IB directed orders and conflict of interest

[Bob111]

Quote from adamant:

But that's my problem. The rules aren't simple.

The commission structure is clear enough.

The routing structure is as clear as bricked up window.

I am beginning to think that the SMART, while it seems cheap, is actually costing many users more than they would be paying using directed orders in failing to hit exchanges, loss of queue position in the order book, and limit orders mysteriously executing as market orders with no rebate.

When you think of it in those terms, IB suddenly goes from an apparently cheap to a very expensive option.

while i agree with all above,you have to understand one thing-it's their company and their rules. and they very clear about it-don't like it? go someplace else. so-IMO-it's pointless to discuss all this
it's like you walking into harley davidson factory and start saying that they do this and that wrong,and you know how it's suppose to be done.
sorry,but english is not my native language

 

[adamant]

Quote from Bob111:

while i agree with all above,you have to understand one thing-it's their company and their rules. and they very clear about it-don't like it? go someplace else. so-IMO-it's pointless to discuss all this
it's like you walking into harley davidson factory and start saying that they do this and that wrong,and you know how it's suppose to be done.

It's not pointless because in discussing it I may discover how much I am really paying IB to trade.

Once I know how much I am really paying, I can make an informed decision whether or not to use them, or whether another broker who may appear more expensive on paper, but who offers more direct order routing, is actually cheaper.

 

[Bob111]

the only way to discover is to try both. and keep a really good track of all executions and compare side to side. i don't see any other way

 

[nitro]

Quote from adamant:

Hi nitro,

Can I ask who you are using instead and whether you would recommend them?

Thanks

I use MBTrading for FOREX currently. Optimus Futures [soon with Rithmic] for futures.

 

[Bob111]

another thing i can add to confirm OP's suspicions-back in a day it was not uncommon for me to see negative number in commissions(i'm not paying much attention to it,cause i'm relatively small guy). mean- the exchange is paying me and i trade commissions free. but not anymore and it doesn't matter what i do-even if i clearly provide liquidity- i always pay at IB. ALWAYS.(unbundled or cost plus)

 

[MoreLeverage]

Quote from Bob111:

another thing i can add to confirm OP's suspicions-back in a day it was not uncommon for me to see negative number in commissions(i'm not paying much attention to it,cause i'm relatively small guy). mean- the exchange is paying me and i trade commissions free. but not anymore and it doesn't matter what i do-even if i clearly provide liquidity- i always pay at IB. ALWAYS.(unbundled or cost plus)

With unbundled commissions, you can get negative net commissions for providing if you're doing enough volume. I sometimes get negative commissions with IB, although sadly the average is still positive .

 

[1245]

I read all these post about your concerns over commissions and rebates. There are many strategies built around narrow edge that require low costs. My guess is that the average trader or investor should not care about this nominal cost difference. Most people trade for more than a few cents profit. There are times you would be better off taking an offer or hitting a bid and not missing an opportunity.

Think about the cost of the trade rather than your best entry and exit point might be costing you money.

1245

 

[atticus]

http://www.interactivebrokers.com/en/?f=/en/general/about/IBKR_ATS_605_Reports.php

 

[adamant]

Thanks for the responses. I hadn't seen the 605 report before.

It seems a lot of my problems may be down to my use of relative orders. REL orders are essentially IB algos and are simulated order types.

This would not be a problem if they were coded to aggressively submit and modify limit orders on the exchanges, but it seems they spend a large amount of time withholding orders, presumably waiting for internal fills.

ISLAND supports relative orders natively, but there is no way of forcing IB to route to ISLAND without using expensive directed orders.

I will change my code to avoid these order types completely.

I still maintain that customers should not be penalized for directed orders. The more efficiently IB allows us to trade, the more we profit, the more volume we transact, the more they profit.

 

[sprstpd]

Quote from adamant:

I still maintain that customers should not be penalized for directed orders. The more efficiently IB allows us to trade, the more we profit, the more volume we transact, the more they profit.

Just a gut feeling, but allowing directed orders at the same commission as SMART orders would probably force IB to raise commissions for all orders.