Interactive Brokers: Fixed or Tiered?

[1245]

Every exchange has a different fee structure. To make it easy to estimate, assume when you take liquidity, you will pay $0.0030 per share and when you add you will receive $0.0020 per share. Min ticket charge on tiered is $0.70 and $1.00 on fixed. So it depends on the number of orders you have under 200 shares, how often you take vs add and your total volume. The best thing to do is pick one and forget about it for a month. If you think about it at every trade, it will cost you money on getting a good execution. Then export your trades at end of month to an excel compatible file and compare what they charged you with what the other structure would have cost.

Unless you are trading a lot of stock, it most likely won't be material.

 

[d08]

In your case, fixed, since 6000 shares*20 trading days per month = 120k shares per month, way below the second tier (300k) and you only take liquidity.

 

[Dean1406]

Hello all,

I'm a relatively new trader. I use sorts of algo-trading methods through my IB account so I trade a fair amount of shares on a daily basis (around 10,000) and until now I used the fixed commission method. Recently I noticed the option of the Tiered commission method and i'm considering switching to it. I just don't fully understand the difference. Why would I go for the fixed if through the Tiered I get already 0.0035/share vs the 0.005/share of the fixed? What am I missing here? And is there a difference as to the Regulatory/Exchange fees?

Another thing I don't get is the difference that arises because of the API routing. Could it be that if it comes specifically from BATS exchange rather than a SMART route, it cost more? and if so, how can I use the SMART route through the API? Do I need to subscribe to different/additional Market Data?

Thanks for any help!

Dean

 

[sprstpd]

Hello all,

I'm a relatively new trader. I use sorts of algo-trading methods through my IB account so I trade a fair amount of shares on a daily basis (around 10,000) and until now I used the fixed commission method. Recently I noticed the option of the Tiered commission method and i'm considering switching to it. I just don't fully understand the difference. Why would I go for the fixed if through the Tiered I get already 0.0035/share vs the 0.005/share of the fixed? What am I missing here? And is there a difference as to the Regulatory/Exchange fees?

Another thing I don't get is the difference that arises because of the API routing. Could it be that if it comes specifically from BATS exchange rather than a SMART route, it cost more? and if so, how can I use the SMART route through the API? Do I need to subscribe to different/additional Market Data?

Thanks for any help!

Dean

You need to read all the details on IB's website of the fees involved. Many times Tiered will produce a higher commission than Fixed, especially if you are removing liquidity. There are also some edge cases (like really small share count orders) where Tiered is better than Fixed because the minimum commission per order is lower (even if you are removing liquidity).

And yes, the directed-API order has a surcharge. To use SMART through the API you just declare your destination to be SMART. I do not believe you need to subscribe to additional market data.

 

[Robert Morse]

Hello all,

I'm a relatively new trader. I use sorts of algo-trading methods through my IB account so I trade a fair amount of shares on a daily basis (around 10,000) and until now I used the fixed commission method. Recently I noticed the option of the Tiered commission method and i'm considering switching to it. I just don't fully understand the difference. Why would I go for the fixed if through the Tiered I get already 0.0035/share vs the 0.005/share of the fixed? What am I missing here? And is there a difference as to the Regulatory/Exchange fees?

Another thing I don't get is the difference that arises because of the API routing. Could it be that if it comes specifically from BATS exchange rather than a SMART route, it cost more? and if so, how can I use the SMART route through the API? Do I need to subscribe to different/additional Market Data?

Thanks for any help!

Dean

Exchange fees are the maker/taker fees that the exchanges offer and charge for offering liquidity or taking liquidity. In general, you pay for taking an offer/hitting a bid and get paid for not doing that.

the only regulatory fee I'm aware of if the Section 31 Fee on all securities sales. It is based on the dollar amount of the sale: https://www.sec.gov/news/pressrelease/2016-206.html

Current rate of $21.80 per million

 

[Dean1406]

Hi sprstpd,

Thanks for your answer. I do need to read all the details on IB. Usually when I trade I add liquidity rather than remove. Does this mean that with high daily volume trading, the Tiered method will always be preferable?

Another important question if anybody knows, I'm trying to use SMART as the exchange from my Java API but with no success. The API doesn't generate any prices when I use the SMART parameter (also ARCA and ISLAND). Only BATS seems to work for some reason. Any thoughts?

Thanks again

 

[HobbyTrading]

Another important question if anybody knows, I'm trying to use SMART as the exchange from my Java API but with no success. The API doesn't generate any prices when I use the SMART parameter (also ARCA and ISLAND). Only BATS seems to work for some reason. Any thoughts?

You see this effect as of today (April 3rd)? IB has implemented changes to the market data subscriptions, starting April 1st (no, this is no joke). You probably will want to review your subscriptions once more.

About fixed versus tiered pricing structure: it might be useful if you ask IB for their advice about your specific situation. They may also be able to point you at the right web pages with applicable information.

 

[sprstpd]

Hi sprstpd,

Thanks for your answer. I do need to read all the details on IB. Usually when I trade I add liquidity rather than remove. Does this mean that with high daily volume trading, the Tiered method will always be preferable?

Another important question if anybody knows, I'm trying to use SMART as the exchange from my Java API but with no success. The API doesn't generate any prices when I use the SMART parameter (also ARCA and ISLAND). Only BATS seems to work for some reason. Any thoughts?

Thanks again

In general, if you have high daily volume and are adding liquidity, then I would say Tiered is the way to go. However, you should probably run some hypothetical scenarios using:

https://www.interactivebrokers.com/en/index.php?f=1590

to be sure the pricing works for you.

Are you saying you aren't getting any SMART quotes through the API? It is probably a market data issue as HobbyTrading noted. I have not confirmed this, but it seems like you should be able to SMART route orders even if you don't have the data.

 

[Dean1406]

Thanks! Yes, exactly. i'm not getting any SMART quotes through the API. I've also tried unsuccessfully ARCA and ISLAND just to see if anything works other than BATS. That's why i'm guessing it might have something to do with the market data subscriptions. I've also queried IB about this. It's important because the SMART routing may reduce trading commissions. I'll be happy to hear any other thoughts about this issue... Thanks again

 

[HobbyTrading]

Thanks! Yes, exactly. i'm not getting any SMART quotes through the API. I've also tried unsuccessfully ARCA and ISLAND just to see if anything works other than BATS. That's why i'm guessing it might have something to do with the market data subscriptions. I've also queried IB about this. It's important because the SMART routing may reduce trading commissions. I'll be happy to hear any other thoughts about this issue... Thanks again

Obtaining price information and submitting orders are two different things. Even if you can't get price data through SMART, you can submit orders through SMART.