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IB Margin Changes
- Thread starter gtcharlie
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Quote from IBsoft:
The mechanics of improving the NBBO are such that a price-improvement auction is started. All market-makers can participate in the auction; the one with the best price gets to trade the broker's order.
IB Soft, during an auto liquidation who initiates a price improvement auction?
Are all auto liquidation orders executed in such a manner that they may potentially benefit from a price improvement auction?
Thanks. Your participation here is very valuable to all of us trying to better understand auto liquidation.
IBsoft please stop using half truths.Quote from IBsoft:
1) Yes, the auto-liq software has the capability to use combinations/strategies.
2) We have various circuit-breakers that monitor (i) portfolio value and margin value jumps on the individual accounts level and system-wide level, as well as (ii) number of recent auto-liquidation trades, attempts, account deficits and similar. These breakers can suspend the auto-liquidation process. When that occurs, human review takes place.
3) We do not track the instances when TH takes the opposite side of a liquidated order. We do not know whether they amount to a profit, or a loss. The auto-liquidation trades represent a tiny fraction of the total number of trades IB executes a day.
1.)While the system has the capability to use combinations/strategies, it sells every leg seprately not as a spread, creating bigger loss for the clients. That's a simple fact.
2.) Yes you may have circuit-breakers, but they almost never triger a humen looking on the liquidation. aren't 95-99% of the liquidations done by the computer with 1 minute of the account going in to margin deficit without a human being ever looking on it? (i hope you have the statistics on this one..)
3.
Auto liquidation is a tiny part of your every day trades, but how much % of TH options volume was it in oct 22 20008, may 6 2010, Aug 8 2011 and Oct 4 2011????
Quote from jayre:
Based on IB agreement TH would get the order as long as they "matched" the price, giving them a huge edge.
This has nothing to do with the IB agreement. In stocks two parties can agree to do an off-exchange transaction and as long as the trade price does not violate the NBBO, they can simply "print it".
The exchange listed options and futures only trade at the exchange. What you describe can not be done unless (as I explained earlier) TH had a countervailing order at the exchange BEFORE the broker routed the liq order to the exchange. TH must not know (Chinese wall) about the order(s) the affiliated broker will send to the exchange. As a result it can't prepare its own orders/quotes in the anticipation of such broker orders. Hence, if TH quote was already there ahead of time, that quote was available to trade on for everyone. TH does not have advantage the way you are claiming.
Look, despite your at times questionable and accusatory statements, I have answered your questions. It appears that I am not able to convince you. What is your agenda here?
If an options is getting liquidated , and TH has a bid of 5.50 on the NYSE while GS has a bid for the same 5.50 on ARCA. Where will the order be routed to??Quote from IBsoft:
This has nothing to do with the IB agreement. In stocks two parties can agree to do an off-exchange transaction and as long as the trade price does not violate the NBBO, they can simply "print it".
The exchange listed options and futures only trade at the exchange. What you describe can not be done unless (as I explained earlier) TH had a countervailing order at the exchange BEFORE the broker routed the liq order to the exchange. TH must not know (Chinese wall) about the order(s) the affiliated broker will send to the exchange. As a result it can't prepare its own orders/quotes in the anticipation of such broker orders. Hence, if TH quote was already there ahead of time, that quote was available to trade on for everyone. TH does not have advantage the way you are claiming.
My agenda is for IB to focus more an avoiding liquidations. I am convinced that IB has more forced liquidations then any other broker an IB does nothing to reduce that(you better keep statistics on that).Quote from IBsoft:
Look, despite your at times questionable and accusatory statements, I have answered your questions. It appears that I am not able to convince you. What is your agenda here?
There is a lot of things IB can do to, if you are interasted I can post a few options or send you a PM, but it sounds that IB is very happy that way it is--Premoting Max leverage, keep changing margin rules quickly, auto liquidate, and TH buying options thar are being sold for the bid price, TH having record profit--...
Quote from jayre:
IBsoft please stop using half truths.
1.)While the system has the capability to use combinations/strategies, it sells every leg seprately not as a spread, creating bigger loss for the clients. That's a simple fact.
Contentiousness aside, Jayre has a point here, IBsoft, in that to reduce margin in (for example) a customer portfolio margin account, where positions are margined based on class groups, the auto liquidation software would have to execute legs simultaneously.
And to be fair the customer would have to also retain the ability to execute both sides of each class group when a margin call is in effect, rather than being blocked from trading due to the fact that the only way to reduce margin would be to execute both sides simultaneously.
Is that what you're saying the IB auto liquidation software does? That the software auto liquidates (and allows the customer to liquidate) in an orderly class-group by class-group manner rather than rip through the positions and leave the customer with little chance of cleaning up from the wreckage.
Can you comment a little more on this issue?
If you don't like the way IB does liquidations, either go to another broker or stop using too much leverage! How is this IB's problem?
IB does not have a monopoly, go to another broker. I suggest you try MF Global, they won't auto-liquidate you....
IB does not have a monopoly, go to another broker. I suggest you try MF Global, they won't auto-liquidate you....
Quote from IBsoft:
3) We do not track the instances when TH takes the opposite side of a liquidated order.
IBsoft, quick follow-up question on the above, are you saying that IB does not have any record of when TH has executed the opposite side of an IB customer trade (auto liq or otherwise)?
Or just that such info is not available for disclosure to the IB customer?
Quote from IBsoft:
2) We have various circuit-breakers that monitor (i) portfolio value and margin value jumps on the individual accounts level and system-wide level, as well as (ii) number of recent auto-liquidation trades, attempts, account deficits and similar. These breakers can suspend the auto-liquidation process. When that occurs, human review takes place.
On #2, do the breakers ever preempt an auto liquidation or do they only suspend an auto liquidation that is underway?
I guess I'm asking, how much time does the IB auto-trading software give the circuit-breakers to review the data described in (i) and (ii) and then give an "all-clear" before the auto liquidation trigger is pulled? Is it one-tenth of a second, 10 minutes, or something in between?
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