Interactive Brokers for CTAs?

[atticus]

Quote from Epic:

I reading this to mean that you either have a relationship with other intro brokers or want to allow clients to select their own FCM, simply using IB TWS as the executing platform.

Is this correct?

From what I understand, IB will do this but they will be a big pain in the @$$ about it. Actually, there are multiple things about IB that are hard for CTAs.

1- The way they assign partial fills to multiple accounts is awful, and will likely end up in them losing my business.

2- Account setup is a bit more burdensome than it should be. Heaven forbid a client already be approved to trade equities or options. That messes up the entire application process for the CTA and they have to start over completely.

3- The single FCM requirement (no give-ups) is not enough to push me away, but at this point is pretty much the last straw.

It's a diminishing return for them. Why deal with the back-office hassle unless you're moving a lot of size. The barrier to entry is there as they're self-clearing in electronic mkts. It's not the bread and butter to deal in give-ups with RCG in ags.

 

[heech]

Quote from Chicago_CTA:

My IB contact in Chicago told me IB would do Give-Up agreements for accounts over $1mm.

For accounts over $1mm, we can find better servicing / execution than IB!!!

Thing is, I have prospective clients who have accounts (under $1mm) @ IB.

But IB's execution for futures is dogshit. I only trust T4 and X-Trader.....

Oh well...

The managed account I wanted to partly execute thru IB is > $1mm, and my fund is even larger. And they still won't do it. I kinda feel like they just don't want to put in the back office to enable this, period.

And all at the same time, they out of the blue are harassing me to validate my mailing address (after.. 2 years?). I think its time to close the account, since it's no longer usable anyways.

 

[Chicago_CTA]

There are other good partners out there.

I have some business at Dorman, but am now more friendly to Advantage Futures and ADM, although ADM needs the T4 platform like roses need rain. Not everyone wants to pay $1600 monthly for XTrader.

Heech, you trade agriculture, right?

 

[heech]

Quote from Chicago_CTA:

There are other good partners out there.

I have some business at Dorman, but am now more friendly to Advantage Futures and ADM, although ADM needs the T4 platform like roses need rain. Not everyone wants to pay $1600 monthly for XTrader.

Heech, you trade agriculture, right?

I trade just about everything, since it's all automated and not fundamental-based... energy/softs/grains/equities.

I'm fine with my existing execution setup (execution w/ Rithmic, clearing Vision but could be really anyone). I just wanted to use IB for some discretionary hedging trades (while on the road), since I really like iTWS on my iPhone. It still added up to a good 500-1000 contracts a month through them. But I guess that doesn't interest them.

 

[Epic]

It's a love-hate relationship with IB for me.

Clients love the ability to login to their individual account any time they want and generate pretty charts showing performance for any period they desire. It is the definition of full transparency.

But, the previous things that I mentioned are simply unacceptable. For example, if a 40-lot limit gets partial filled for 20 contracts and the trade is applied across my 40 clients' accounts, obviously only 20 accounts get filled on the opening trade.

If the market then reverses and hits a target, the closing trade is triggered. But IB allocates randomly on both the opening and closing trade. So frequently an account that never saw an opening trade will still receive a closing trade.

I then have to be very attentive to notice this happening. Then I'm forced to trade two clients' accounts against each other to balance things back out, which is a BIG compliance issue. Or I can send in a complaint to IB and wait for them to fix it. HUGE HEADACHE!

 

[heech]

Quote from Epic:

It's a love-hate relationship with IB for me.

Clients love the ability to login to their individual account any time they want and generate pretty charts showing performance for any period they desire. It is the definition of full transparency.

But, the previous things that I mentioned are simply unacceptable. For example, if a 40-lot limit gets partial filled for 20 contracts and the trade is applied across my 40 clients' accounts, obviously only 20 accounts get filled on the opening trade.

If the market then reverses and hits a target, the closing trade is triggered. But IB allocates randomly on both the opening and closing trade. So frequently an account that never saw an opening trade will still receive a closing trade.

I then have to be very attentive to notice this happening. Then I'm forced to trade two clients' accounts against each other to balance things back out, which is a BIG compliance issue. Or I can send in a complaint to IB and wait for them to fix it. HUGE HEADACHE!

Does IB allow average-price on give-ups? Or does it only allow you to allocate individual trades to each account? Seems like a real pain.

I have a real issue dealing with reconciliations too, and I just have *one* other SMA account. But I trade quite a bit (sometimes 50-80 different strikes a day)... so that's part of the reason why.

By the way, I have an overnight team based out of Asia that I use to do my back-office for me. They literally scan through the statement, compare trade quantity / positions (I don't ask them to look at price.. keep it relatively simple) versus what I thought should've been allocated at the end of the day. They highlight missing positions, etc.

It's kind of grunt work, but I couldn't find anyone reliable to do it here... and on the plus side, it's done over night, so I have it ready to go early the next morning. If you're interested in out-sourcing that, drop me a PM.

 

[heech]

By the way, does IB only allow "random" allocations of buys/sells? NFA has several approved allocation mechanisms, right? Including rotating based on account number, for example? If you used the same rotating based on account number for buys/sells, the problem would go away.

I.e., your clients have account numbers 1-40. You buy 20 futures.. these are allocated 1 each to accounts 1-20. You then sell 20 futures, these are also allocated 1 each to accounts 1-20.

The next future you buy goes to account 21, etc, etc.

 

[Epic]

Quote from heech:

By the way, does IB only allow "random" allocations of buys/sells? NFA has several approved allocation mechanisms, right? Including rotating based on account number, for example? If you used the same rotating based on account number for buys/sells, the problem would go away.

I.e., your clients have account numbers 1-40. You buy 20 futures.. these are allocated 1 each to accounts 1-20. You then sell 20 futures, these are also allocated 1 each to accounts 1-20.

The next future you buy goes to account 21, etc, etc.

I'm not aware of any method for designating a rotation, otherwise I certainly would've done so already.

They've suggested that I switch away from using the manual allocation in favor of the automatic allocation, but this does not address the issue. The problem arises with notional accounts. Auto allocation is based on account NAV. There is no way to indicate whether an account is notional and thus it would end up mis-allocating every trade.

 

[Epic]

Quote from heech:

Does IB allow average-price on give-ups? Or does it only allow you to allocate individual trades to each account? Seems like a real pain.

I have a real issue dealing with reconciliations too, and I just have *one* other SMA account. But I trade quite a bit (sometimes 50-80 different strikes a day)... so that's part of the reason why.

By the way, I have an overnight team based out of Asia that I use to do my back-office for me. They literally scan through the statement, compare trade quantity / positions (I don't ask them to look at price.. keep it relatively simple) versus what I thought should've been allocated at the end of the day. They highlight missing positions, etc.

It's kind of grunt work, but I couldn't find anyone reliable to do it here... and on the plus side, it's done over night, so I have it ready to go early the next morning. If you're interested in out-sourcing that, drop me a PM.

Only allow allocating trades to individual accounts. The strange part about that is that APS and post-trade allocation is sort of the accepted best practice as far as the NFA is concerned.

The group in Asia sounds interesting, I'm just trying to figure out how necessary they would be for me.

 

[ktm]

I used to use IB as a CPO. I had a few that wanted me to run managed accounts for them - and I had the CTA to do it, but it became too much of a logistical headache.