How well does IB's Relative orders work for you?

S

stock_punter

Hi Everyone,

I've been trying out IB's Relative Orders the past couple days with mixed results.

For Nasdaq stocks, it executes very quicky I've found.

For NYSE stocks, they didn't execute at all.

I'm not sure what happened with the NYSE relative orders. Was it because I didn't give them enough time to fill?

I had sent the orders a little under 1 minute to the close. The Nasdaq orders were filled very quickly. NYSE not at all.

Can anyone shed any light on this?

Thanks in advance.

-- Punter


P.S. See below for info on the relative orders that I copied from the TWS User's Guide.


Relative Order
A Relative order is an advanced order type whose price is dynamically derived from a combination of the market quote and a user-defined offset amount. The order is submitted as a limit order and modified according to the logic below until it is executed or you cancel the order. You can also set an optional price cap, which keeps your order from executing at a price inferior to the cap.

Relative Order Pricing Logic

When you submit a relative buy (sell) order, the offset amount is added to (subtracted from) the best bid (ask) price and the order is submitted as a limit order. The pricing algorithm continually monitors the market and will re-price and resubmit a relative order according to the following rules: (these rules are written from a buy order perspective. For a sell order, reverse the direction of market movement.)

When the market advances beyond the current order price and the time since the last revision of the order price is less than five seconds, the order is re-priced to match the market quote.

When the market quote advances beyond the current order price and the time since the last revision of the order price is greater than five seconds, the order is re-priced to the market quote plus the offset.

When the market quote equals the current order price, and that quote is NOT issued by the current destination or by SOES, SuperSOES or SelectNet, and the time since the last revision of the order price is greater than five seconds, the order will be repriced to the market quote plus the offset.

When the market quote declines below the current order price, the current order price will stand.

Routing Availability

Product Routing choices

U.S. Equities Best Execution or Best ECN

U.S. Options Best Execution

Non-U.S. Equities Best Execution or direct routing

Non-U.S. Options Best Execution or direct routing

Note: Relative orders are not available for commodities.
 
punter,

I'm happy the basics now seem to be working at IB (stops).

I don't understand the purpose of relative orders, why would you use an order like this?

Thanks
 
I think the purpose of relative orders is two fold.

First to have an automatic offset on the inside market : this is very good imo. it means you send a limit order and automatically you add slippage to your price. Adding slippage right away does not prevent you from a better price (!) but it does prevent you from a larger slippage as you chase the market.

Second, it is an automatic -chase the market- feature. This is no obviously good. However the one NEVER caught in chasing and loosing an entry of a great trade because he was too slow or hesitating, raise your hand : liar !

I never tried these new orders since I trade commodities now. But the feature is common at other brokers. maybe not that automated though, but basically it is not new. It is nice to have extra automated features for very short term trades.

tntneo
 
Here's why I use it:

Its qualities are in between a limit order and a market order.

You get better pricing than a market order, and you are more likely to be filled than using a limit order.

It's great when you really want to get into a position, but don't want to pay the spread.

-- Punter
 
one of the main uses of relative orders is to for basket trades. the use of these types of orders could help complete the basket and allow one to calculate the highest possible cost of the basket.

as for the NYSE, my guess is that time is the issue - especially on the close when a specialist may be dealing with market on close orders or larger blocks.
 
how are IB's relative orders handled for nasdaq stocks?

is the relative order basically a pegged order, and thus must be sent to bloomberg ECN?

or is it sent to whatever ECN BEST selects, and then cancelled and resubmitted by IB's routing computers whenever the market moves???

i realize this might be determined by the 5 second rule - it sounds to me as if the price moves in under 5 seconds, your order is pegged and is handled by BTRD (bloomberg ECN), but if the order sits for more than five seconds, it is cancelled by IB routing and resubmitted at the new price.

also - let's say XYZ is a nasdaq NM stock and is 30.00x30.10 - if my order default is set to relative with a 0.01 price increment and i want to buy 100 shares of XYZ, do i still enter either a market or a limit order? can i still use hotkeys for both types???

are these the two possible outcomes:
1) i want XYZ at any price, so i enter a market order to buy, and the order gets put in at 30.01 and keeps updating until i get filled for 100 shares?
2) i want XYZ, but am unwilling to pay more than 30.25 - i enter a limit order at 30.25, and the order is sent as a bid at 30.01. i either get 100 shares at some price below 30.25, or if the market moves above 30.25 and i do not get my 100 shares, the order is cancelled???

(i am using build 735g of TWS 4.0)

BTW Def - if it would be possible to put the build of TWS on the TWS download page, that would be extremely helpful and time-saving to us in the event of software conflicts, especially if say, the last five builds of TWS were concurrently available for download.

thanks
ken
 
>it sounds to me as if the price moves in under 5
>seconds, your order is pegged and is handled
>by BTRD (bloomberg ECN),

Wold you mind explaining your position a bit better here? I don't find anything related to BTRD in any of the IB information.

Thanks

JB
 
bloomberg is the only ECN that handles "pegged" orders...

pegged orders are orders that move with the market. see http://www.bloomberg.com/corp/tradebook/tt.pegwithdis.pdf for the extreme detail of this order type.

because BTRD is the only one accepting pegged orders at this time, chances are that IB's discretionary orders are sent to BTRD. (obviously I am not anywhere near sure of this, which is why i'm trying to find out, as IB does not mention at all where the relative order is sent).

this is the scenario that i believe would happen, using the XYZ conditions above:
1)you put in a rel order to go high bid; it is sent to BTRD as a pegged order with the initial price being 30.01
2)BTRD does not currently allow pegged orders to stay higher (or lower) than the best bid (ask), so any movement in the market where the best bid goes above 30.01 (in this example) will result in BTRD pegging along with the best bid, as opposed to going high bid (low ask), which it cannot do. further, if you have a sizeable amount you are trying to buy (which is more than the current best bid) you will go first anyway, acc to NASD regulations.
3) if the market moves away from you and it is greater than 5 seconds since the last revision, it would seem that the order is cancelled and resubmitted as a new order.

...haven't you ever tried to scalp and had some BTRD f*cker with a pegged order always get ahead of you??? the only good thing is that BTRD is slower to re-price the order than it would be for someone with direct access software to cancel the order and resend it through island.

frankly, i think these types of orders should be banned, and that it be required that all post-transmission modifications of orders be done from the sender's computer. i mean hey, this kind of order could potentially be damaging in the event that the price runs too fast, and shouldn't the SEC, the great protector of the Comman Man, be looking out??? :p

heh heh
 
From my limited experience with IB relative orders, I don't believe that they simply route them to BTRD as you suggest. My position is based on the fact that I have received quite a number of fast fills using the relative order and have not once been filled on BTRD. I believe that IB's own algorithms handle the work through their usual routing mechanisms.

Not a fact, just a current opinion.

JB
 
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