Robert Morse
Sponsor
"I am mostly trading multiple legged option strategies"
IBKR Smart route and order fills.
- Thread starter TheBigShort
- Start date
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.
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.
I see. So you either get a flat rate commission with an extra fee for direct routing, or you get maker/taker fees but no extra fee for direct routing?
I trade a lot of multiple legged option spreads. The exchange it is sent to has a big effect on the fill price. The exchange that offers the most rebates generally does not give you the best fills, and as mentioned in previous posts, rebates are a big factor in where the order is sent using a "smart" route. If you are trading single listed products such as the SPX or VIX it doesn't matter as all orders are sent to the CBOE.
I have found the CBOE will generally give the best fill price on multi legged option orders (there is no extra rebate or charge for customer orders here for either adding or taking liquidity). So I will start with a limit price away from where I think I will be filled and walk the price up/down, sending the order to the CBOE (using a l lot spread). I have found the CBOE will also generally give the best price improvement on your spread if you are a bit away on fair value. After I am filled, I will then send a 1 lot at that price to the C2 exchange and the ISE. They offer the best rebates for adding liquidity. I generally wont be filled at the same price as the CBOE, but sometime if it is within .01 it is worth it for the added rebate.
Note that depending on the stock, you will be filled at better prices for smaller orders. So it is best to start small and gradually increase the size of the order.
I'm not sure if IB allows you to direct spread orders to various exchanges or if Smart is the only choice.
I have found the CBOE will generally give the best fill price on multi legged option orders (there is no extra rebate or charge for customer orders here for either adding or taking liquidity). So I will start with a limit price away from where I think I will be filled and walk the price up/down, sending the order to the CBOE (using a l lot spread). I have found the CBOE will also generally give the best price improvement on your spread if you are a bit away on fair value. After I am filled, I will then send a 1 lot at that price to the C2 exchange and the ISE. They offer the best rebates for adding liquidity. I generally wont be filled at the same price as the CBOE, but sometime if it is within .01 it is worth it for the added rebate.
Note that depending on the stock, you will be filled at better prices for smaller orders. So it is best to start small and gradually increase the size of the order.
I'm not sure if IB allows you to direct spread orders to various exchanges or if Smart is the only choice.
Robert Morse
Sponsor
I'm not sure your wording is correct, so I would rather re-state.
On Lightspeed Trader, to protect us from maker taker and exchange fees, we offer either SMART routing for equity options with no additional fees and a flat charge for ETFs or choosing an exchange. I can add a process where we can track maker-taker fees and avoid the posted fees. If I do that, you can choose SMART or a route. The SMART route avoids maker taker fees and the choice of routes subjects you to those maker/taker fees. On all cash settled symbols, we pass through those fees. I know this is very complicated. I wish it were not.
On the other platfrom, those posted fees do not apply, because we can track maker-taker fees and reconcile them at end of month. Except for cash settled symbols, on the other platforms, SMART orders have no exchange fees. Choosing a route subjects you to those fees/credits.
Happy to describe this better on a call.
Rob I see you have mentioned in the past connecting LiveVol X with IB. Is this still possible?
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)?
I know alot of question and there must be a book/manual on this stuff. When I SMART route, I usually slowly get a fill near the mid. Is this hidden liquidity due to market makers? And if so if I deal directly with an ECN will there be similar hidden liquidity?
Robert Morse
Sponsor
Yes. https://www.lightspeed.com/trading-platforms/livevol-x/
I would say no. When you log into the CBOE COB on the website, you only see live spread orders not the NBBO.
http://www.cboe.com/cob
A SMART routed order on IB is held in their internal system only subject to other IB orders until they deem it executable. This was the case a few years ago but might have changed. You might not see your SMART order on any COB. If you route to the CBOE, you will. The NBBO you see on most platforms represent the NBBO of all option exchanges which doesn't always provide an execution on a COB unless a MM wants to match that.
Not sure if I answered your question.
These are generally market makers that monitor the COBs and a number of option exchanges. If they get an edge to "their" values, you get a trade. Sometimes you get lucky and catch a customer order. BTW, an ECN is a electronic communication network for equities not options. Option exchanges are not ECNs.
There is no book or manual. Anyone that says they "know" what will be best for your order on any specific options or spreads is guessing. The point is to have the choice. That has value.
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?
Robert Morse
Sponsor
I'm not sure how that works or what protection that offer from getting legged. We either offer single legs or spreads. No system for spreading orders out over exchanges with protection. I do not see how a broker can do that and leave your order on each exchange.