IB order types

[delta_1]

Hi guys,

trying to make sense of different IB order types:

"Sweep-to-fill orders are useful when a trader values speed of execution over price. A sweep-to-fill order identifies the best price and the exact quantity offered/available at that price, and transmits the corresponding portion of your order for immediate execution. Simultaneously it identifies the next best price and quantity offered/available, and submits the matching quantity of your order for immediate execution."

That is exactly what I expect a market order would do as well as a marketable limit order. So what is the difference to a sweep to fill?

"A Market-to-Limit (MTL) order is submitted as a market order to execute at the current best market price. If the order is only partially filled, the remainder of the order is canceled and re-submitted as a limit order with the limit price equal to the price at which the filled portion of the order executed."

This one sounds like a bad deal to me. Let's say I put in a limit order to buy at the bid. Assuming the price doesn't change I would get the bid price or better. A MTL is a market order at first so it would execute at the bid and not better than that, correct?
Isn't MTL always worse than a limit order?

 

[TheDawn]

Hi guys,

trying to make sense of different IB order types:

"Sweep-to-fill orders are useful when a trader values speed of execution over price. A sweep-to-fill order identifies the best price and the exact quantity offered/available at that price, and transmits the corresponding portion of your order for immediate execution. Simultaneously it identifies the next best price and quantity offered/available, and submits the matching quantity of your order for immediate execution."

That is exactly what I expect a market order would do as well as a marketable limit order. So what is the difference to a sweep to fill?

"A Market-to-Limit (MTL) order is submitted as a market order to execute at the current best market price. If the order is only partially filled, the remainder of the order is canceled and re-submitted as a limit order with the limit price equal to the price at which the filled portion of the order executed."

This one sounds like a bad deal to me. Let's say I put in a limit order to buy at the bid. Assuming the price doesn't change I would get the bid price or better. A MTL is a market order at first so it would execute at the bid and not better than that, correct?
Isn't MTL always worse than a limit order?

What a MTL order is that it will guarantee that your entire order would be filled at no worse than the market price when the order first got filled in case if your order is filled with lots f partial orders. So whether it will be worse than a straight limit order will always depend on how much worse off the market price that you got vs. a limit price just like how market orders compare to limit orders always. If there was a lot of slippage with the market order, it will be worse off than a limit order but if there was not a lot of slippage with the market order, then there would be very little difference between the market and limit orders.

 

[qlai]

That is exactly what I expect a market order would do as well as a marketable limit order. So what is the difference to a sweep to fill?

What you are missing is that a market order is sent to a particular exchange. That exchange has an obligation to try and fill you at the NBBO but only for the displayed size. For example, let’s say you send Buy 1000 APPL market to Nasdaq. There’s 100 shares of Best Offer displayed at NYSE. Nasdaq must route 100 shares of your order to NYSE but, the rest 900 will be filled from Nasdaq order book only, at whatever levels there are. This would happen even though there are better prices displayed at other exchanges. So sweep-to-fill is kind of a Smart Order Router which looks at all exchanges to get the best prices.
Now, if you use IB’s smart router, they will make a determination where to send the order themselves, but you need to let them know that you value speed/certainty of execution above price.