IB's Best ECN

Klaorman, based on my limited experience so far using BEST ECN it does everything you've asked for in your earlier post. BEST ECN seems to make routing decisions based on the inside prices of the various ECNs. So if you submit a buy order for 500 shares with a limit of 50.10 and ARCA offers 100 at 50.02, ISLD 200 at 50.05, and INCA 1000 at 50.09 it will split up the order and send individual orders to each of those ECNs matching their inside price (e.g. 50.02 in the case of ARCA).

I'm not quite sure yet what happens with leftover size as I haven't had that case yet. I would assume any unfilled portion of the order will be put on the ISLD or some other ECN book. The question is at what price? In the case of ISLD where crossing orders is supported the order limit price could be used but with other ECNs the remaining portion would have to be priced below/above the inside as/bid. Another question is if BEST ECN will automatically reroute the order if additional ECN liquidity becomes available within the price limit at a later point in time (I recently discovered when trying to dispose of one of those pesky odd lots that BEST does a pretty good job at that automatically rerouting from ISLD to SOES once an MM becomes available at a better price).

Such details really should be documented by IB in order to spare their customers from potentially ugly surprises using this new route.
 
I've mentioned the need for documentation on Best Execution and other methods to some of the folks at IB. They recommended sending a request to ibmgmt@interactivebrokers.com.

That address is for IB Management, and they do listen.


Richard
 
i understand the repeated request for documentation on best ex and I will make another query as well. However, the policy to date has been that the algorithms are proprietary and subject to change and thus the methodology has not been posted.
 
def:

I understand that IB is way smarter than the rest of the world and so their proprietary Best Execution is a valuable trade secret that should be kept that way.

Not!

Many of IB's competitors (like Cyber) have had fancy execution options like IB's Best Execution for years. And many of them work better than IB's. They all provide documentation about how the `magic' is supposed to work. Many experienced traders wouldn't touch them otherwise.

You can keep the minute timing details to yourself, we don't care about those (as long as they work.) But the bigger questions need to be answered.

What if the first attempt at a good execution fails?

Does the system retry? After how long?

How long before it reverts to the price I started at?

What are the effects of starting with a high or low price?

What happens if my price is out of the money to begin with?

How long does the system wait for an acknowledgement before trying a new execution path?

What are the effects of odd lots (those the trader starts with or that B.E. encounters, itself)?

What happens when I attempt to cancel at various points within the process? What happens if I modify the order?

Which ECN's are given preference? Which market makers? The answer to these questions can have great bearing on whether B.E. is appropriate for trading certain stocks and in certain situations.

Smart trading requires constant attention to detail. Trading with a black box increases risk. Traders can spend their own time and money testing B.E. to get a feel for how it reacts in various situations, which could take years. Or IB could do the sane thing and provide some information to give them a head start.

Sometimes documentation is a nice thing to have. In this case it's essential.

Secrecy is counter productive, both for IB and their clients.



Richard

 
rfoulk, try taking the time to understand def's posts regarding inquires on the Best-ECN documentation.

Specifically def's said,
"you have come across what is called a soft/stealth release which basically means that no announcement has been made. I think they are playing around with different logic and beta testing and when they are content with the feature an announcement will be made." ( http://www.elitetrader.com/vb/showthread.php?threadid=1401 )

Until then, cut down on the rude chatter and wait for the official release.
 
greydeath,
Thanks for coming to my defense but to be fair the others have a point in that IB has never released details on bestex and i am not certain the details of the routing that the others seem to want will be documented either. I'm just going to do my best to make sure it is discussed at the appropriate levels.
 
def:

I'm aware that you are the messenger. I'm not shooting at you -- I'm shooting through you. :-)

I expect that useful critiques posted here will make their way to IB, so I speak with the passion that I would if I was talking to IB directly.

IB is my favorite broker, I'm just trying to help them become even better. And unlike some others, they listen.

So it's worth the trouble.

Thanks for your help def. My apologies in advance for the next time I get excited and tell you how I really feel. :-)


Richard

 
Hi all,
Yes, I have mixed feelings too. I do understand Def, and from previous post he knows I pay a lot of respect to him for coming here and most of the time listen to complains [usually we write to complain and not enough to say thank you. I try to do both though].

On the other hand, we, IB users on elite trader we usually make valid points. We should try to wait for the official release. But there is a precedent and Def honestly did acknowledge that, with the Best Execution [standard].

The best execution is usually worthless for Nasdaq, and for other markets you must learn the hard way, stock by stock if it is working or not [and pay to learn!].
A good example is try to buy QQQ with Best Execution and cry.

Because the logic is not made public, we, as users, have to try and get frustrated.
Then, many, many wrote here and elsewhere how bad IB is. This is very bad publicity and IB management should understand that. It is bad publicity and unfair.
The logic of best execution is flawed, when you know it, you don't use it, don't complain and continue to love IB as I do.

I, and I guess others, don't want to live this again with the Best ECN. [which, by the way, is the response to all the complains!].

The bright side is Best ECN seems to work very, very well. We only want to know its broad logic in order to know what happens in difficult situations and what we should do. That's basically it. Not the minute details.
I do not know any 'smart routing' which is 100% great [or even 80%]. All the ones I tried fail in certain conditions, I do want to know, not knowing brings hesitation and delay, which bring losses.

Thanks Def for bringing this to the attention of IB's management.

vpiNeo
 
Where can I find the Best ECN execution? I have the lastest version of Java TWS and find no Best ECN in the pulldown execution tab.
 
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