IB routing choice

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njrookie

I would like to learn more about IB routing choices from ET experts. I mostly place limit orders and trade about 1 million shares of mostly NYSE stocks a month using IB unbundled commission. Lots of my trades are for smaller and less liquid stocks.

1. When placing limit order, should I route directly to an exchange with highest rebate or should I use IB smart routing? If I choose highest rebate, will execution be slower? If I am on top of the book on an exchange with highest rebate, say INET, will trades placed on other exchange re-routed to the exchange that I posted?

2. It seems that IB does not allow me to place a limit order on an exchange if NBBO is from another exchange. Is it possible to sit on top of an exchange for other orders to hit you?

3. If you choose IB smart routing, and your order will take liquidity, will IB smart routing automatically route it to the lowest exchange for taking liquidity, say NYSE, in order to reduce fees for removing liquidty? Or do I have to route it directly to NYSE?

Thanks for fellow ETers help in advance.

njrookie
 
You should go to

'Configure' > 'MISC' > 'Smart Routing'

At the bottom of that page, you will see 'Strategy' with a drop down box next to it.

You have 4 choices.

1. Highest Rebate
2. Primary Exchange
3. Highest Volume Exchange w/ Rebate
4. Highest Volume Exchange w/ lowest fee

You must be unbundled to have these options.

Sal
 
One additional point people have a lot of questions on. For US options, regardless of your commission structure (bundled vs unbundled), IB will route to the exchange with the lowest fee.

If multiple exchanges are tied at NBBO, IB will send the order to the exchange that offers the lowest fee or a rebate. There are exchanges that offer rebates for removing liquidity in certain classes.

We go to great lengths to keep this data up to date and modify our routing as needed. We are constantly monitoring for changes in fee structures in both stock and options.

We do this on a best efforts basis as each exchange is constantly updating their fee structures to find the one that works best for them. With little notice, we are lucky to have the programmers available to make changes as fee schedules are published by the exchanges.
 
Thanks a lot for the help. It seems that you are suggesting that smart routing will automatically send my order:

1. to the best NBBO;
2. in case of tie for NBBO, then to the exchange with highest rebate.

I only trade equity, and mostly NYSE equity.

What about orders that TAKE liquidity? Will the order be routed to the exchange with LOWEST fees for taking liquidity if two exchanges are tied for NBBO?

Furthermore, if one exchange has a better NBBO, can I route the order to another exchange at the NBBO without being charged for taking liquidty?

Let me give you an example. Say I want to sell and the best NBBO bid is at INET at 20.01. The best bid at NYSE is 20.00. Can I route to sell at NYSE at 20.01 and wait for buy order to hit me? Is that feasible? Is so, how?

njrookie.
 
The 4 options I gave you determine

1. where unmarketable orders will be routed
2. where marketable orders will be routed when multiple exchanges are at NBBO.

Making that selection will determine how SMART will route.

Secondly, IB cannot route to NYSE when they are not NBBO and your order is marketable. We cannot avoid a fill because of cost in the US.
 
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