IBKR Smart route and order fills.

[Robert Morse]

I mean the COB for a 352 FLY must be pretty thin.

Maybe it would be safer to start with a 2/-4/2 fly with a spread, which typically has a small delta. Then buy the 1/-1 vertical to achieve the 3/-5/2 FLY when it lines up. Just a thought.

 

[FSU]

=The Ask I get from(for example) CBOE COB for a 352 FLY, is this the sum of all the Asks of each individual leg (SMART route within the ECN)?

With IB what you see when you enter a spread is the price using the best quoted bid and ask, but if that exact spread is currently in the COB, they will show you that bid/offer. You can't actually see the COB though with IB

 

[FSU]

Indeed you did! CBOE COB quotes are not quoted right now.When the market opens I will be spending some time monitoring it to get some further intuition.

Although @FSU stated he gets the best liquidity routing complex orders at CBOE, breaking the order up into it' s individual legs and spreading them across exchanges (SMART) seems like it would have a much better/faster chance of getting filled (Even with the time lag IB takes to find the exchange with the highest rebate). I mean the COB for a 352 FLY must be pretty thin. Am i thinking about this right?

This is almost never the case, you will almost always get a better fill entering a spread as a spread and sending it to the COB. You also won't risk missing one leg. The markets on most spreads are very tight in relation to the individual quoted legs. You won't know what that spread market is (as it isn't quoted) that's why its best to use 1 lot orders and walk the price up/down to find that market.

 

[FSU]

Another trading tip is using the COB to fill individual orders. For example, I trade a lot of back month options. Say you want to buy a Jan 2021 20 put in a 50 stock. The quoted price is 2-3. I know through trial and error that the "inside market" the market that some is willing to fill a limit order is 2.30- 2.60. But what I might do if I want to buy these is set up a spread where I buy 1 of these and sell a front month option that has a very tight spread. So for example here say the Jan 19 20 puts are trading at .01 -.03 as they are about to expire. I will put a time spread in where I buy the Jan 21 puts and sell the Jan 19 puts. This spread might only be .10 wide, and I buy the spread for 2.45. I then can cover my front month puts that I am short from the spread and pay .03. Now I have the same net position, long the original puts I wanted for a net of 2.48

The point is using the spread book can reduce/increase your prices dramatically.

 

[helpme_please]

Does Smart Routing works best for equities but not so good for other financial instruments like options? Need to specify asset class when discussing the effectiveness of Smart Routing.

 

[remoteControl]

I have traded a zillion shares on Lightspeed and prefer not to use smart as of 4 or 5 years ago. Direct routing definitely led to better fills for me.

IB's smart has some pretty looney behavior, not at all how I want to be executed. Very unintuitive, poor documentation and almost no one in support truly understands how some aspects of it work. I argued with countless reps about my fills before finally getting to the bottom of it -- which ultimately led me to stop using smart.

My 2 cents. Hopefully you save more than that. Good luck.

 

[Fain]

I trade with IB, and am guilty of using their SMART route for my orders. Recently, my buddy has been copying a few of my earnings trades using Questrade. His position sizes are smaller than mine but he is getting MUCH quicker and slighlty better fills.

Some reputable posters on this site have mentioned that the "SMART" route is only smart for IB.
Interactive Brokers has populated the first few pages on google regarding their smart route and there are alot of non reputable people encouraging smart route (Difficult to get a true opinion). I am mostly trading multiple legged option strategies on both US and CAD exchanges + individual equities.

After doing some reading on this topic I will admit that I feel like a fish leaving WAY to many half dimes on the floor.

I've worked at Questrade for years. At Questrade we sell your order flow to large High Frequency traders(Citadel,Apex for USA and ITS for Canada). These firms will mostly internalize the order flow versus IB and don't really do any price improvement over NBBO. Questrade doesn't have a smart router for U.S. and relies on Citadel, Apex for fulfilling NBBO requirements. You get charge ECN fees for removing liquidity and no rebates for adding liquidity. Plus there's a mark-up on the ECN fee that is sometimes double the liquidity fee that the ECN charges.

I'm not sure about Anecdotal testing with your friend where you send the same order at roughly the same time. Thats not really good way for comparison. better to use more of an empirical method for TCA(transaction cost analysis)... look at Price improvement over Lit prices. Executions at IB are a lot better. Especially in cases where its a multi-legged option order.

 

[Fain]

Does your order show a green status indicator and list the exchange(s) it is active on? Occasionally I see orders with green status that say "Active on SMART" and those seem to be slow to execute.

In general I'm not happy with the way IB's smart router splits orders across exchanges. For my complex orders I never see a difference in speed/price between high and low fee exchanges, but the extra fee for direct routing would negate the lower exchange fees. I wish they had the max-rebate setting like they do for equities and single legs.

Splitting across exchanges is better for execution quality. Imagine if your forced to send 4 legs to a single exchange where 2 buy/sell orders sitting on another exchange will give you price improvement. Sometimes the other exchange won't do 4 legs but has better prices for half of your orders.

 

[Robert Morse]

I have traded a zillion shares on Lightspeed and prefer not to use smart as of 4 or 5 years ago.

Have you tried the option SMART route. I think he was asking about options. The advantage of the equity smart route is you do not have to find which ECN has liquidity, it will do that for you and will save on take costs. I can't tell you which is "better" or "faster".

 

[Metamega]

I've worked at Questrade for years. At Questrade we sell your order flow to large High Frequency traders(Citadel,Apex for USA and ITS for Canada). These firms will mostly internalize the order flow versus IB and don't really do any price improvement over NBBO. Questrade doesn't have a smart router for U.S. and relies on Citadel, Apex for fulfilling NBBO requirements. You get charge ECN fees for removing liquidity and no rebates for adding liquidity. Plus there's a mark-up on the ECN fee that is sometimes double the liquidity fee that the ECN charges.

I'm not sure about Anecdotal testing with your friend where you send the same order at roughly the same time. Thats not really good way for comparison. better to use more of an empirical method for TCA(transaction cost analysis)... look at Price improvement over Lit prices. Executions at IB are a lot better. Especially in cases where its a multi-legged option order.

Very interesting. I use Questrade for registered accounts. (Mostly ETF dollar cost averaging) and always found it strange how I never saw price improvements like TDI. On their platform I can see where my orders were executed and mostly it’s TSX and MATCH. Now I thought this was weird that they weren’t selling retail order flow and looked at their disclosure and they don’t mention any intermediaries. TDI’s mentions something about internalizing some orders blah blah blah.

https://www.questrade.com/disclosur...closures/2018/05/22/best-execution-disclosure

My confusion was ECN fees for taking liquidity and I was thinking theirs no way their charging ECN fees and selling my order but for 80 percent of my orders they say their routed to the TSX so I can’t argue. Maybe I’m missing something.