IB SMART routing not so Smart

Actually...
If you have a profitable quantitative strategy... and only use Limit Orders...
Your profit from an AMEX-listed stock will be perhaps 70-80% of an identical NYSE-listed stock.
That is real money... and not bad at all.

In your favor:

The market fragmentation results in various players seeing your order...
As the SMART system bounces it around between the AMEX and ECNs.

The factors that create a CORRUPT EXCHANGE...
Also ** magnify market inefficiencies ** that can be exploited.

Against you:

The institutionalized cheating at the AMEX...
Will cut your expected volume by 20-30%...
And, occasionally, cost you a penny or two (only if you are impatient).

--------------

I did not trade the AMEX from late 90s till this summer...
But now I find it's def worth trading (as a sideline)...
If one has the right attitude and patience.

As for IB and their SMART routing system...
After about 18 months and about 70,000 trades... I think it works VERY WELL.

With NYSE "billable limit orders" after 5 min...
My business is entirely dependent on how well the SMART system works.

The shuffling between NYSE and Third Markets...
Cuts your volume by about 10-20% relative to direct routing to the NYSE...
But then you make up that volume with more new orders on more stocks.

It's nice that IB and my firm have the ** exact same common interest **... maximize volume.

Perhaps people with limited trading experience and limited experience at IB...
Should refrain from commenting on complex issues...
And, especially, refrain from posting unfair headlines like the one on this thread.
 
Quote from HoundDogOne:


Perhaps people with limited trading experience and limited experience at IB...
Should refrain from commenting on complex issues...
And, especially, refrain from posting unfair headlines like the one on this thread.
More...

I agree.

OldTrader
 
Quote from HoundDogOne:


Perhaps people with limited trading experience and limited experience at IB...
Should refrain from commenting on complex issues...
And, especially, refrain from posting unfair headlines like the one on this thread.
More...

Fair enough. I was trying to provoke a response and I succeeded. You'll notice I promptly posted a reply laying the blame on the Amex.


The shuffling between NYSE and Third Markets...
Cuts your volume by about 10-20% relative to direct routing to the NYSE...[/QUOTE]

I appreciate the stats you provided on your SMART experience, but I find this stat disturbing. YTD I have executed 16,701,060 listed shares, most NYSE through Ameritrade. In that period I had 32,900 unables because the orders had not been routed to the primary exchange. That's a .2% failure rate, much less than 10-20%. If I experience 10-20% unables then I doubt I'm going to like SMART.

I have also executed 1.8M through Fidelity with no unables. Further, I have had several fills outside the NYSE high-low that partially compensate for the unables. Of course I don't participate in price improvement as often and sometimes my orders are picked off when a significant order imbalance opens a large enough window for someone willing to rush in hoping that the NYSE will trade through my price enough to make it worth their while (I assume many of my fills outside the high-low are when these trades go awry).

Ameritrade does not publish their routing algorithm or even routinely note where your order executed, but it seems most listed get routed to an ECN after participating in the opening cross if eligible.

But then you make up that volume with more new orders on more stocks.[/QUOTE]

I do not understand this statement. Would you mind clarifying?

The institutionalized cheating at the AMEX...
Will cut your expected volume by 20-30%...
[/QUOTE]

Perhaps we have a different approach, but when I'm unable and I believe I'm due a fill I'll take the issue to my broker and if I'm due a fill I'll get it. In a situation similar to the one I described, if I had not eventually been filled I would have taken it to IB and expected a fill. I'll only accept being cheated if it's done within the rules, which used to happen frequently for Nasdaq stocks, but not so much recently.
 
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