Hard Stops at IB on Globex

D

ddefina

Many people using Interactive Brokers don't seem to know that you can use Native simulated market stop orders on Globex with Interactive Brokers. They do have their own simulated market orders which reside on their (IB) servers, but this isn't ideal if they happen to go down, and they are slower (sometimes a lot) than the native market stops.

All you have to do to place a native market order stop is use their Stop limit order and set the election price at say 890 on the ES for example, and the limit at 893 (for a buy stop). This effectively creates a market order with 3 points of leeway once the election price of 890 is hit. 99% of the time you will get 890, but if the market is moving fast, you will get the next best price. Globex will even give you 899.50 if it becomes available first (rare but it happens).

It doesn't make sense to have IB do the same exact thing for you and create one extra step in the execution process. And it doesn't make sense to risk IB being offline for some reason and be unprotected in the market.
 
The IB simulated market is "better" in the case that the market goes flying by you by more than the 3 points you used in your example because it re-evaluates and moves your order with the market if you miss it initially.

With your buy stop at 890 with an 893 limit, if the bid suddenly spikes from 885 to 895, and then keeps going, you'll be stuck with a live buy order at 893 and never get a fill. The IB stop market order would follow the market up, changing the order price to 0.3% above the offer if/when the order becomes non-marketable. While this may be a bad thing, it is what one expects for a market order, and you will get a fill (except in the rare circumstance where all the offers through limit-up disappear).
 
Quote from alanm:

The IB simulated market is "better" in the case that the market goes flying by you by more than the 3 points you used in your example because it re-evaluates and moves your order with the market if you miss it initially.

With your buy stop at 890 with an 893 limit, if the bid suddenly spikes from 885 to 895, and then keeps going, you'll be stuck with a live buy order at 893 and never get a fill. The IB stop market order would follow the market up, changing the order price to 0.3% above the offer if/when the order becomes non-marketable. While this may be a bad thing, it is what one expects for a market order, and you will get a fill (except in the rare circumstance where all the offers through limit-up disappear).
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Yes, good point Alan. I suppose you could widen the limit range beyond 3 points to lower that probability. I've personally been stuck with a Market stop while IB's been down twice now, and they don't work in that instance either. Luckily IB refunded one of them. I guess you have to determine what the odds are of a spike being bigger than your limit allowance or IB's system going down. I set alarms as well, so if something does trigger I'll be there to supervise.
 
I find there are a few advantages to pure Stop orders as opposed to Stop-Limit.
  • The ease and speed of entering them, one number instead of two for each order line. And this is compounded if you tweak your stops throughout the duration of the trade.
  • Avoids the confusion in how TWS orders things. While they are called STP LMT orders, the columns always list Lmt Price before Aux (Stop) Price, in other words backwards. When I try rearranging the column order to set things straight I always get an error msg saying, "The Price column must be displayed before the Price2 column". (btw, if anyone knows how to successfully get the Aux Price column to the left of the Lmt Price column pls let me know).
And it depends on what you mean when you say IB "being offline". If you mean that you get disconnected from IB then your pure stop is fine, still sitting on IB's servers. If you mean that IB gets disconnected from Globex (which happens rarely) then a native stop-limit order will usually work out better depending on which way the market goes.
 
I don't think the following is true, certainly not in the way Globex orders are supposed to be handled, but it's interesting that I just took this off the IB website today:

"Regardless of whether an exchange accepts or processes STOP-LIMIT orders, Interactive Brokers will simulate all STOP-LIMIT orders."

:confused:
 
Interesting debate. The odds of IB losing its connection and a price spike at the same time would have to be very very slim. What happens to your native stop limit order if Globex goes down and while it is down the market moves beyond your limit?
 
Another thing to consider is speed in execution. I believe using the stop limit to enter a breakout trade is superior to a stop market in that your order is sitting on the globex servers. Onelot said he had two points of slippage the other day playing the 30-min break with a market stop. So on offense it's probably superior for the speed reason.

I agree that they are more of a pain to enter and adjust. I always move the election first, then go back and move the limit second.
 
Quote from ddefina:

Another thing to consider is speed in execution. I believe using the stop limit to enter a breakout trade is superior to a stop market in that your order is sitting on the globex servers. Onelot said he had two points of slippage the other day playing the 30-min break with a market stop. So on offense it's probably superior for the speed reason.

I agree that they are more of a pain to enter and adjust. I always move the election first, then go back and move the limit second.
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Good point about the possible speed-up of execution. Unfortunately being a stop-limit order they won't be getting ahead in line like a pure limit order (nothing you can really do about that), but once the stop is triggered then it gets in line at the limit price. Which raises an interesting question as to how Globex executes a so-called marketable limit order. I suspect it's similar to IB in that, once triggered, their computers treat it like a limit order a certain percentage above the ask (on a buy), and if not filled because of a very fast market keeps adjusting it up a percentage relative to the ask (maxing out at your defined limit).

Anyway, having the stop triggered on Globex and immediately treated as a marketable order (with a limit) has got to be slightly faster than being triggered on IB's servers and "immediately" sent as a limit order. In practical terms I don't know how much that matters and I don't think that alone would necessarily make it worthwhile relative to the continual hassle of the dual-numbers, etc. But in conjunction with the protection against an IB disconnect from Globex, however rare, it might swing the balance in favor of using them.

Thanks for raising the issue ddefina, I've been wrestling with this one for awhile and it's good to address it.
 
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