Clarification Time:
(1) most exchanges consider an order modification as a cancel-replace. You can see this by the fact that you lose time precedence on price modifications and in most cases, also on size modifications. The replace order is treated as a new order for whatever purpose, be it pricing or priority.
(2) Many E-T commentators are only considering the US market in their discussions. IB is a global broker. Non US exchanges almost all have a minimum and maximum fees (effectively ticket fees) which is applied to the trading and/or clearing events. These minima get re-applied whenever an order is modified. They do not charge the order fees for multiple fills at multiple prices (for example on a market order that executes at various levels); they do charge if the order was modified and then new executions resulted.
(3) IB has order minimums and maximums but in the past only (and incorrectly) applied the logic to order as originally submitted without considering the mutations. We found that a non-trivial population of clients were doing things like:
buy 10'000 shares XYZ @ 42, iceberg, show 500 (on an exchange where we applied a commission cap). Then the client would modify the price up and down all day, and if necessary, would refill the size. They could trade an unlimited amount of stock for 29 EUR. Day trade all day for 58 EUR by adding a sell side as well.
We had to address this kind of misuse.
(4) The billing will work as follows: you submit an order. An order ID will be assigned. If the order is modified (by the client), the order ID will be incremented (or to be exact, a version number will be incremented). Billing considerations, which formerly were based on the original order ID only, will now be based on the orderID+versionNumber. All executions derived from a given OID+VN will be treated together when considering minima and maxima regardless of which exchange the order executed at.
(5) Order version numbers only get incremented if the client is responsible for the order modification. If IB's systems modify an order, for example as a result of the parameters applied for trailing stops, volatility orders, or spread/conditionals, then we do not consider these as order mutations. You can submit a complex order and have it fill at various times and prices all under a single min/max commission application as long as the client did not themselves modify the order attributes.
Note that IB continues to pay all exchange fees where order mins/maxes apply because they have a less generous billing model than does IB.
(6) In case point 5 was not clear, there should be no interaction between the execution path or ultimate venue and the commission model. If you route SMART, and IB executes at multiple exchanges and perhaps at multiple prices, there is only one minimum fee (or maximum fee).
(7) The change should only affect clients getting many small fills for the minimum trade size, say 100 shares of US stock or 1 lot options where the client modified the order between fills.
We think clients using the system normally (i.e. creating orders to get the best fills rather than to leverage a hole in the billing model) will not experience a substantive change in costs.
(8) The order ID algorithms is system wide. It is not related or limited to any particular exchange or asset class.
(9) I fully expect the conversation to continue when the actual change goes in place tomorrow. While we will try to respond to various concerns if they actually come up, it should be understood that the past/current approach was actually in error and the new approach to order ID management (and the effect it has on other things such as commissions) is more consistent with industry standards.
I hope this is of some assistance.