Does IB take responsibility? An amazing story
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Just open a $2000 account and leverage it to the hilt repeatedly until you either make $1 million or Ameritrade goes belly up....
Funny.
One day, or even intraday would have been MORE than enough to save loss, even if they charged $500 for the phone call!! But let us see if IB takes responsibility. I think that would be a big relief for a lot of people to see IB takes responsibility for stepping on people's toes when trying to fully automate.
Back the market making question: It is upsetting for me to have heard that yes, spreads are routed to Timberhill or IB who take the orders for themselves. My question is: is IB the beneficiary in the unwinding process as well, which was placed as individual legs (not spreads), and at market?
*Someone started a thread about another broker; I added comments--perhaps that is a good forum for broker choices.
One day, or even intraday would have been MORE than enough to save loss, even if they charged $500 for the phone call!! But let us see if IB takes responsibility. I think that would be a big relief for a lot of people to see IB takes responsibility for stepping on people's toes when trying to fully automate.
Back the market making question: It is upsetting for me to have heard that yes, spreads are routed to Timberhill or IB who take the orders for themselves. My question is: is IB the beneficiary in the unwinding process as well, which was placed as individual legs (not spreads), and at market?
*Someone started a thread about another broker; I added comments--perhaps that is a good forum for broker choices.
Regarding patience, you had just quoted me as follows:
Had I not had patience, regulators would have heard about his a LONG time ago!! For that reason, in part, I have only been trickling in information. IB has its advantages, and there is nothing more that I and others would want to see than to for IB to save face for themselves. (Another issue at stake: will IB still be one of the eligible brokers that I would refer other traders to.)
Question to Def,
The box spread legs were liquidated at market. The best fill was available both by market makers and by IB. Who fills profitable orders in the event of a tie?
Had I not had patience, regulators would have heard about his a LONG time ago!! For that reason, in part, I have only been trickling in information. IB has its advantages, and there is nothing more that I and others would want to see than to for IB to save face for themselves. (Another issue at stake: will IB still be one of the eligible brokers that I would refer other traders to.)
Question to Def,
The box spread legs were liquidated at market. The best fill was available both by market makers and by IB. Who fills profitable orders in the event of a tie?
def
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I thought the comments provided by IBj were detailed, informative and clearly spelled out our policy. FWIW, we have been proactive in explaining and noting our liquidation policies with the regulators.
The brokerage IB does not trade the other side of your trade as it does not trade on a proprietary basis. IB's affiliate Timber Hill (just like any other market participant) may take the other side of an order if it can offer the best price to an order.
I'd like to add one additional comment... You mention "profitable orders". When a liquidating order is sent to an exchange, no one knows that it is a liquidating order and no one knows at that instant in time whether or not the order will be profitable to the opposing side.
Quote from dis:
While initial liquidations may indeed increase the box value and trigger additional liquidations, liquidations would cause the gpv/netliq ration to drop below the 50:1 threshold well before the entire position is liquidated. It looks like the automatic liquidation program checks the gpv only once and, if the gpv is out of range, liquidates the entire position.
No, the checks are made prior to each liquidation cycle. The example shows why the GPV ratio is repeatedly violated when there is a change in a mxiamlly leveraged portfolio. As the position value changes due to the unfavorable marks resulting from market orders, the maximally allowed position value declines at a rate 50x bigger.
Reply to Def (part one)
Two types of liquidations: a) one for margin violations, b) the other for the RATIO of net liquidation value versus gross position value, as occurred here. The former, IB says liquidates according to what will best alleviate the margin problem. The latter, IBj acknowldges does NOT liquidate according to the RATIO, rather the software almost randomly breaks down the position SIZE, ignoring whether it will help or hurt the RATIO.
My securities attorney told me clearly that the latter is a clear violation, because it hurts the customer unnecessarily, and does not necessarily help the broker; for sure, if it happened, has to be corrected.
...and we have been waiting patiently.
Two types of liquidations: a) one for margin violations, b) the other for the RATIO of net liquidation value versus gross position value, as occurred here. The former, IB says liquidates according to what will best alleviate the margin problem. The latter, IBj acknowldges does NOT liquidate according to the RATIO, rather the software almost randomly breaks down the position SIZE, ignoring whether it will help or hurt the RATIO.
My securities attorney told me clearly that the latter is a clear violation, because it hurts the customer unnecessarily, and does not necessarily help the broker; for sure, if it happened, has to be corrected.
...and we have been waiting patiently.
Reply to Def (part 2):
In short, the liquidation was erratic, and it seems apparent Timber Hill was first in line.
There are difficulties which have to be explained. IF IB merely wanted to send a message to their customers to increase concern position size, you don't need example setting for that!
A) It would be sufficient for that to be one of the informative pop-ups which appear on the IB screen when you first log in.
B) Minimally, if the customer explicitly requests/ requested information be forwarded to him relevant to the safety of his assets, IB would forward it to him or send him the appropriate link, especially if it is obvious to upper management the customer is oblivious to the danger (as occurred here), and especially if corporate IB is aware of the request.
C) It would be sufficient to for IB to program the auto-liquidation software to improve the RATIO, rather than to liquidate randomly!!
D) And if the software cannot be programmed, it would be sufficient to call the customer (even for $$600), or for a live broker to liquidate the position
As it stands now, IB earned themselves $11K (minimum; plus extras due to a shift in underlying stock price.). If IB concludes they are taking responsibility, then fine. If not, I just don't have any other way of understanding why IB would allow automation to work against instead of for the customer.
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