Does the broker make a difference when executing limit orders?

[ajensen]

If a stock is trading at 10.00-10.01, and I place an order to buy 10,000 share at 10.00, will the broker I use (say Fidelity vs. Interactive Brokers) may a difference in the execution I receive? I think there is more scope for "price improvement" if I place a market order or a limit order to buy at 10.01.

Fidelity charges a flat rate for trades and has lower commissions for large trades than IB, which charges commissions on a per-share basis. I am trying to understand if the higher IB commissions get me anything if I am using simple limit orders.

 

[gaussian]

Interactive Brokers posts their dark pool, payment for order flow, and other information. It would appear to me you're getting better execution via their special order routing system:

IB does not sell its order flow to another broker to handle and route.
Instead, IB has built a real-time, high-speed Best Execution Order Routing System (SmartRoutingSM),
which is designed to optimize execution price, speed and total cost of execution for stocks and
options. IB constantly changes and enhances the SmartRouting system to adapt to changes in markets,
new exchanges, new trading rules, etc. IB's SmartRouting system continually scans competing market
centers and automatically seeks to route orders to the best market, taking into account factors such as
quote size, quote price, exchange or ATS transaction fees or rebates and the availability of price
improvement (execution at a better price than the National Best Bid or Offer (NBBO). The IB
SmartRouting system continually reevaluates market conditions and prices for pending IB customer
orders and dynamically re-routes orders as necessary.
For some products, IB customers may directly route their orders to a particular market of their choice,
although IB recommends that our customers use the IB SmartRouting system.

Pure speculation but Fidelity almost certainly sells your order flow. Their routing system determines that. Assuming they are selling your order flow the liquidity provider they use (probably Citadel or something) will determine the criteria (lowest price, fastest execution, etc).

If I had to guess you will see a difference with IB as they are an execution-only broker with a high speed routing system. Since execution is all they do, I would put my money on IB being the better choice as routing through a liquidity provider may not give you optimal execution. For more information IB posts their quarterly routing report.

 

[wrbtrader]

If a stock is trading at 10.00-10.01, and I place an order to buy 10,000 share at 10.00, will the broker I use (say Fidelity vs. Interactive Brokers) may a difference in the execution I receive? I think there is more scope for "price improvement" if I place a market order or a limit order to buy at 10.01.

Fidelity charges a flat rate for trades and has lower commissions for large trades than IB, which charges commissions on a per-share basis. I am trying to understand if the higher IB commissions get me anything if I am using simple limit orders.

Split the order of shares...1/2 with Fidelity (5,000 shares) and 1/2 with IB (5,000 shares) to do a comparison. Have both platforms open at the same time and then place the orders.

wrbtrader

 

[Robert Morse]

If a stock is trading at 10.00-10.01, and I place an order to buy 10,000 share at 10.00, will the broker I use (say Fidelity vs. Interactive Brokers) may a difference in the execution I receive? I think there is more scope for "price improvement" if I place a market order or a limit order to buy at 10.01.

Fidelity charges a flat rate for trades and has lower commissions for large trades than IB, which charges commissions on a per-share basis. I am trying to understand if the higher IB commissions get me anything if I am using simple limit orders.

Since there are more choices than Fidelity and Interactive Brokers (Yes I mean us), I'll speak in general terms. It is not clear to me if you are talking about the cost of the execution or how likely you are to get an execution. In my experiance, any broker that allows you to choose your route vs a "broker" route, is better. For compliance reasons, no I have no evidence, just my opinion being in the business for over 35 years. Broker routes like those I think Fidelity and TD use, go to an equity MM like Vitu/Nite or Citadel. As symbols trade, it is not clear to me when your order is up, or if the stock needs to be offered at your price to buy on your 10.00 limit. On ECNs and exchanges, you take your place in line. I expect that for this reason, you are more likely to buy at 10.00 when the market is still 10.00/10.01 on an ECN or exchange than with a broker route. Either way, you should get an execution if the big drops and the market is 9.99/10.01 or 9.99/10.00 after your order is booked.

Now let's look at cost.

Some brokers like Fidelity and TD offer ticket charges. Some offer per share like IB. We offer both. Most brokers that offer ticket charges send your orders to a broker route, which does not give you the opportunity to get rebates, but protects you from ECN fees. With us, if you are either per trade or per share, you choose your route and are subject to those credits and fees. We limit per trade orders to 10,000 shares. Adding liquidity on NASDAQ, as an example, with 5000 shares would cost $4.50 but if you add liquidity, you would get $10 back for a net credit of $5.50, not including reg fees. And, your order is subject to price discover and inline with other NASDAQ orders.

I hope that helps.

 

[comagnum]

Fidelity has DMA to ECNs ARCA/NSDQ/NYSE/SuperDot they don't have it to the IEX. Per the 606 report non-directed orders are sent to predatory HFTs: Citadel/Virtu/G1.

You can set up your trade ticket so that it routes to the ECNs you choose instead of the HFTs. Go to settings/direct trade in ATP (Active Trader Pro).

About 96% of all Fidelity orders are not sent via direct trade - shocking!
Other brokers I use have an IEX route. My 401k is with Fidelity - the order fills are very good using direct trading.

 

[Robert Morse]

Fidelity has DMA to ECNs ARCA/NSDQ/NYSE/SuperDot they don't have it to the IEX. Per the 606 report non-directed orders are sent to predatory HFTs: Citadel/Virtu/G1.

You can set up your trade ticket so that it routes to the ECNs you choose instead of the HFTs. Go to settings/direct trade in ATP (Active Trader Pro).

About 96% of all Fidelity orders are not sent via direct trade - shocking!
Other brokers I use have an IEX route. My 401k is with Fidelity - the order fills are very good using direct trading.


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Cool, but I'm not sure all accounts get the DMA ticket. Not even on their website. I was more providing information on brokers routes, the ones you call "predatory," and ECN routes. I like the ECN routes for control, not so much to avoid HF trading firms.

 

[ETJ]

It should not make much difference unless the stock goes through some wild volatility. You have a trade through rule and dark pools from both providers.
The real difference could occur with wild volatility and having the order held upstairs. Not a great practice for you and you'd have no price protection.
Fidelity's Luminex is fairly heavy to institutional flow so if 10,000 shares in the name is a more common institutional order I would bias to Fidelity.
Straight limit or any other qualifiers? Straight limit it's pretty even. AON again I would bias
Fidelity.
The devil is in the details and the biggest detail is the liquidity of the underlying. Penny wide - as per your example - it's pretty even. You are more likely seeking an answer for a hypothetical and then the devil is in the details. If it's really 10,000 shares with a wider spread and there isn't wild volatility I'd want to see the quote montage - sweep as much liquidity when it's offered at 10 - see how it resets.

 

[Nighthawk]

Fidelity has DMA to ECNs ARCA/NSDQ/NYSE/SuperDot they don't have it to the IEX. Per the 606 report non-directed orders are sent to predatory HFTs: Citadel/Virtu/G1.

You can set up your trade ticket so that it routes to the ECNs you choose instead of the HFTs. Go to settings/direct trade in ATP (Active Trader Pro).

About 96% of all Fidelity orders are not sent via direct trade - shocking!
Other brokers I use have an IEX route. My 401k is with Fidelity - the order fills are very good using direct trading.


View attachment 196133

Just asking - isn´t there a thing called "internalization"? Before using external execution, I would assume Fidelity to take the order onto its internal book called "inventory"...Just my 6 cents, of course....

 

[Nighthawk]

If a stock is trading at 10.00-10.01, and I place an order to buy 10,000 share at 10.00, will the broker I use (say Fidelity vs. Interactive Brokers) may a difference in the execution I receive? I think there is more scope for "price improvement" if I place a market order or a limit order to buy at 10.01.

Fidelity charges a flat rate for trades and has lower commissions for large trades than IB, which charges commissions on a per-share basis. I am trying to understand if the higher IB commissions get me anything if I am using simple limit orders.

It´s clear to you that execution of 10.000 shares of Apple, Alphabet, Facebook, Netflix is a different thing than execution of a 10.000 order in Russell 2000 stocks, right?

Try to execute a 10.000 order on OTC BB - and you will be literally "blown away"

 

[ET180]

It should not make much difference unless the stock goes through some wild volatility.

That's what I was thinking. Unless you're running an HFT algorithm (in which case, you would not be using these brokers) trying to scalp for pennies, shouldn't matter.