss such subject matter in the first place? Do you enjoy wasting time?

How can you purport to disagree with such a business practice when you have defended it and rationalized it repeatedly in this thread? You went from saying how it provided accurate market pricing (what a joke) to the end-user to then complaining about how it was the broker's choice (not necessarily the trader's choice) and how said brokers would go bankrupt without internalization, etc. You were all over the map in a torrid defense.
 
Ultimately, I think we're all on the same team here and can agree that internalization and back-door payment-for-order-flow deals are bad for us and the rest of the market, aside from benefitting the broker who has captive order flow from the client. So if you're the type who is inclined towards writing letters to your congressman, then may I suggest investigating the issue yourself and consider writing such a letter. Now might be a good time to do it, as they've got a Knight guy testifying, and I'm sure many of his interests are quite contrary to ours (and indeed everyone else's, excepting the payment-for-order-flow oligopoly and the brokers they cut deals with).
 
Quote from MRBRETTONWOODS:

It seems that there are only a few US-based retail brokers left that provide actual Direct-Market-Access (for equities).

The 3 seem to be IB, Tradestation and Vision.
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MRBRETTONWOODS, one question on the original post:

You group IB, Tradestation and Vision together. Is this because you believe that IB does not internalize or receive PFOF?

Last I checked, Tradestation and Vision disclosures explicitly state that they do not internalize or receive PFOF. With IB, it's not so clear.

Interested to hear your take on this debate.

Thank you in advance.
 
Quote from Options12:

MRBRETTONWOODS, one question on the original post:

You group IB, Tradestation and Vision together. Is this because you believe that IB does not internalize or receive PFOF?

Last I checked, Tradestation and Vision disclosures explicitly state that they do not internalize or receive PFOF. With IB, it's not so clear.

Interested to hear your take on this debate.

Thank you in advance.
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Well, my take on it is that while IB may or may not internalize orders to a certain degree for its own market-making activities, it is still not as bad as most other retail brokers. So, relative to other retail brokers, it comes out ahead in that regard.


It's like comparing the Swiss Franc to the Pakistani Rupee, not that Switzerland doesn't have flaws of its own..
 
Quote from MRBRETTONWOODS:

Well, my take on it is that while IB may or may not internalize orders to a certain degree for its own market-making activities, it is still not as bad as most other retail brokers. So, relative to other retail brokers, it comes out ahead in that regard.


It's like comparing the Swiss Franc to the Pakistani Rupee, not that Switzerland doesn't have flaws of its own..
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What about PFOF?

Also, can you explain why IB internalization would be less bad (CHF vs. PKR?!?) than internalization conducted by another broker-dealer?
 
Quote from Options12:

What about PFOF?

Also, can you explain why IB internalization would be less bad (CHF vs. PKR?!?) than internalization conducted by another broker-dealer?
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They don't take PFOF, but there have been complaints lodged against IB in that they use client orders to feed liquidity to Timber Hill.

IB is still a retail broker, yes, but a more unique retail broker in the sense that they compete in terms of price improvement and execution quality, so say relative to your typical retail broker, they are more likely to give you a better fill. That is also part of their business model, it is actually their niche. Your average retail broker has a different objective in the sense that their main objective is to profit from the liquidity that you provide.
 
Quote from MRBRETTONWOODS:

They don't take PFOF, but there have been complaints lodged against IB in that they use client orders to feed liquidity to Timber Hill.

IB is still a retail broker, yes, but a more unique retail broker in the sense that they compete in terms of price improvement and execution quality, so say relative to your typical retail broker, they are more likely to give you a better fill. That is also part of their business model, it is actually their niche. Your average retail broker has a different objective in the sense that their main objective is to profit from the liquidity that you provide.
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You have no idea what your talking about. They Absolutely take PFOF in both equities and options. They say so on their website. Anyone that controls their routes and order flow sells any equity order directed to smart route (to a dark pool first then sometimes to an ECN, sometimes not) and all option orders send to ISE, CBOE, AMEX where MM and DMM offer PFOF to route to that exchange. As an example, the AMEX pays .25 per contact for penny pilot orders and .55 for non penny pilot orders. If your Timber HIll, Barclay, GS, etc., you can direct orders to yourself and be guaranteed 40% of the contra side if you want it. They call these "marketing programs" on the exchange websites.

I'm not bashing IB. I think their fine. But don't pretend they are not a for profit company. Don't think that PFOF AND directing order flow to Timberhill is not a profit center.

My point is WHO CARES. As long as you have access to DMA when you want it and dark pools when you want it and understand when it fit s your trading.
 
I'm very confused. I don't know much about HFT as I'm just a retail trader but this thread seemed interesting so I thought I would give it a read.

WinstonTJ was winning the debate in my opinion until I saw his previous posts that seemed to completely contradict what he is saying now.

That being said, I don't care if a broker makes an extra fraction of a cent off of me for giving me $1-3 trades. Just my 2 cents.
 
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