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Interactive Brokers Smart Routing
- Thread starter directionless
- Start date
Quote from Options12:
Do you recall where this was stated?
I have searched on ET but cannot find mention of such a change in IB's business practice since 2007 when TH was last disclosed on the 606 reports.
Here's one in that general direction:
http://www.elitetrader.com/vb/printthread.php?threadid=222191
I think there were others too. I recall one post by IB that said that there never really was any risk of conflict of interest, but just to to make that absolutely clear, they removed the Timber Hill routing completely.
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Posted by def on 06-29-11 07:57 PM:
A couple of years ago TH did provide a dark pool of liquidity to IB for US equities and that is when the FAQ was created. TH no longer does that as I said and the FAQ was not brought down. Yes, you pointed that out and it but it should have been brought when our policy changed. It's a conspiracy because despite numerous statements from the firm saying one thing, you guys keep coming back saying something else without - and specifically w/o any proof.
what's to start us from changing our policy? Actually nothing. However, our firm has a reputation and history of providing best execution to clients. If that changed, we'd risk losing a large part - including many large and significant institutions - as clients.
Pricing, you can route where you want with the same commissions but not without SMART. This has nothing to do with internalization, it has all to do with significantly reducing - and I mean significantly - the order to execution ratio. If our pipes are clogged then all clients are effected.
For your "boutique" players that don't make markets. Read their 606 report. Many are indeed selling and receiving payment for their order flow. Either way, the proof is in the pudding and the challenge remains for someone to do a side by side test of their brokers routing vs IB's SMART routing so we can see who gets the better fills.
I do distinguish US equities because that is the market that keeps coming up and I want to specifically exclude FX because in FX we have a number of major institutions, which includes TH making markets. But even in FX, TH just places it's markets w/o any knowledge of client orders.
For the post that points to an trade being placed in your account. I'm sure that was a trade bust or something of the sort placed into your account. I am certain it has nothing to do with TH.
Quote from comintel:
Here's one in that general direction:
http://www.elitetrader.com/vb/printthread.php?threadid=222191
I think there were others too. I recall one post by IB that said that there never really was any risk of conflict of interest, but just to to make that absolutely clear, they removed the Timber Hill routing completely.
=======================================
Posted by def on 06-29-11 07:57 PM:
A couple of years ago TH did provide a dark pool of liquidity to IB for US equities and that is when the FAQ was created. TH no longer does that as I said and the FAQ was not brought down. Yes, you pointed that out and it but it should have been brought when our policy changed. It's a conspiracy because despite numerous statements from the firm saying one thing, you guys keep coming back saying something else without - and specifically w/o any proof.
what's to start us from changing our policy? Actually nothing. However, our firm has a reputation and history of providing best execution to clients. If that changed, we'd risk losing a large part - including many large and significant institutions - as clients.
Pricing, you can route where you want with the same commissions but not without SMART. This has nothing to do with internalization, it has all to do with significantly reducing - and I mean significantly - the order to execution ratio. If our pipes are clogged then all clients are effected.
For your "boutique" players that don't make markets. Read their 606 report. Many are indeed selling and receiving payment for their order flow. Either way, the proof is in the pudding and the challenge remains for someone to do a side by side test of their brokers routing vs IB's SMART routing so we can see who gets the better fills.
I do distinguish US equities because that is the market that keeps coming up and I want to specifically exclude FX because in FX we have a number of major institutions, which includes TH making markets. But even in FX, TH just places it's markets w/o any knowledge of client orders.
For the post that points to an trade being placed in your account. I'm sure that was a trade bust or something of the sort placed into your account. I am certain it has nothing to do with TH.
Thanks. But I have read through the posts again and still cannot understand why TH no longer appear on the 606 reports when other disclosures from IB do indicate that TH will pick up SMART orders if they choose to. And for options orders, TH pays IB $1/per contract for orders it picks up via the BOX exchange. So it appears that TH still gets first crack at IB customer orders that are routed via SMART.
And I don't think internalization is automatically bad or even an unusual practice for a broker-dealer to engage in.
However, I think that someone from IB should clarify what changed in 2007 that caused TH to no longer appear on IB's 606 reports?