Identifying when IB is your counterparty

[ids]

Our Chairman answered these questions very clearly at the last Interactive Brokers Group Earnings Call.

The order from the brokerage unit always goes to an exchange. There are certain exchanges where we are specialists, so at that time when we see that the exchange, where we are specialists, is just as good as one where we are not specialists, we are going to route to the exchange where we are specialists.

Reference:
http://seekingalpha.com/article/650...group-q4-2007-earnings-call-transcript?page=8
Please look at the bottom of the page.

We do not trade with our customers; this is very important that everybody knows. We do not trade with our customers. We have a Chinese Wall, we do not see those customers orders and our brokerage company tries to execute those trades at the best available price on the exchange.

Reference:
http://seekingalpha.com/article/650...group-q4-2007-earnings-call-transcript?page=7

 

[Option Trader]

Quote from ids:

Our Chairman answered these questions very clearly at the last Interactive Brokers Group Earnings Call.

The order from the brokerage unit always goes to an exchange. There are certain exchanges where we are specialists, so at that time when we see that the exchange, where we are specialists, is just as good as one where we are not specialists, we are going to route to the exchange where we are specialists.

Reference:
http://seekingalpha.com/article/650...group-q4-2007-earnings-call-transcript?page=8
Please look at the bottom of the page.

We do not trade with our customers; this is very important that everybody knows. We do not trade with our customers. We have a Chinese Wall, we do not see those customers orders and our brokerage company tries to execute those trades at the best available price on the exchange.

Reference:
http://seekingalpha.com/article/650...group-q4-2007-earnings-call-transcript?page=7

Thank you for clarifying matters. Can you still clarify though, does "Smart" indicate the counterparty was Timberhill? And does "IDEAL" indicate the counterparty is another IB customer?

 

[kostia00]

Quote from Option Trader:

Thank you for clarifying matters. Can you still clarify though, does "Smart" indicate the counterparty was Timberhill?

No, it does not. TWS shows executing exchange as SMART if the order was routed to a non-IB dark pool whose name IB does not or can not disclose.

Quote from Option Trader:

And does "IDEAL" indicate the counterparty is another IB customer?

DAV is correct, IDEAL means counterparty is definitely not IB/TH:

Quote from DAV:

Executions on IDEAL are either with another IB customer or with another liquidity provider

 

[Option Trader]

Quote from kostia00:

No, it does not. TWS shows executing exchange as SMART if the order was routed to a non-IB dark pool whose name IB does not or can not disclose....
DAV is correct, IDEAL means counterparty is definitely not IB/TH:

Thank you. I understood frome customer service there is a way to identify when IB/Timberhill is the counterparty, however, they said from the statements, and I don't know what they meant. Can you clarify?

 

[ak15]

To simplify:
When you choose smart as the route:

You can be filled by any of the ECNS or NYSE and your orders page will show these ECNS. It can also be filled by Ideal in which case the orders page will show Smart as the Exchange.

I called up IB and asked them about situations where orders are filled by Ideal and he said that Timber Hill was the one filling your orders. Makes sense to me. The notion that it could be another IB customer or liquidity provider who IB can't identify is ludicrous.

 

[ak15]

Quote from ids:

Our Chairman answered these questions very clearly at the last Interactive Brokers Group Earnings Call.

The order from the brokerage unit always goes to an exchange. There are certain exchanges where we are specialists, so at that time when we see that the exchange, where we are specialists, is just as good as one where we are not specialists, we are going to route to the exchange where we are specialists.

Reference:
http://seekingalpha.com/article/650...group-q4-2007-earnings-call-transcript?page=8
Please look at the bottom of the page.

We do not trade with our customers; this is very important that everybody knows. We do not trade with our customers. We have a Chinese Wall, we do not see those customers orders and our brokerage company tries to execute those trades at the best available price on the exchange.

Reference:
http://seekingalpha.com/article/650...group-q4-2007-earnings-call-transcript?page=7

Not accurate. If you do not see customers' orders how are you able to route specific orders through Ideal? Not only do you see customers orders, you also determine whether Ideal can benefit by routing to them and if not you then route to other ECNS or NYSE.

 

[Option Trader]

Quote from ak15:

...If you do not see customers' orders how are you able to route specific orders through Ideal?

This is a very good question.

 

[cvds16]

Quote from Option Trader:

This is a very good question.

Easy, it works the other way around, Timber Hill is quoting markets and when they have an order they look if Timber Hill is the best ... not exactly rocket science ...

 

[Option Trader]

Quote from cvds16:

Easy, it works the other way around, Timber Hill is quoting markets and when they have an order they look if Timber Hill is the best ... not exactly rocket science ...

See the following quote from DAV: Although IDEAL is the executing exchange, IB is not the counterparty. Executions on IDEAL are either with another IB customer or with another liquidity provider.
IB or Timber Hill is never the counterparty on IDEAL. There is no way to know the actual counterparty in a trade at IDEAL or any other real exchange.

I.e. to route an order to IDEAL or to route a trade to Timberhill (with NYSE?) are mutually exclusive decisions.

 

[ak15]

Quote from Option Trader:

DAV, seemingly ak15 isn't happy with your answer?

It is not a question of being happy or unhappy. It is a question of reality. Just think about it. You place an order to buy or sell. You get filled in milliseconds. Do you think IB has the time to line up other IB clients to match your order within that time frame?
Also do you mean to tell me that an IB rep over the phone was lying to me when he unequivocally stated that 'Ideal' signifies Timber Hill. This is the only logical explanation. If it was filled by any other ECN they will list the ECN... Arca, Bats, Inet etc.
Any IB client trading stocks will notice that they get filled by Ideal only when they attempt to lift the inside bid or offer or try to buy or sell at well below or above NBBO depending on whether it is a purchase or a sale i.e. you are in a hurry to get out of the position. So IB readily finds other IB clients or other unidentifiable 'dark pools' only in such situations? Get real. The only logical and feasible explanation is Timber Hill.
There are also other ways to determine this outcome. Just do your own dd.