zdreg, I understand your point that treating everyone equally is one of our strong points that we should not compromise. But, in this case, accommodating an opt-out request wouldnt be favoritism since, IMHO, it would be a negative for the client to request exclusion given there is absolutely no cost and there is a possible benefit. However, if someone wants to opt out of a system because they feel it is does not help them, there is no point to debate their reasons. I would be amazed if anyone actually insisted on opt-out so I guess offering a possibility that nobody will take is the easiest way to minimize the complaints and rhetoric. Having fewer competing locate requests will benefit other IB clients who find the locate system more useful.
IB auto-locate
- Thread starter alanm
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zdreg, I understand your point that treating everyone equally is one of our strong points that we should not compromise. But, in this case, accommodating an opt-out request wouldnt be favoritism since, IMHO, it would be a negative for the client to request exclusion given there is absolutely no cost and there is a possible benefit. However, if someone wants to opt out of a system because they feel it is does not help them, there is no point to debate their reasons. I would be amazed if anyone actually insisted on opt-out so I guess offering a possibility that nobody will take is the easiest way to minimize the complaints and rhetoric. Having fewer competing locate requests will benefit other IB clients who find the locate system more useful.
Mr. IB...
You seem to overlook the fact that I short "hard-to-find" stocks all day every day.
If the system doesn't help me...
Then it is poorly designed... or in place only to cherry pick for IB.
You failed to address any of my points...
Or answer any of my specific questions....
In the context of severe shortcomings of the Auto-Locate system.
Please remember...
The point of this system is to locate "hard-to-find" stock...
Which often means making one phone call.
For example...
I read the algorithm posted... and among other things...
The algorithm takes into account:
(1) Ability to locate in past.
(2) Trading history of the account.
A "hard-to-locate" stock will obviously have a spotty locate history.
Someone shorting "hard-to-find" stock will likely succeed less than 50% of the time due to liquidity issues.
After I got 2 or 3 messages a month ago..
I have gotten ZERO locates in the last month.
So I have ALREADY been eliminated by your alogorithm.
I make > 10,000 short trades/year...
And your system helped me make an additional 5 so far... and now I've been cut off by your algo.
So Mr. IB... am I better off with it... or without it?
If I say it's not helping me with specifics...
Why do you take the position that it's virtually a "sacred cow"?
Instead of making me out to be the Bad Guy...
*** And telling me to switch brokers ***...
Maybe you guys can try to design an Auto-Locate system that works better...
And look at some of the specifics I posted.
One of the few areas where IB does not have a great reputation... is in terms of Stock Loan...
And I don't see any positive feedback about the Auto-Locate system here.
rm+
Let's say IB has two people tasked to look for short loaners. Now assume that there are 20 requests one day for one stock not on their available list and they are from 20 different customers that consistently short with IB. Further assume one customer requests another stock, and that customer rarely shorts (as far as activity in that customer's IB account is concerned).
Where do you use your resources? Obviously IB has made a business decision to service the first group of customers because it will, they believe, make them more money than helping out the lone eagle.
IB hasn't grown because they keep screwing up. Their business model seems to work rather well.
That said, the locate program is in its infancy and the people doing the locating need to find out where they can borrow. The list is probably growing weekly. As they get better at locating new stocks and the list grows longer they will be able to obtain the more obscure stocks as they will be able to locate faster and thus have more time to spend on lower priority stocks.
Jack
Where do you use your resources? Obviously IB has made a business decision to service the first group of customers because it will, they believe, make them more money than helping out the lone eagle.
IB hasn't grown because they keep screwing up. Their business model seems to work rather well.
That said, the locate program is in its infancy and the people doing the locating need to find out where they can borrow. The list is probably growing weekly. As they get better at locating new stocks and the list grows longer they will be able to obtain the more obscure stocks as they will be able to locate faster and thus have more time to spend on lower priority stocks.
Jack
I suggested, a few pages ago, that the auto-locate system should have an option to allow the customer to disable auto-locate selectively, on an order-by-order basis. I suggested this would benefit all concerned. I suggested it would benefit IB, by eliminating auto-locate workflow arising from orders for which the customer already knows that he will no longer be interested in a short position if he cannot acquire it immediately. I suggested it would benefit customers, by eliminating the problem which seems already to be affecting RedManPlus. RedManPlus didn't accept auto-located stock on certain occasions when the auto-locate delay made the trades undesirable for him to pursue. This resulted in damage to his customer rating. This damaged customer rating, he believes, now excludes him altogether from use of the auto-locate system. If he had been allowed to enable auto-locate only for those trades where he knew he would still take the short, even after the delay required by auto-locate, THEN he could have avoided damage to his customer rating, and THEN he would still be permitted to participate in auto-locate, when he makes a trade for which he actually wants an auto-locate.
Perhaps the cost of providing such an option would outweigh the savings it would produce. I doubt that it would. I think that everybody would benefit from this suggestion. Maybe now that RedManPlus has provided a specific example of a customer who really needs the option, perhaps it will be considered?
Perhaps the cost of providing such an option would outweigh the savings it would produce. I doubt that it would. I think that everybody would benefit from this suggestion. Maybe now that RedManPlus has provided a specific example of a customer who really needs the option, perhaps it will be considered?
This is a good analysis.
IB's "religion" is minimize people and maximize automation.
The "religion" works great in most areas... and is not a bad thing...
But is a major liability in the Stock Loan area.
While Mr. IB called the Auto-Locate system "egalitarian"...
What you just described is something that does NOT treat all customers equally...
But is strictly designed to max the profit of a microscopic Stock Loan department.
I'm not asking for a free lunch.
For every 1000 shares I short... I go long 1000 shares.
If IB gave me 10 minutes of a man's time... cost = $5.00.
I would probably do an extra 10,000-15,000 shares/day = $50-$75 in revenue.
Whether that math could be extrapolated by 1000s is not everything.
Some things should be offered as a basic service... even if, in isolation, it's a breakeven proposition.
But a quality Stock Loan department is at odds with their business model...
So I have no real expectation of improvement.
rm+
IB is not egalitarian. Just look at the margin interest charged and paid, as well as the interest paid on short credit balances. The tier structure is designed to pay more to bigger players. I for one have no problem with that business model. However, the customer with low balances pays more or gets paid less. I accept that just as I accept the $10 fee for data and the free trading platform. It satisfies my needs. IB cannot satisfy everyone, that is not their way.
Jack
Jack
Believe it or not, the motive for this system has nothing to do with making money via our SLB department. Let's assume the amount of additional shorts enabled by this system is 20M/day. That works out to something just over 500 USD per day before expenses. Doesn't even pay the salaries for the people involved, not to mention systems, and other such costs. Our motivation for this system was to offer a a better opportunity for clients to trade. Trading clients generate commissions which is how IB, as with most brokers, makes its money.
There is lots of blah-blah about the rating process. Think of it as a prioritization process, not as a rating. As JackR said (and most of his points are very much on target), if you actually short the stocks we find for you, it would be logical for IB, given not unlimited resources, to assign a higher priority to your future requests. But if you don't short stock, there is no "penalty". That would not make sense. We fully understand that an interest at 10:00 does not imply an obligation to be also interested at 14:00.
Most importantly, the consideration of past client activity is just one of many factors in the prioritization algorithm, including stock specific factors such as prior success in locates, number of different clients looking for a title, etc.
I offered my suggestion based on my assumption that it would save IB's limited resources by cutting costs, and also make customers happier at the same time. If, on the other hand, IB feels the cost of implementing my suggestion would be greater than the savings it produces, then I could understand why IB has not implemented it.