IB VWAP versus MOC

[volpunter]

Interesting, could you please elaborate what you mean with that? Which brokers? And how do they get a better fill than anyone submitting orders electronically?

There are brokers on the NYSE that work orders similar to a VWAP. There is no guarantee, but they can often do better than the VWAP because they can match on all prices. That means when they are matching the bid or offer, they can get a small match on each trade. You don't have to wait for it to be your bid or offer to participate.

 

[Maverick2608]

I have a lot of experience designing vwap algorithms with quantitative overlay for myself when i traded cash equity as part of an internal hedge fund. I believe one cannot beat guaranteed vwap on average as one will always react to volume,traded, rather than anticipate. With quant overlay (basically measuring momentum and predicting the continuation if such) my best performance on average was beating guaranteed vwap by 11 basis points. I later on replicated the strategy and sold it to a sell side dma algo team.

Moral of the story is that you are better off trading guaranteed vwap if it is only a few basis points more expensive. I don't know how good IB'S algo is but if they charge more than 15 basis points more than best effort then I would reckon going with best effort to be cheaper over time. But again You should ask IB fir some statistics. They should publish what their best effort tracking error is.

Thank you.

Then it would be IB's best effort VWAP, because with the 0.017 cents per share exchange fee plus normal commission for the guaranteed VWAP, on low priced stocks, the cost can easily amount to 50 basis points one way.

I don't know what the slippage is on IB's best effort VWap compared to e.g. MOC - I guess I will find out myself. Until then I will use good old manual limit orders during morning hours.

 

[volpunter]

Its better to assess the difference between a broker's best effort vwap and guaranteed vwap price (aka tracking error). You probably won't find statistics regarding differences between MOC and VWAP. Ignoring market impact (as you stated) the difference comes down to the market dynamics during a given day. If you are not interested in assessing intra day momentum then you are better off using MOC imho.

Thank you.

Then it would be IB's best effort VWAP, because with the 0.017 cents per share exchange fee plus normal commission for the guaranteed VWAP, on low priced stocks, the cost can easily amount to 50 basis points one way.

I don't know what the slippage is on IB's best effort VWap compared to e.g. MOC - I guess I will find out myself. Until then I will use good old manual limit orders during morning hours.

 

[Maverick2608]

Its better to assess the difference between a broker's best effort vwap and guaranteed vwap price (aka tracking error). You probably won't find statistics regarding differences between MOC and VWAP. Ignoring market impact (as you stated) the difference comes down to the market dynamics during a given day. If you are not interested in assessing intra day momentum then you are better off using MOC imho.

I will try to ask for IB's best effort VWAP versus guaranteed VWAP tracking error and post it here, if they provide it.

I guess there should be no conflict of interest, because it is the exchange fee that makes the guaranteed VWAP expensive - not the IB commission per se.

 

[volpunter]

I am not sure but IB may guarantee vwap as part of their facilitation desk operations hence the fee may vary by size and name. Worthwhile checking also

I will try to ask for IB's best effort VWAP versus guaranteed VWAP tracking error and post it here, if they provide it.

I guess there should be no conflict of interest, because it is the exchange fee that makes the guaranteed VWAP expensive - not the IB commission per se.