IB Great at catching erroneous trades

[cashola]

I must say that as an IB customer executing 8000+ trades a year in 2 accounts I have had only several bust/reconciliation issues. Just yesterday I was playing a somnolent DIA ,building in and out 200 shares at a time. With the slow action I routed 200 shares short to Amex (I know...they should be wearing orange) 2 cents above the arca/inet price. It was filled and the prices dropped, instigating a cover 10 cents below on the accumulated position. Great...some pocket change and hourly compensation to reward my sore ass sitting there watching it. Half an hour later a dialog box pops up saying that 200 shares have been revalued and my trade records erased that Amex fill leaving me long 200 from the previous cover. So now I am negative a handful of $ as the market proceeded down. The thoughts of "Big Deal...Amex bandits...serves me right for joining an out of market offer...etc "came through. I covered the difference to flatten the position chuckling at the piker experience. This would have been a forgettable blip on the days action except for the fact that IB called me on my cell phone advising me that they were adding back the 200 shares as they had attributed it to some logging error on the exchange....I am recounting this to emphasize my quiet astonishment at the fact that they would call me long distance (2 attempts) to inform me of they had corrected this by hand (even though it had showed up earlier on the P/L and summary) and felt the need to tell me personally. Understand that to me this series of trans actions could have been filed under CANDY ASSED and the commisions involved were ludicrously small and yet the resolution took effort and money (time) on their part to resolve. With the volume they do there it seems impressive that such a small issue commanded such an immediate and personal solution.

 

[jficquette]

Quote from def:

That is a lame comment. I know of no broker that would want a client to submit a trade that is going to be busted. BUSTED TRADES ARE A MAJOR HASSLE FOR BOTH THE CLIENT AND THE BROKER. First, exchanges often charge the party the made the error. Second, brokers have to track down the client and do a number of other manual tasks to reverse the trade. Third, clients want speed, they don't want to hit "are you sure" every trade. However, if you want to do that with IB, you can by entering all of your orders via the ticket window.

As mentioned in the post above, you can set filters within the TWS. IB also has other safeguards in place which shouldn't allow anyone to blow out an account but that's another topic.


Oh, and by the way, when a trade gets busted we reverse the commission charge as well.

IB's revenues will be maximized when our clients are profitable. Your comment infers we are unethical and that is really a load of BS. If we wanted to nickel and dime you, we'd charge SEC fees, wire fees, withdrawal fees, etc. We don't. Your comment is out of line and flat out wrong.

You sort of prove my point on the IB's shitty attitude toward customers.

No where did I mention busted trades. I was speaking off the lack of verification which only indicates to be that IB is nickleling and dimeing. Why else would IB not put in that check??

John

 

[MaxDrawdown]

You mean I press transmit and then it asks me for verification? That's would be a pain.

Also, bad trades lead to busted trades so I don't know how you can speak of one without implying the other.

 

[risktaker]

John, are you saying IB's TWS *needs* some type of confirmation box, where it would ask you to verify *every* order individually and then you confirm it and THEN it gets sent to the exchange, kinda like scottrade or ameritrade?

Quote from jficquette:

You sort of prove my point on the IB's shitty attitude toward customers.

No where did I mention busted trades. I was speaking off the lack of verification which only indicates to be that IB is nickleling and dimeing. Why else would IB not put in that check??

John

 

[NKNY]

Quote from Don87109:

I don't think you would be thanking IB if the trade executed at a favorable price. Furthermore, if you had a corresponding hedging transaction and the trade was busted your hedge would then be naked. Again, you'd likely be cursing IB instead of praising them.

Busting trades is an unconscionable practice and should be illegal. If you made a mistake trading you have no similar recourse.

I guess I should point out that it may not have been IB's fault, I think it could be an exchange problem.

Don

Hi Don...



I can understand your point about being caught in a naked situation especially if you were using a leveraged vehicle. But in this case IB contacted me several times about the bust so I would have had time to flatten the position without real damage.

IE: IMO, If a stock was trading at 20 201/8 and I get filled at 18 3/4, this is clearly a mistake and should be broken. In my case, the stock never traded at the price I was filled.


Now about my trade, even If it executed at a favorable price for me I would still have no problem with the trade being busted providing it was in fact erroneous. I wasn't hedged and it was a small position in the portfolio that by itself was insignificant.

Look, nothing is perfect and this is a risky business. If your hedging you should have considered the possibility that a trade could be busted just like I have considered the possibility that any stock I'm in could get halted and drop by 70%. I know one may have a false sense of security when hedged but position sizing should never be neglected no mater what strategy you use. Doing so should be and is at your own risk.

In other words, I believe If any one position, hedged or otherwise can really hurt you... you have no one to blame but yourself.

Nick

 

[NKNY]

Quote from def:

If a trade is executed out of range you better know the exchange bust rules before hedging the transaction. Trade busts are determined by the exchange but there are many exchanges which require the broker to contact them within a specified period of time.

As for busts being an unconscionable practice, I completely disagree. While software should check and not allow input errors, not all firms have adequate controls (for the record IB's controls are exceptionally good). Now if someone inverts a price and size it could potentially be a billion dollar error and not only wipe the client but take all the firms clients and possibly a bank down with it. Who ends up paying then? Possibly the exchanges clearing members and other innocent bystanders. Granted most errors are on the order of a few thousand bucks but you need to be consistant. I personally think the best policy is to rebook the trade(s) to a fair price plus a small penalty. The key is that an exchange should have a clear policy and those trading on that exchange should know exactly what it is and hedge/react accordingly.

Hi DEF, I agree, rebooking the trade would be a great idea. this would even save a hedger who has no idea one of his legs were busted....


Nick

 

[def]

Quote from jficquette:

You sort of prove my point on the IB's shitty attitude toward customers.

No where did I mention busted trades. I was speaking off the lack of verification which only indicates to be that IB is nickleling and dimeing. Why else would IB not put in that check??

John

I would beg to differ. If you want a box popping up each time you enter an order, use the ticket window and/or set the percentage error check to "0". Just by reading this thread you have a number of examples where IB has been proactive in respect trying to do what is best with our clients. I personally took offense to your statement which IMO questions our ethics.

I've been with the IB Group for a very long time and am proud that proper ethics are a guiding force behind our business decisions. When an inaccurate statement which questions our morals is posted, don't expect me to take it lightly.

 

[Bitstream]

So, would it be possible to set TWS to have that box popping-up ONLY on orders that are sent outside the bid/ask spread by a certain amount while all correct ones are sent immediately?

 

[def]

Quote from Bitstream:

So, would it be possible to set TWS to have that box popping-up ONLY on orders that are sent outside the bid/ask spread by a certain amount while all correct ones are sent immediately?

The warning can be set by percentage.

 

[JackR]

Quote from Bitstream:

So, would it be possible to set TWS to have that box popping-up ONLY on orders that are sent outside the bid/ask spread by a certain amount while all correct ones are sent immediately?

Yes.

From the IB Help File (Order Setup)

This option was created as a safety net to prevent you from transmitting a limit order that has a mistyped limit price. If you attempt to transmit a limit order with a price outside of this calculated percent off the market price, you will receive a message asking you to verify that you meant to enter that off-percentage price before it will transmit the order. The market price used is the price displayed in either the bid (sell) or ask (buy) field at the time you transmit the order. This option can be left blank.

Obviously Market Orders cannot be checked. Size cannot be checked directly. You can setup a margin limits check to do it indirectly, but with a large account you could still get in trouble. IB also checks monetary limits as part of their protect you/protect us program and will reject an order which would exceed margin or cash limits.

Jack