Interactive Brokers Exchange Quote on ES Option Spread?

C

comintel

If I enter an ES option Spread such as a butterfly on IB (at which I currently have only a demo account), it gives me a ludicrously wide spread quote. It basically just assumes the worst possible fill from the bid-ask spread on each leg.

I know from experience that if I set up the same spread on the exchange using a UDS on a platform such as OptionCity, it would be extremely narrow.

Is there a potential workaround to this on IB; namely, submit a trial spread order with an unrealistic limit price, initially?

Does that order submission force IB to create a UDS on the exchange and immediately pick up and display back to me the narrower spread quote that would result on the exchange?

If not, how could IB possibly attempt to execute any such order without creating a UDS spread first?

(I asked in another thread in a slightly different context and appreciate the suggestion there to look elsewhere, but am just trying to figure out exactly what would happen in this case specifically on IB, to see if this effectively allows one to do an implicit exchange RFQ/UDS to get a narrower spread quote).
 
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Do NOT take a demo quote seriously --
you know already that it is not live data, and
-- the data come without reference to time/date so you could be looking at anything of the 24 hours ES clock. As well,
-- the execution engine in the demo is rudimentary, and not representative of a live market, so neither is the 'found' spread of an execution.

if you post the butterfly strikes, any of us (at any time, and from any broker) could reflect what we had as ES butterfly(s) pretty quickly.

FWIW, as a longer-time IB account-holder, and long-ish time ES trader, you'd be hard-put to find better fills, or cheaper costs. (Something else you undoubtedly already know.)
 
Thanks that's very encouraging!

Another member confirmed to me, in fact, that once you do enter a spread order on IB, the spread quote does come in.

So I think the overall mechanism is exactly what I guessed:
- When you set up a quote, IB does not yet (or may not yet) issue a UDS/RFQ, so the spread quote is not yet tight
- When you submit the order, even with an unrealistic limit, THEN IB does issue a UDS/RFQ if needed, and from that point you get realistic spread quotes (actually a UDS lasts for the rest of the week).

So in effect, you actually can and do submit a UDS/RDQ if the spread is not already active on the exchange, once you submit an order.

This is all I need. As you mention, IB may have some other methods as well of improving execution which may also help out.

That is enough for me to re-open my long-inactive IB account. I was just puzzled because they do not ever explain the mechanism in the above terms or say exactly what they do. But I understand they want to keep everything general and not specific to particular exchange mechanisms.
 
I've had similar experiences. Sometimes the quote will be very wide and then tighten once I enter the combo in Option Trader and create the line. Other times it stays wide and only tightens when I send an order - usually at the favorable end of the limit on my side.

I think it's always a fairly tight spread on ES, the issue is what we are being shown.
 
tommcginnis said:
.......

IB/TWS has no issues in providing NBBO.
"Fo' sho'!"
More...

I am sure that is true where NBBO applies, but of course in ES futures options spreads there is no NBBO and it all turns on how they use the UDS / RFQ mechanisms as discussed above.

It appears from multiple current reports that they do not always use a UDS/ RFQ for their initial spread quote, which behavior is less than ideal, and somewhat inferior to what is available on other platforms, but can be adequate because you can bypass it to get a real spread quote by submitting a test limit order.

I myself traded on IB for many years and saw these behaviors over a long time, even though I do not currently have an account. But others have confirmed they still apply now.

It may not affect you if you are trading widely-traded spreads for which there is always already a good spread quote on the exchange.
 
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