Interactive Brokers Fined

For the record, most brokerages (especially those with many customers) at some point do get fined for one thing or another. Personally, I have always submitted limit orders and been filled at my limit price as it's usually a marketable order - nearly 100% of the time. Even with the occassional market order, the fills are fine.

Some of you Billy The Kid traders out there who can get in and out of a position in under 6 milliseconds might claim foul.

This may explain some orders hanging up a while back. If the ECN rejected it, IB's routing system may not have known what to do with it.

It's interesting news when anybody gets fined, especially IB - but I wouldn't consider this a big deal.
 
i dont use ib, but a fine is not that big of a deal, at least they are not under investigation like merrill lynch. also, remember schwab was fined, and they had to start doing those investor workshops. i like how they advertise those as if they really want to educate the investor. should be a notice, (the feds are making us do this.) datek was under investigation a while back. this should not effect the customers of ib in my opinion.
 
buzzy,

If you read the fine carefully it says "certain details to SELECTNET" for 1 week. This does not mean audit trails are not available. A few comments:

1. If any client asks for an audit trail the day of or after an order, they will receive it with no delay.

2. IB's internal audit trail goes above and beyond the requirements. I can speak for Hong Kong. We are required to keep documents for 7 years. We went through the check list and believe we are retaining all that is required. However, I admit I am not reading every exchange circular in detail and who knows what can slip through the cracks. This is no excuse but for a firm with only 400 people that must answer to over 40 different exchange and regulatory bodies, it is not an easy task to keep up with the mountains of rules/regulations.

3. Deloitte & Touche did an internal audit & attested to IB's routing claims (this was on the web site for two years).

4. If IB was doing any kind of front running or scalping against the order flow, don't you think you'd hear more about it form the 10's of thousands of very active clients (never mind many of these clients are some of the biggest investment banks/trading houses in the world).

5. Read the routing details and reports on the web site. They clearly say IB doesn't play games with orders. Best price is the first priority. Your statement infers that IB is lying to the regulators, its clients and its staff. Your claims are wrong.

6. Say what you want about the software, speed, etc. However, for a firm that has gone out of its way to level the playing field for the average guy on the street (read numerous comment letters, see the firms commission structure, note the firms actions), the firms reputation speaks for itself.

7. There is nothing in the action that even comes close to suggesting the firm benefited from the oversites. (then again, I can see how you think the firm benefited from sending order id's in hex.)

One thing for certain is that you are not the first and you will not be the last to question the firms reputation. I know the chairman well. You will not come out on top questioning his integrity.
 
Def I have never challenged you or IB about anything before. But you answer leaves me a little put off. You refer me to the web site and you use words like IB doesn't play games. (this is not an example of a very simple and non-evasive answer)

Please state that IB never ever front runs or trades against customer orders. (At least without telling us it was routed to timber hill).

2. When trading Futures does IB or anyone besides Globex get to interact with my order.

3. If I post a bid for the emini under the market -- am I placed on the bid in the globex machine or is my order being held until it can trade with an offer. I guess I am also interested is where in the que will my bid be placed.

Thanks and I assume your answers will be good ones as I have believed IB to be a very good company.
 
Jem,
Didn't mean to be evasive as I thought this issue was addressed many times on this site. Pointing to the web site was meant to show that the company has made many official comments in this regard. My response may come across as harsh or defensive but when you work hard at building a reputation and believe you have done a good job at earning a good one, it is only natural to be put off by someone calling you a cheat - especially with no evidence.

To respond directly to your questions:

1. IB doesn't front run orders. Even orders routed to Timber Hill are not front run. Orders are only sent to Timber Hill if it can match or better the NBBO. Timber Hill will only see the orders if the systems internal quote is flagged to show TMBR's quote is flagged to better or equal the NBBO. This means that it really doesn't even see a customer order until it executes against it. In short, TMBR doesn't change or alter its pricing because of customer flow. Its pricing decisions are made indepent of customer flow.

2. I am not sure what you mean by interact when sending orders to Globex. Nevertheless, orders sent Globex are immediately sent there (stop orders are a different case. They sit on the IB servers waiting to be triggered. As soon as they are triggered they are sent straight to Globex. This is supposed to change shortly). The prop side does not see, know, or care about the stop orders.

3. Limit orders will sit on the globex queue. They are sent immediately upon entry.

Hope this answers your quesitons and puts the issue to rest.
 
I completely disagree with all your guesswork approach ("where do you think IB cheap commissions come from?"), as I would call it. Write your own order trace application, then request order trail from IB and give us some proof of your claims. Could you give us at least an example of a more transparent API and executions ?

In my experience, executions and API's at other brokers have been much more transparent.
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IBs commisons are not cheap - as far as i am concerned they are very expensive - but they are way cheaper than anyone else. They do not have to rip off their customers in anyway to sustain their charges, as they are also the clearers and they do not have introducing brokers - and therefore get all the income

So, I am not saying they are not up to anything bad - just that they don't need to be, as they are making as much money out of each trade as any other clearer.

In fact, since they do not have introducing brokers to hide behind, they would have to be nuts to do anything that would impact on the integrity of their brand, which would immediatly unravel the succesful business model they have established.

I believe low commisions are the most important factor (out of the traders control) in order for traders to make money, so in the long run, offering traders low commisions is the most logical strategy for a brokerage's forward going business.
 
"IBs commisons are not cheap - as far as i am concerned they are very expensive - but they are way cheaper than anyone else. "

What do you mean? Expensive for your situation specifically? or everyone?

Who do you use that is cheaper and what restrictions if any limit everyone else from using them?


Thanks
 
Originally posted by metooxx
Be nice now; everybody gets fined in this business.
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Correct...I've seen individual stock brokers get fined more than that
for a simple screw-up.
 
My point is that there seems to be a feeling that IBs commisions are cheap - and by extension - they offer a cut down service

I suspect the problem is that they are getting a lot of business and their technical infrastrucuture and expertise is always behind the curve

The fact is that they are not cheap - they are expensive in relation to professional rates - but they are way cheaper than other retail brokers - since those brokers act on behalf of a clearer - whereas IB is the clearer

Clearers who charge as much as introducing brokers are basically avoiding competing with their introducing brokers, or are just trying to make excess profit - based on their historic business models
 
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