Quote from NYSEscalpa:
Buy a brain and do some research before you insult people....
Interactive Brokers internalizes order flow to a company they own called Timber Hill. Essentially what most retail firms do is set their pricing structure such that it is in your favor (in terms of commission and fees) to route orders AUTO or SMART versus sending direct to an exchange. By internalizing orders IB crosses your trade with other IB clients rather than sending to an exchange. What this means is that even though the stock is traded on NYSE for example, your trade will never reach the open market. Timber Hill has internal matching/crossing engines that take your trade first.
This is why you will often see sub-penny price improvement when you route SMART. They front-run your trade and if you read the fine print your order is essentially handled as a Market order versus a limit to an ECN. IB/Timber Hill looks at your order first. If they don't like it or want to pass on the trade then they can flash it (they get paid for this) to dark pools, and finally if the dark pools pass on your trade then they send on to whatever exchange has liquidity. All of this takes time and costs you slippage which most people overlook because the commissions are lower. Also, your fees are lower but IB makes the spread by charging you the offer to get long and the bid to get short. So every order they cross internally they make the penny spread from their customers while having the ability to front-run your trade via price improvement.
