IB's poor stop execution?

V

viewpoint

A daytrader told me that IB holds stops internally and sometimes fails to put them out to market when the stops are activated. Thus a trader will see the trade go against her beyond the stop set.

In such situations, IB makes the trader eat the extra loss, saying that it was a system problem, etc.

Is this true? I wouldn't want to use a broker like that. Sure, a broker make mistakes at times, but it must break the trade and make you whole.

Has anyone had this type of problem with IB?
 
IB's stop limits are now native on Globex, thus this isn't an issue.

For stocks, the triggers are now also configurable. Most of the issues with IB's stops have been with not completely understanding the default trigger method - which has double tick rules to avoid triggering a stop via poor data.
 
"Is this true? I wouldn't want to use a broker like that. Sure, a broker make mistakes at times, but it must break the trade and make you whole."

boy do you have a lot to learn.
 
Probably spam. Cheap shots at the market leader?

Stops are sent to market. Stop limits have no guarantee of being filled. Also most brokers that I know in non-electronic markets execute stops on a best efforts basis only.
 
Doing 5 - 10 trades per day via IB and always using hard stops I can't remember ever having a problem with them not been sent to market when I expected them to. The double tick rule has also helped me out on occasion.
 
Def,

I accept IB for what it is, an excellent platform alternative for many people, particularly those who can benefit from the great commissions. But I have to say that there is no doubt that equities traders do indeed see the market trade significantly through their stop...more so than is explainable by anything but what it is: IB sometimes does not send your stop out to market in a timely fashion, and sometimes even fails to send them at all.

The latter case is actually not as bad since in every case I have ever heard, IB will honor the stop price (not the likely fill price), but only IF you leave your order there. It is very difficult as a day trader watching the market run away (and your account drain) hoping that the stop never executes so that you can raise someone on the phone to get your wanted fill, and I know many traders who can't stand it, cancel, and resend an exit order (which seems to guarantee that IB will not honor the stop). Indeed, I opened an account at another broker to concentrate on those certain strategies that require tighter and more reliable stops. I still use IB for options and some "less hyper" equities trading, and may use it even more if I increase my NQ trading.

Granted, the failed stops do not happen often, but it certainly happens often enough to be noticeable. I realize that whenever you use a simulated (held) stop order you introduce an additional potential failure point for the benefit of "hiding" your intentions from the market. I just don't know what to do about this, other than running my stops manually when trading my IB account. IB has been making progress in this area, now allowing clients to configure their stop triggers, but I wish there was a way to make the problem go away completely. Then again, I used to wish that IB would provide a more modern interface with truly streaming quotes and a more serious (and integrated) charting/L2 capabilities. But I always decide in the end that I don't want that at the expense of higher commissions and additional fees. Even with it's shortcomings, IB occupies a valid spot in my aresenal for the strengths and benefits they bring to the table.

--Derek
 
derek,
your points are well taken but in the past 6 months or so every complaint i've seen about a stop when researched was inaccurate. All were accurately processed (or unprocessed). I need to qualify this as I am on the trading side and when the help desk in HK gets a complaint about stops, I've requested to look at them and help in the "research". However, I can only speak of requests acted upon by the HK help desk. I can't speak for queries sent elsewhere.

The best thing to do if you believe a stop should have been triggered is to send the information to the help desk who can look at the audit trail, time & sales, etc. If they believe there was an error, it would be reported to programming who could correct it.
 
Thanks Def...your insider annecdotes are appreciated as always. I also think that you are primarily looking at it from a GLOBEX perspective, whereas I am speaking principally of equities. Personally, I manage my own stops now, unless I'm going to be away. But I trade in a chat room with a few IB traders who very occassionally run into the "missed stop" problem. I don't have any hard statistics on it as far as other traders go, but I will say in my case it happened about 1% or 2% of the time. In all cases (myself and others) what happens afterwards is pretty consistent. If you DON'T TOUCH it and call in the problem, IB honors your market stop price. If you cancel and resend your exit, even clearly way past the time the stop should have executed, then you are stuck with your resent fill.

I have no reason to doubt your claim of "all" alleged missed stops being resolved in IBs favor upon investigation. Your reputation as a straight shooter is well established here. I'm only pointing out that it does still happen often enough that IB fans ought not pile onto those who complain by immediately assuming that they either fail to understand how they work, or that they are simply lying in an attempt to IB bash.

Peace... :)

--Derek
 
No doubt as well. That's why I like to see any out here. As I know a fair amount about trading and the inner workings of our trading system, I'm often able to figure out what if anything went wrong. Thus if this does happen to you again, please send me the details of the trade, we'll research it and assuming there is an error, I'll pass on to the programming group. I did qualify my comments as the help desk in HK is after hours and wouldn't see the majority of requests to investigate.
 
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