Does the broker make a difference when executing limit orders?

gaussian said:
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:



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.
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Fidelity and IB are the only two major firms that don't sell any order flow. A few others don't receive payments for equity trades but IB and Fidelity are the only two of the Majors that don't sell option flow.
 
HelloDollar said:
Fidelity and IB are the only two major firms that don't sell any order flow.
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IB gets PFOF for options.

This is from their 606 report.
Payment for Orders: IB receives payments for certain orders in varying amounts from U.S. options exchanges, specialists and/or market makers pursuant to the mandatory marketing fee programs that have been adopted by the exchanges and approved by the SEC. If multiple exchanges are quoting at the NBBO for an option order and IB has discretion as to where to send the order or a portion of it, IB generally will “break the tie” by sending the order to an exchange where it will receive the most payment for the order, or to an exchange designated by a firm from whom IB will receive the most payment at that market.

This is the way the option markets are structured with DMMs.
 
It can make a difference on limit orders if the firm is selling flow. Here's an example.
Say you want to buy 1000 shares of X. They place your order on an exchange or hold it to internalize. They now have a hard stop where they can step in front of you to purchase shares. They can scalp out for say a penny and buy back and so on all the while knowing they can sell 1000 shares to you for a max penny loss. You still get a fill but if it ticks down but you may miss the chance to get a fill as the HFT is trading in front of you. Over time, it does make a difference.
 
ETJ said:
Simply not factually correct. Read their SEC form 606. Fidelity says it receives an average of $.22 contract on options.
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Given that every entity listed on Fidelity's 606 filing is an actual Exchange (as opposed to Citadel & Virtu etal, who litter most everyone else's 606's) I'm guessing that those are rebates for adding liquidity (i.e. limit orders) rather than payment for order flow. Granted, the two kickback methods seem the same but I think we both know that ICE providing a rebate on a limit order that's displayed to the world and Citadel paying for the privilege to bucket the same order are quite different.
 
Options all occur on exchanges. Those are most likely Smart router rebates. They are just naming the MMs.
 
The most valuable data - a broker posts it to an exchange they may still get paid, but would I pay to know where the limits rest. The best weather vane you could buy.
When the OEX was still an active product the CBOE posted a large screen showing all of the orders in the que so all the MMs could see what was pending, about to be executed and reported.

BTW he answers his own question - as long as the SIP is slower than the private feed the information has value.
 
His solution is elegant and has been suggested frequently. I central exchange and order book for stocks and on for options an no payment.
 
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