IB Raises Commission Cap?

I'm failing to understand the example of the problematic arbitrageur given above.

If I am reading this link correctly: the NASDAQ fee schedule already provides
no liquidity rebates for shares executed below $1.00.


http://www.nasdaqtrader.com/trader/tradingservices/productservices/pricesheet/pricing.stm

Rebate for Adding Liquidity for All Securities

Greater than 35 million shares added: $0.0025
Greater than 20 million shares added: $0.0022
All others: $0.002

There will be no rebate for NASDAQ-listed
shares that execute below $1.00.
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Further it seems that execution fees were capped at 0.1% of total dollar
volume for liquidity removing trades executed below $1.00.

Execution Fees for Removing Liquidity for All Securities

Greater than 35 million shares added and greater than 55 million shares removed or routed: $0.0026

Greater than 25 million shares added and greater than 65 million shares removed or routed: $0.0026

Greater than 20 million shares added and greater than 35 million shares removed or routed: $0.0028


NASDAQ-listed shares that execute with a share price below $1.00 are 0.1% (i.e., 10 basis points) of total dollar volume of the transaction to remove liquidity. Orders executed outside of the NASDAQ facility will be charged execution fees for routing.
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So how can the example above ever have worked with a penny stock?

Sorry if this is just an elementary misunderstanding, but I am confused.
 
dpt

you're right. nasdaq used to offer this rebate until around december time, if I remember rightly but not anymore

however IB still gives a rebate on sub $1 stocks - their version of "exchange fees" is not entirely accurate remember.

anyway I dont think this thread is going to achieve anything apart from allowing us all to vent.

They want their extra share of the pie, no matter how miniscule, and thats that.

I guess TP isnt satisfied with becoming "only" the 19th richest man in America. Go on, squeeze your customers for every last little drop of juice they've got left, no go on, more please. Pound of flesh? No, have two pounds & a vital organ or two, I insist.

Now how's that for venting ( I feel better already )!
 
Quote from Fanzig:

Dear IBJ

Yes I agree with you on a "0.2% inclusive of all costs agreement"

However your argument doesnt hold water mathematically when it is "0.2% + exchange etc fees" vs "0.5% + exchange etc fees". Either situation is a negative sum game for such a notional arbitrateur. In other words you have already passed thru ALL COSTS. The rest is profit. Period.

The fact of the matter is that legitimate trading (i.e. not arbitrage) of low priced stocks offers the greatest risk to reward ratio there is on an alpha basis verses the free beta that the general market offers (for a non-institutional trader).

You are simply seeking to increase your exposure to such profits without incurring the risks that your customers incur to gain this profit in the first place.

Stock777: Unbundled starts at 0.0035 and you can get NASDAQ rebates (although by my reckoning IB keep some of those rebates on a volume basis, so their "exchange fees" are not really accurate). Therefore the bundled commission of 0.005 (with no effective cap) is absolutely pointless.
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Is there any reason why folks trading sub $1 stocks do not use brokers like Ameritrade. Theirs is a flat $10 per trade regardless of number of shares.
 
Fanzig

Thanks for that, I gotcha now. As you can tell, I don't actually trade sub
$1.00 stocks all that often. But the 0.2% cap did, formerly, make IB look
attractive for that purpose.

Eating too much pie can also make one grow fat :p
 
Quote from def:

If you dig deep and research all the fees a broker must pay (that is one not getting paid for order flow), you'll find that for the fees we charged for stocks for large size trades below $1 were less than the costs. All we did was raise the cap on the fee to cover these costs. We can't be all things to all people but we need to service our core client base. Changes such at this allow us to keep our fees low where the majority of our business is generated.
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It's too bad the commission structure was changed. I trade mostly Canadian stocks and currently a fair number on the TSX Venture. Whereas I was paying $20 before on a $10,000 trade (5000 shares @ $2.00), I'm now paying $50. A very big jump. I can execute the same trade through TD Waterhouse (with direct market access) for $9.99, all costs in.

Why such the difference now?

I didn't care about the few bucks before but now it's definitely making a difference. On the trade mentioned above, it now amounts to $80.

I originally switched to IB mainly for the commissions. I really don't care about the 'extras' and use the TWS for order execution only. I don't use customer service and don't ask for much.

It's ufortunate but I'm going to have to switch back to TD Waterhouse for a large portion of my trading (or maybe entirely?). I've been happy so far with IB up to this point but I'm not asking for much. Just order execution and cheap commissions.

I've turned a fair number of friends and acquaintances onto IB in the past for the commissions but now IB is the expensive choice in Canada. My friends are as disappointed as I am with the new commission structure.

I sincerely hope that IB will rethink their position on this.
 
Quote from Wetton:

It's too bad the commission structure was changed. I trade mostly Canadian stocks and currently a fair number on the TSX Venture. Whereas I was paying $20 before on a $10,000 trade (5000 shares @ $2.00), I'm now paying $50. A very big jump. I can execute the same trade through TD Waterhouse (with direct market access) for $9.99, all costs in.

Why such the difference now?

I didn't care about the few bucks before but now it's definitely making a difference. On the trade mentioned above, it now amounts to $80.

I originally switched to IB mainly for the commissions. I really don't care about the 'extras' and use the TWS for order execution only. I don't use customer service and don't ask for much.

It's ufortunate but I'm going to have to switch back to TD Waterhouse for a large portion of my trading (or maybe entirely?). I've been happy so far with IB up to this point but I'm not asking for much. Just order execution and cheap commissions.

I've turned a fair number of friends and acquaintances onto IB in the past for the commissions but now IB is the expensive choice in Canada. My friends are as disappointed as I am with the new commission structure.

I sincerely hope that IB will rethink their position on this.
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Wetton,

You are comparing IB to TD, and concluding that since IB's commissions are higher, TD is the superior alternative. Do you think that TD will get you execution prices as good as IB's? If IB gets you better fill prices, will the difference in fill prices favoring IB be greater than or less than the difference in commissions favoring TD?
 
Quote from Wetton:

It's too bad the commission structure was changed. I trade mostly Canadian stocks and currently a fair number on the TSX Venture. Whereas I was paying $20 before on a $10,000 trade (5000 shares @ $2.00), I'm now paying $50. A very big jump. I can execute the same trade through TD Waterhouse (with direct market access) for $9.99, all costs in.

Why such the difference now?

I didn't care about the few bucks before but now it's definitely making a difference. On the trade mentioned above, it now amounts to $80.

I originally switched to IB mainly for the commissions. I really don't care about the 'extras' and use the TWS for order execution only. I don't use customer service and don't ask for much.

It's ufortunate but I'm going to have to switch back to TD Waterhouse for a large portion of my trading (or maybe entirely?). I've been happy so far with IB up to this point but I'm not asking for much. Just order execution and cheap commissions.

I've turned a fair number of friends and acquaintances onto IB in the past for the commissions but now IB is the expensive choice in Canada. My friends are as disappointed as I am with the new commission structure.

I sincerely hope that IB will rethink their position on this.
More...

We will introduce an unbundled model for Canadian stocks sometime in the next few months. That will address your situation since the costs for ECN liquidity taking will be partitionable. The problem we had with the bundled model on cheap stocks is that the 20bps cap was less than the ECN liq-take fees. We had people using IB to remove liquidity, paying 20bps, and actually trading with their own orders submitted through another broker who gave them the liquidity adding rebate whose value was more than 20bps. No market risk, merely arbitraging two commission schedules.
We had to eliminate that activity and raising the cost was the only solution. It never makes sense to run any segment of a business at a loss.
 
Quote from IBj:

We will introduce an unbundled model for Canadian stocks sometime in the next few months. That will address your situation since the costs for ECN liquidity taking will be partitionable. The problem we had with the bundled model on cheap stocks is that the 20bps cap was less than the ECN liq-take fees. We had people using IB to remove liquidity, paying 20bps, and actually trading with their own orders submitted through another broker who gave them the liquidity adding rebate whose value was more than 20bps. No market risk, merely arbitraging two commission schedules.
We had to eliminate that activity and raising the cost was the only solution. It never makes sense to run any segment of a business at a loss.
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If only you would hurry up and start taking canadian RRSP/Locked in accounts... I'd transfer from Questrade in a heartbeat!

THe poll has been up for a while.... any idea if you will ever start doing this?
 
I trade a small amount of currency futures every month. maybe 5-20 a day. I am a bit wary about switching over to unbundled pricing but heard in almost all instances it will provide lower costs. Should I remain using bundled until I start consistently trading well over 300 contracts a month?
 
Quote from jazzsax:

If only you would hurry up and start taking canadian RRSP/Locked in accounts... I'd transfer from Questrade in a heartbeat!

THe poll has been up for a while.... any idea if you will ever start doing this?
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We have had such miserable experiences with the tax/regulatory complexity of US IRA accounts that adding the Canadian or other country equivalents has not made anyone excited. In fact, we wince. I know it may seem short sighted but I estimate an tax deferred account model requires 5-10X as much systems complexity as a regular account due to all the controls to prevent tax-exempt funds from commingling with taxable funds via transfers.
 
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