How Good is BEST

J

jperl

I would like to start a thread here about traders' experiences using the BEST or (BEST-ECN) feature of IB. My experiences with this have not been good so far but I would like to hear what others have to say about it.
The BEST feature is supposed to find you the best price in a timely manner. In theory it will go into the market, search all ECN's first for the best price or if an ECN is not available, SOES an order to a market maker.
No pro trader I have talked to would ever recommend this type of order execution even to a beginner. So let's hear from you about your experiences both good and bad. I will post some of my own here as well.
 
Why would no pro trader recommend this type of order execution? I don't want to click on an ECN in my Level II and then click on a Buy button or remember the keystrokes to hit a particular ECN at a particular price; that's too slow (at least for me)! I just want to press the same few keys most of the time and know that an order will go out to the ECN with the best price. I've set up my programmable Smart Order key on Hold Brothers' Graybox to do exactly this and it works great if there's an ECN on the inside. If there is no ECN, a SOES order goes out and if I'm the first one in the queue, I get executed. But what I really want is for Smart Order to scan the inside plus/minus a certain amount (.10 or .20) for the best ECN and hit that. From the other threads here, BEST ECN is supposed to do that. How does it not work well for you?
 
Klaorman-

Why would no pro trader recommend this type of order execution?
Professional traders I have talked say that you loose control of your order when you submit it to an automatic execution system. You never know where it is going to end up. My experiences agree with this.

If there is no ECN, a SOES order goes out and if I'm the first one in the queue, I get executed.

Your key phrase here is "if I'm the first one in the queue." Good luck. If you are not the first one in the queue, then your order will be held up and then it may end up getting rejected. In a fast moving market-you will loose big time.

How does it not work well for you?
I have had some good experiences and some bad ones. The bad ones are really bad. I've had the SOES experience mentioned above where the SOES order was never executed, and I have had BEST send an ARCA order which sat at ARCA for as long as 17 minutes without a confirmation and no way to cancel it.
Personally-I think every daytrader needs to have a level II screen to see where to preference orders. Unfortunately, InteractiveBrokers does not provide a way to preference Market Makers which I think is a major flaw in their software design.



 
jperl,

Graybox's Smart Order is programmable; list which third parties you want to try in order from top to bottom. I put in all the ECN's (ISLD 1st, then ARCA, REDI, INCA and the rest) plus throw in SOES as a last resort. I wait less than 5 seconds to see if I'm at the head of the SOES queue; if not, I cancel the order and look elsewhere.

I disagree about losing control: I'll send a Smart Order only when I see an ECN on the inside or when I feel like trying SOES on a slow moving stock. I don't want to remember the various key combos to send specific ECN orders. "Oh, there's REDI on the inside. Let's see, do I press CTRL-F1 or CTRL-SHIFT-F1 or CTRL-ALT-F1? How about CTRL-ALT-DEL...?"

Re: ARCA order sitting for 17 minutes. That's IB's software acting up, which is why I hesitate to open an IB account even though BEST ECN seems to do what I want.
 
Klaorman-
ARCA order sitting for 17 minutes. That's IB's software acting up,...

Yes and no- No in the following sense: I spoke to IB about this and they say it was ARCA. According to Tony Oz("Stock Trading Wizard",p 105), in a fast moving stock, ARCA is its own worst enemy. The system gets flooded and you have to wait for an execution with no way to cancel-a bad scene. Yes in the following sense: IB's BEST should have never sent a partial order to ARCA in the first place especially when the stock was changing rapidly. If I had my way I would have preferenced a Market Maker several colors down from the top and been out of the trade in a hurry.
Bottom line-BEST failed in this instance.

Tell me more about Graybox-I am not familiar with it.
 
jperl,

BEST probably saw ARCA on the inside and tried to hit it; it won't first determine if a stock is moving fast, although that's an interesting idea. Does Tony Oz's book really say you have to wait for an execution with no way to cancel, or are those your words? I've hardly used the full ARCA routing, so I haven't experienced the waiting. At Tradescape and Hold Brothers, ARCA (and REDI) are set up as Immediate or Cancel, so that if there's no execution right away, the order is cancelled, with no attempts at trying to hit MMs.

You should use the Search box at top to search for "Hold Brothers" to see the ample discussion of Graybox, but basically it's a powerful order execution platform that's mainly oriented towards scalpers (with keyboard shortcuts for everything, basket trading of multiple stocks at once, blast orders which allow you to attempt to wipe out all of the ECNs on the first few levels, etc.), although swingtraders like myself can use it too. Go to holdbrothers.com to see screenshots and a manual.
 
I haven't used it many times but the times I've used it it was too slow. I used it trying to trade both CSCO and JNPR and was never filled. Toady I tried JNPR at 6:36 ET as it bottomed at 40 bucks. I hit the offer and it just sat there and it sat there and then the ask took off and left me. I didn't chase it. Instead of hitting the offer I wonder if I should be offering up a couple of cents? I don't want to enter market orders just to get filled.
 
I've actually been using best_ECN exclusively the last two days with no problems. I only use two market lines per stock now(best_execution and best_ECN) and use best_ECN for all orders. Outside the market orders sit on Island with best_ECN. However, I don't trade more than 300 shares at a time so that might be why it works for me.
 
El Cazador,

Were there ECNs on the offer at the time? If not, it will, according to jperl, send out a SOES order, and since JNPR was bottoming, you most likely won't be at the head of the queue.

With my ideal Smart Order I'd send an order at 40.10 or 40.20 to try to hit any ECN between there and 40. Can you specify a limit price with BEST ECN?
 
I don't have Level II. I can do a limit order using Best_Ecn and was attempting a limit at 40.03 at the time. I'm fairly new to IB and just trying to get comfortable with what works best. The prints weren't moving fast ... I thought there was plenty of time for a fill. I just hope the cancel goes through I'd hate to find they filled the order as it came back down this afternoon. Thanks
 
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