IB IdealPro Commissions

P

pipscooper

Steve or def,

Is there a reason why IB's Forex commissions are charged in the denominated currency rather than based on the units purchased?

For instance I buy 125,000 units of EUR/USD at 1.2. The commission is .00002 per side in the denominated currency. Now logically I would multiply .00002 x 125,000 to get the minimum commission $2.5 per side.

However, IB uses the denominated currency so I would need to multiply 1.2 x 125,000 to get 150,000 USD x .00004 (round turn) = $6. By coincidence :) this also happens to be the bundled Globex rate for EUR. However the unbundled Globex rate is 5.84/rt.

If I buy 125,000 units of GBP/USD at 1.73 I pay 8.65 per round turn, but if I buy 125,000 AUD/USD at .74 I pay $3.7 r/t commission. Does this seem way out of whack to anyone else? I would like to pay a flat fee based on the # of units purchased so that I will know the cost per transaction before the transaction takes place. I would like to pay $5 per 125,000 units whether it is EUR/USD, GBP/USD or AUD/USD. (Incidentally IB could also achieve the $5 target rate on EUR/USD by lowering its per side to .000017 or so but that would be my second preference.)

The added calculation makes commission charge a variable based on price. I realise there may be some variable costs to IB that are not disclosed. However, I would guess that about half of IB's Forex volume is in EUR/USD. If IB's RT cost for a 125,000 lot were $5 instead of $6 this would help IB steal volume from Globex, where IB isn't making as much money per transaction, due to the excessive CME fees. The net effect is that even if all foreign exchange volume stayed static, and IB increased its Forex portion over the futures portion, IB would make more money because IdealPro is a higher margin product than the equivalent Globex foreign exchange futures because of the CME fees. And I'm sure that lower fees would lure more net volume to IB's products.

Bottom line is that IB should make more money by lowering its Forex fees to undercut the CME. And a simpler (per unit purchased) rate structure would be better for IB's customers. Just my opinion.

And kudos to IB, Steve and def for creating and supporting such a great product. In the next few months I'm looking to transition a lot more volume to IdealPro.
 
They did a GREAT job reducing the comms from $5 per side minimum to $2.5 per side minimum recently due to requests on this forum.

Though i'll rather they drop the comms structure and build their comms into the spread like Oanda/GFT/Refco. 1.5 pip spread is far better than $5 RT IMHO.
 
That would defeat the whole point of the IB model.

Quote from Remiraz:


Though i'll rather they drop the comms structure and build their comms into the spread like Oanda/GFT/Refco. 1.5 pip spread is far better than $5 RT IMHO.
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Quote from paradox:

That would defeat the whole point of the IB model.
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oh yes, that would mean those trading 250k and above lot size would suffer higher costs. T_T
 
pipscooper,

Look at this way, in your example:
"For instance I buy 125,000 units of EUR/USD at 1.2. The commission is .00002 per side in the denominated currency. Now logically I would multiply .00002 x 125,000 to get the minimum commission $2.5 per side."

125,000 is in Euro's, so 0.0002x125,000 = Eur2.50 not $2.50

Looking at your examples:
If you buy 125,000 units of EUR/USD at 1.2
In this case you are selling $150,000

If you buy 125,000 units of GBP/USD at 1.73
in this case you are selling $216,000

If you buy 125,000 AUD/USD at .74
in this case you are selling $92,500

These amounts are all vastly different, hence the different charges. Sure, commission will change depending on price, but your US dollar amounts are also changing.

You may find it easier to think of our commission rate as 0.2 pips.


Remiraz- As paradox said, I do not think that building our commission into the spread will ever happen. That would defeat the whole model - that of a transparent and open FX ecn/exchange.
 
I too, wish that IB would cancel the commish and offer 1-unit trade size increments beginning at 1.

I think they could figure out how to remain honest and cater to the small retail trader as their mission indicated in the beginning.

Michael B.
 
Quote from ElectricSavant:

I too, wish that IB would cancel the commish and offer 1-unit trade size increments beginning at 1.

I think they could figure out how to remain honest and cater to the small retail trader as their mission indicated in the beginning.

Michael B.
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Sorry, that's not something that is likely to happen. I posted more about this here:
http://www.elitetrader.com/vb/showthread.php?s=&postid=782655#post782655

IDEAL will remain the exchange for $1 - $25,000 traders.
 
And Thanks Ramirez for bothering to post...what would we do without you?

You know what some of us feel is important and want to communicate about, may not seem important to you.

Thanks again for tolerating us stupid ones..

Michael B.

Quote from Remiraz:

IB reps : Thanks for even bothering to reply! ^_^
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