Interactive Brokers vs Apex Clearing?
- Thread starter ferrycorsten
- Start date
1245:
DEF is probably asleep in Hong Kong. The following is from the options portion of IB's quarterly report on Order Flow:
Payment for Order Flow â Options: IB receives order flow payments in varying amounts from U.S.
option exchanges, specialists and/or market makers pursuant to the mandatory marketing fee programs
that have been adopted by the exchanges and approved by the SEC. If multiple exchanges are quoting
at the NBBO for an option order and IB has discretion as to where to send the order or a portion of it,
IB generally will âbreak the tieâ by sending the order to an exchange where it will receive the most
payment for the order or to an exchange designated by the firm from whom IB will receive the most
payment (typically IBâs affiliate Timber Hill LLC â see below).
Several options exchanges, including BOX and NYSE ARCA have adopted a âmaker-takerâ market
structure, in which exchange members are charged for orders that take liquidity from the exchange
(i.e., marketable orders that trade against a posted quote or limit order) and receive a rebate for orders
that provide liquidity to the exchange (i.e., non-marketable limit orders that are posted and then trade
against incoming marketable orders). The charges imposed or rebates offered by these exchanges
affect the total cost of execution, and IBâs Smart Routing System may take this into account in
determining where and how to route options orders.
So as I read the above, IB may or may not be paid for order flow, but they route to the exchange that maximizes their profit per trade while doing the customer no harm.
Jack
DEF is probably asleep in Hong Kong. The following is from the options portion of IB's quarterly report on Order Flow:
Payment for Order Flow â Options: IB receives order flow payments in varying amounts from U.S.
option exchanges, specialists and/or market makers pursuant to the mandatory marketing fee programs
that have been adopted by the exchanges and approved by the SEC. If multiple exchanges are quoting
at the NBBO for an option order and IB has discretion as to where to send the order or a portion of it,
IB generally will âbreak the tieâ by sending the order to an exchange where it will receive the most
payment for the order or to an exchange designated by the firm from whom IB will receive the most
payment (typically IBâs affiliate Timber Hill LLC â see below).
Several options exchanges, including BOX and NYSE ARCA have adopted a âmaker-takerâ market
structure, in which exchange members are charged for orders that take liquidity from the exchange
(i.e., marketable orders that trade against a posted quote or limit order) and receive a rebate for orders
that provide liquidity to the exchange (i.e., non-marketable limit orders that are posted and then trade
against incoming marketable orders). The charges imposed or rebates offered by these exchanges
affect the total cost of execution, and IBâs Smart Routing System may take this into account in
determining where and how to route options orders.
So as I read the above, IB may or may not be paid for order flow, but they route to the exchange that maximizes their profit per trade while doing the customer no harm.
Jack
def
Sponsor
Big difference where an exchange pays for flow vs. a firm paying you for flow. The firms paying for flow obviously do so because they believe they can make more by trading against the the brokers order. This shows in the price improvement and quality of execution stats which IB publishes. In addition at IB, on some exchanges you may be eligible for a rebate.
def, doesn't IB / Timber Hill also pay other firms for order flow?
For example, Natixis reports that 30% of AMEX non-directed customer orders are routed to Timber Hill for execution: http://www.blr.natixis.com/Rule_606.pdf