Is IB designed to just feed liquidity to Timber Hill?

[489]

I am always curious why somebody cares who is on the other side of their trade when the execution occurs at the price you determined before placing the order. Isn't that the goal?

If I want to sell at $1, why is it important who is my contra side? Also, if you pay any attention to Timber Hill's role over the last few years, their footprint is smaller than it used to be. Worry more about the HFT guys out there that are stepping in front of your order that leave you without an execution.

 

[bone]

Quote from 489:

I am always curious why somebody cares who is on the other side of their trade when the execution occurs at the price you determined before placing the order. Isn't that the goal?

Sheer brilliance. X 2

 

[clearinghouse]

Quote from 489:

I am always curious why somebody cares who is on the other side of their trade when the execution occurs at the price you determined before placing the order. Isn't that the goal?

It's because it's stupid to trade against informed flow if you are "uninformed." If informed flow is hitting you, it's likely to go through you, and by definition leaves you with an inefficient price. There was some article by Don Bright that tangentially illuminated the finer points of this; you may be able to find it on the web.

For the typical retail trader, the other side doesn't matter. On IB, if you pay your .01 per share, it doesn't matter because the commissions are already very high relative to prop and what HFT traders have. Short-term inefficient prices are like a sort of built-in commission for the retail trader.

But it does matter for people trying to squeeze that last drop of blood out of their trades, particularly people who don't want to be the source of profit for the BD-MM. You might just say to go trade prop, and that's fine, ... but I sort of see it as fair disclosure if there is internalization, because that cost is sort of baked into your trade price.

 

[bone]

I prefer complete counter-party anonymity. If I actually knew who was taking the other side of my stuff, I would be scared shit-less and paralyzed no doubt.

Besides, it appears that you have no choice in the matter. If you need complete transparency or need to deal with certainty, open a shoe store because you are in the wrong business.

GS fills alot of prime brokerage business, so just because GS is a counter-party does not necessarily mean that they are "informed" order flow as you put it.

Besides, if you are trading with a 3 minute holding timeframe and the GS paper has a 6 month holding timeframe, then the "information" is based upon completely different premises. Another piece is that the "informed" order flow is frequently a hedge for and OTC transaction.

 

[clearinghouse]

Quote from bone:

GS fills alot of prime brokerage business, so just because GS is a counter-party does not necessarily mean that they are "informed" order flow as you put it.

They are informed with regard to microstructure or their internal inventory, otherwise they wouldn't be there. They don't run a market microstructure charity. If you're crossing the spread without being "informed", odds are you got the short-term inefficient price. If you get hit passively as retail, typically you got taken out by an informed trader, or a faster uninformed trader.

 

[zdreg]

Quote from 489:

I am always curious why somebody cares who is on the other side of their trade when the execution occurs at the price you determined before placing the order. Isn't that the goal?

If I want to sell at $1, why is it important who is my contra side? Also, if you pay any attention to Timber Hill's role over the last few years, their footprint is smaller than it used to be. Worry more about the HFT guys out there that are stepping in front of your order that leave you without an execution.

don't flatter yourself.

 

[bone]

Quote from clearinghouse:

They are informed with regard to microstructure or their internal inventory, otherwise they wouldn't be there.

That, IMO, is an absurd assumption that the prime brokerage business clientele are all "informed" with respect to the outcome of your particular position. Are you hedging a 3 year plain vanilla swap OTC transaction with CBOT Note futures ? Was Amaranth "informed" ? Was LTCM "informed " ? (this is a big list, btw) Do you know how many HFs and CTAs blow out every year ?

Besides, it is a silly and frustrating contention for you in the sense that you will NEVER know your counterparty identity no matter who you clear.

 

[clearinghouse]

Quote from bone:

That, IMO, is an absurd assumption that the prime brokerage business clientele are all "informed" with respect to the outcome of your particular position. Are you hedging a 3 year plain vanilla swap OTC transaction with CBOT Note futures ? Was Amaranth "informed" ? Was LTCM "informed " ? (this is a big list, btw) Do you know how many HFs and CTAs blow out every year ?

Besides, it is a silly and frustrating contention for you in the sense that you will NEVER know your counterparty identity no matter who you clear.

Nobody implied being 100% informed.

 

[Occam]

Quote from 489:


If I want to sell at $1, why is it important who is my contra side? Also, if you pay any attention to Timber Hill's role over the last few years, their footprint is smaller than it used to be. Worry more about the HFT guys out there that are stepping in front of your order that leave you without an execution.

Timber Hill is close to, if not the, original HFT. I'm not quite sure what you mean by "stepping out in front" (there are many possibilities here, some real and some imagined), but you're worried about the other HFT's when your own broker is one of the biggest HFT's in existence?

 

[def]

Quote from Occam:

Timber Hill is close to, if not the, original HFT. I'm not quite sure what you mean by "stepping out in front" (there are many possibilities here, some real and some imagined), but you're worried about the other HFT's when your own broker is one of the biggest HFT's in existence?

You guys are killing me on this one. How many times and ways can I say that TH doesn't make any decisions based upon or even see US equity order flow from IB. Those complaining clearly are not clients because clients know firsthand the quality of their fills and where the orders trade. Your IB/TH conspiracy theories have no merit.