IB Modify Fee Question

[walterjennings]

Heres some questions iv been scratching my head about for a while and I thought maybe one of the gurus here would know.

Why does IB charge a modify / cancel fee for US Direct API stock orders but not US Smart API orders?

Why picking on the API clients?

How can they tell that an order is coming from the API and not TWS? since all API orders are routed through TWS as if the user typed it in.

Assuming they would lose money from an API system modifying an order a lot (presuming humans cant do it that fast)?

Do they automatically cancel / not submit modifies when sent from the api at SMART and just hold them at IB until they are marketable after the first modify is sent? presumably to prevent them from losing money on subsequent modify orders?

Are Smart API limit orders garbage because of this?

Puzzling

 

[rayl]

Just a guess: Perhaps it is to minimize the costs imposed by someone creating his/her own order router that constantly pings the different destinations very rapidly?

 

[walterjennings]

Quote from rayl:

Just a guess: Perhaps it is to minimize the costs imposed by someone creating his/her own order router that constantly pings the different destinations very rapidly?

if they do that then they must delay the API Smart limit orders which are being modified often. otherwise it would be the same costs.

 

[rayl]

Quote from walterjennings:

if they do that then they must delay the API Smart limit orders which are being modified often. otherwise it would be the same costs.

You can programatically do it much faster than manually, across more issues, etc.

 

[JackR]

Quote from walterjennings:

How can they tell that an order is coming from the API and not TWS? since all API orders are routed through TWS as if the user typed it in.

Can't answer the rest of your questions but if you look at the Audit Trail you'll see where the order came from. The API interface to the TWS must be coded to allow identifying the order source.

That feature has helped me figure out where an order came from when I was doing discretionary and automated trading training simultaneously.

Jack

 

[walterjennings]

i just got off help chat with IB. i was just told that the reason why IB Smart orders arnt charged the modify fee is because limit orders used on smart arnt sent to an exchange until it is marketable.

meaning if you are using smart through IB your orders will only ever be filled against other limit orders (removing liquidity), and never aginst market orders.

meaning limit orders through smart are completely useless for agressive pricing / trading inside the spread.

i looked at that PDF of how smart routing works and it seems that what the IB support person contradicts what they said.

was that IB support person wrong?

 

[rayl]

Quote from walterjennings:

i just got off help chat with IB. i was just told that the reason why IB Smart orders arnt charged the modify fee is because limit orders used on smart arnt sent to an exchange until it is marketable.

meaning if you are using smart through IB your orders will only ever be filled against other limit orders (removing liquidity), and never aginst market orders.

meaning limit orders through smart are completely useless for agressive pricing / trading inside the spread.

was that IB support person wrong?

This is clearly not true (thankfully -- it would be disastrous if so) with orders sent via TWS. You can see the inside quotes changing at IB, and through independent quote provider if you want to verify, if you post a limit that is the new inside.

 

[walterjennings]

Quote from rayl:

This is clearly not true (thankfully -- it would be disastrous if so) with orders sent via TWS. You can see the inside quotes changing at IB, and through independent quote provider if you want to verify, if you post a limit that is the new inside.

i wonder if that means that API smart orders are messed and not TWS originated smart orders.

if both API and TWS originated unmarketable orders are sent to the exchange then i still cant see any reason behind the Direct/SMART differences for modify fees coming from the API

 

[rayl]

Quote from walterjennings:

i wonder if that means that API smart orders are messed and not TWS originated smart orders.

if both API and TWS originated unmarketable orders are sent to the exchange then i still cant see any reason behind the Direct/SMART differences for modify fees coming from the API

I'm not an API user, but if you are, it's easy to test.. if you do it outside RTH when quotes on many issues are wide, you won't take on much capital risk.

 

[walterjennings]

turns out the online tech support person didnt know what they were talking about. smart acts the same for API vs TWS and send none marketable limit orders to an exchange right away. The cancel/modify fees are charged regardess of pricing model / whether or not the exchange charges cancel/modify fees on api direct orders. oh well.