Interactive Brokers Prime Services

T

tonyf

Hi all,

I have been running a families + friends strategy on an IB personal account for a little while now, and have reached the minimum size to take advantage of IB Prime. I am hoping it would serve as a springboard to establish a track record and tap into their market place.

IB Prime is said to offer the possibility of doing 2 things: 1) Execute with IB and clear at another venue and 2) Execute elsewhere and clear trades with IB.

I am unfamiliar with these setups: is there any advantage of executing or clearing away of IB? Would it be any cheaper? And how would one go about doing it (would I need to open accounts with clearing houses)?

Thank you,
Tony
 
A few reasons I can think of to Prime at IB but execute at another broker:

You only want to custody and clear at IB for whatever reason but need:
  • to get access to a trading desk or floor broker.
  • to get access to a low latency hosted environment.
  • to give commissions to another broker to get access to a service they provide-E.G. IPOs, secondaries, research etc.
Having a "Prime" account does not make it easier or harder to build a track record. It provides access to execution venues IB does not offer or others offer better or services outside IB.

Bob
 
Robert Morse said:
A few reasons I can think of to Prime at IB but execute at another broker:

You only want to custody and clear at IB for whatever reason but need:
  • to get access to a trading desk or floor broker.
  • to get access to a low latency hosted environment.
  • to give commissions to another broker to get access to a service they provide-E.G. IPOs, secondaries, research etc.
Having a "Prime" account does not make it easier or harder to build a track record. It provides access to execution venues IB does not offer or others offer better or services outside IB.

Bob
More...

Hi Robert,

I run some strategies that use high leverage overnight, and I pay a lot of margin interest. For this reason I have been stuck to IB with their super low interest rates that no one seems able to beat, and also the fact that they rebate interest on cash from shorts.

Recently I have been getting more interested in doing low latency strategies that might not be able to be traded at IB. However if I switch then I would lose a lot of the revenue from the other strats.

I'm wondering if it's possible to get the best of both worlds by using IB Prime and another broker, e.g. Lightspeed Institutional as executing broker? In a combo like that would IB's margin rates apply for overnights since they clear/hold the actual stocks?

I'm also curious about how commissions are split and what is the interaction with IB's autoliquidation system if any. Does IB just trust the executing broker's risk checks?
 
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cruisecontrol said:
I'm also curious about how commissions are split and what is the interaction with IB's autoliquidation system if any. Does IB just trust the executing broker's risk checks?
More...

You would need to:
#1. Open a DVP/CMTA account with your execution broker for execution only.
#2. Set up your account at IB for PRime business.
#3. Choose a trading platform.

You need to ask IB if they require live drop copies. Most Prime business is not that way. We are either given BP on a daily upload or told what you are allowed. Typically, the Prime broker sees nothing until the end of the day. They would then apply their risk and margin then.

Lightspeed and Lime have a fair number of these accounts. Honestly, I have never set one up but our process is in place.
 
Robert Morse said:
You would need to:
#1. Open a DVP/CMTA account with your execution broker for execution only.
#2. Set up your account at IB for PRime business.
#3. Choose a trading platform.

You need to ask IB if they require live drop copies. Most Prime business is not that way. We are either given BP on a daily upload or told what you are allowed. Typically, the Prime broker sees nothing until the end of the day. They would then apply their risk and margin then.

Lightspeed and Lime have a fair number of these accounts. Honestly, I have never set one up but our process is in place.
More...

I appreciate that your question is addressed to Robert but care to say that this is precisely the point of IB Prime: Finding product elsewhere (primary equity issuance, distressed credit, etc...) that IB does not offer and bring it onboard. Some you may subsequently trade via IB (post-IPO equity) and some would only be parked at IB's custody but will have to be traded out OTC.

As to Lightspeed and the rest, I am still trying to figure out what they offer that IB does not? Lower latency perhaps, but not better execution when looking at the algo's and venues. No ones is as cheap as IB as far as I know regarding US equities. You will have to target the likes of Fineco and Degiro for European equities but that's a different topic for another thread.
 
Robert Morse said:
You would need to:
#1. Open a DVP/CMTA account with your execution broker for execution only.
#2. Set up your account at IB for PRime business.
#3. Choose a trading platform.

You need to ask IB if they require live drop copies. Most Prime business is not that way. We are either given BP on a daily upload or told what you are allowed. Typically, the Prime broker sees nothing until the end of the day. They would then apply their risk and margin then.

Lightspeed and Lime have a fair number of these accounts. Honestly, I have never set one up but our process is in place.
More...

Thanks! Any idea about my question about margin interest?
 
tonyf said:
As to Lightspeed and the rest, I am still trying to figure out what they offer that IB does not? Lower latency perhaps, but not better execution when looking at the algo's and venues. No ones is as cheap as IB as far as I know regarding US equities. You will have to target the likes of Fineco and Degiro for European equities but that's a different topic for another thread.
More...

I can't legally tell you as a statement of fact that our data feeds are faster, our executions are faster, our platforms are better, as I have no metrics to show you. There are a number of large brokers and prop firms that use Lightspeed to execute with manual or automated platforms that could also use IB but choose us. They can use anyone but they choose us. And, I do not think IB has a low latency offering like the Lime Trading Gateway, our Fully Automated Trading System hosted at three data centers in NJ.

IB clearly is better at the banking side of the transaction. We can match their rates for equities and are lower for options. And, once you make a deal with us, we do not make you hit your tiers each month.
 
Robert Morse said:
That would be on the prime side, not execution.
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Very nice, sounds like the "best of both worlds" idea might actually work out then. IB's interest rates with lightspeed/lime's low latency execution.

I think I read somewhere that the minimum to set up this type of account is $1MM is that correct? Just wondering if I am anywhere close to being eligible for this kind of setup.
 
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