IB now forcing traders to cross spread in OTCBB stocks
- Thread starter Shadetree42
- Start date
Like I said, a little humbleness goes a long way when you're a CEO. Calling your customer's laughable when they have a legitimate complaint and point out why the response looks irrational from their point of view is a horrible business practice. Making irrational looking changes and offering irrational explanations is also a horrible business practice, but that's just me. Maybe there are some people out that who appreciate that and choose who they give their business accordingly, who knows. All hail Peterffy, his great and mighty omnipotence!
I think their "price improvers" demanded this of them. However, lets assume it's regulatory cost related or that they've determined that the all in costs of supporting small lot penny stock traders isn't worth it (ie these users generate in commissions less than their all in cost in terms of server resources consumed as well as things like contacting support more frequently). I suspect they do these kinds of demographic analysis to determine which groups of traders cost vs benefit them. Who wouldn't? Possible solutions:
1) Discourage penny stock trading in small lots (which appears to be what they've done)
2) Stop penny stock trading (of course they'd lose all penny stock revenue, including that which is worthwhile -- it's also one less selling point. Even people who don't trade penny stocks might like that they have the ability even if they never use it)
3) Increase commissions on penny stocks across the board
4) Make a more complex commission structure for penny stocks where the bottom tier gets a price increase
If they did 3 or 4, I suspect the impact would exceed just penny stock traders. People considering switching to IB as well as those on the fence / considering leaving, would see a commission price hike that they'd naturally think could be expanded to include their trading (even if they don't trade penny stocks). Because of the negative business impact outside of penny stocks due to the negative perception of a commission hike may be why they decided to go the other route -- discourage the small lot penny stock trading.
All speculation of course.
1) Discourage penny stock trading in small lots (which appears to be what they've done)
2) Stop penny stock trading (of course they'd lose all penny stock revenue, including that which is worthwhile -- it's also one less selling point. Even people who don't trade penny stocks might like that they have the ability even if they never use it)
3) Increase commissions on penny stocks across the board
4) Make a more complex commission structure for penny stocks where the bottom tier gets a price increase
If they did 3 or 4, I suspect the impact would exceed just penny stock traders. People considering switching to IB as well as those on the fence / considering leaving, would see a commission price hike that they'd naturally think could be expanded to include their trading (even if they don't trade penny stocks). Because of the negative business impact outside of penny stocks due to the negative perception of a commission hike may be why they decided to go the other route -- discourage the small lot penny stock trading.
All speculation of course.
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A very rational analysis. I'd maintain that as a customer or potential customer I'd be fine with a company that determined 1) saying "We discovered we can't make money on class A of business, so we're restructuring it so that we can continue to offer it". Fair enough, makes sense, doesn't insult the intelligence of a customer, isn't a lie....
And we now have you -- a troll who has nothing better to do than lurk in threads that have no relevance to him!
Having corresponded with IB's investor relations about this issue, their stance is basically that the market maker(s) made this a requirement and given they want to do business with those market makers (Knight especially), both for larger OTC orders and for dark pool / internalization of listed equities, they agreed to the restrictions as a business decision for their customer base overall even if it is to the detriment of specific customers.
I question that this was the best outcome IB could have negotiated for their customers (I certainly would have liked to see advanced warning to those holding otc positions and offering limit orders for closing positions regardless of size), but I guess smaller customers aren't that important to them.
I question that this was the best outcome IB could have negotiated for their customers (I certainly would have liked to see advanced warning to those holding otc positions and offering limit orders for closing positions regardless of size), but I guess smaller customers aren't that important to them.
Quietly, they appear to have done away with the min. order size restriction. Perhaps they do care more about what paying customers think than trolls like truetype?
I don't know what you're talking about but the OTC order restriction is still there just as described by OP.
Is this new BS posted anywhere on the 10,000 pages describing TWS policy?