IB: Smart routing and BATS

M

macrotrader

Hi,

I just today found out that IB can route to the venue with the lowest commission. If I would have known that this option exists, this would have saved my thousands of $s. But anyway, now most of my trades go through BATS. What I don't understand is, I'm using the flat-rate structure. Why does it effect fees then? Because I though with bundled it doesn't make a difference what the ECN itself charges. Thanks.
 
You're talking about stocks?

With unbundled you get lower IB commissions + rebate from exchange. If you use limit orders.

Example for BATS, 1000 shares:

unbundled: (0.0035 - 0.0025) x 1000 = $1

bundled: 0.005 x 1000 = $5

In case you remove liquidity unbundled might be slightly more expensive.
 
Yes, stocks. I trade <500'000 shares/day accross a the whole range of prices. I wasn't aware of the fact that I can explicitly route to the ECN with the highest rebate. I'm not sure how this works. Does IB aggregate the order book accross all ECNs and does some internal optimziation? Is there a trade-off between the best rebates and good execution?

I also didn't quite realize that there is such a huge difference between the ECNs in terms of rebates.
 
All depends on what order type you use. My experience is that non-marketable SMART orders are almost always executed at an exchange. And as almost all exchanges use rebates you have lower commission.

For market orders it's a different story. No rebates and more often executed @ SMART (i.e. no exchange mentioned).
 
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