IB SMART Routing and BATS/HFT

S

sf631

So, I've been watching the back-and-forth in the media over the last few days sparked by Lewis, Katsuyama, O'Brien et al, and it's gotten me rechecking and reconsidering my order routing settings at IB. I wanted to solicit other IB traders' thoughts on how to best configure

Let me say at the outset, I have no misconceptions about becoming a speed trader using IB. My only goal is to avoid being skimmed as much as possible while executing my trades (mostly 100 share blocks on illiquid equities).

There are five different formulations of SMART available now in TWS. The choices look different than last time I checked, and I thought there used to be a specific choice about BATS. I'm attracted to either the default or the "Primary Exchange" as means of avoiding shenanigans. In past when I used "Highest Rebate" I saw a markedly worse slippage rate that far outweighed my commission savings.

https://www.interactivebrokers.com/...ebook/configuretws/configure_smartrouting.htm

Thoughts on choice of SMART algo configuration, based on experience? IBALGO or the others?
 
When I send limit buy orders at the offer, default smart routing splits the order between multiple exchanges and can get filled when you try to buy more than is displayed as there appears to be hidden orders sometimes. On a smaller stock, this year, I tried to lift the offer and the market immediately moved away from me as described by Michael Lewis.
 
Are your orders inside/outside/at the spread?

But generally with 100 share orders, you don't have anything to worry about.
 
IB smart routing is splitting large orders into smaller orders that get sent to multiple exchanges at the same time. Just check your trade reports. I usually take the displayed liquidity.
 
Daal said:
what I want to know is if IB's SMART router does a Thor like procedure where they try to hit all the pools in the same millisecond
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I am getting filled, when taking liquidity on larger market cap stocks, on multiple venues at the same time.
 
just21 said:
I am getting filled, when taking liquidity on larger market cap stocks, on multiple venues at the same time.
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Has someone from IB told you the router is designed so that they arrive at various venues at exactly the same time (like Thor)? I haven't seen any time stamp from IB granular enough to make that determination from an execution report.
 
This would be a very good time for IB to provide more information about how their smart routing works. email ibmgmt [at] interactivebrokers.com and ask for more information to be publically be disclosed.
 
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