Lightspeed Jacks Up Commissions

[def]

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.

Same BS about front running and not an ounce of truth.

First, the order routing stats which someone else posted a link to show completely otherwise. I think he mentioned 90% but if you add up the exchanges listed where significant volumes are sent, they total > 95%. (so much for the comment stating your order never gets sent to an exchange).

Second, SMART routing determines where to send an order based upon where the client can obtain the best price. If a better price is available on an exchange or ECN, the order is immediately sent to that venue. There are no free looks as the poster states. There is no withholding of orders as the poster states.

Third, as mentioned numerous times in other threads, all TH does is provide a market to IB which becomes part of the IB NBBO. It is no different than another ECN adding a source of liquidity.

The fact is, IB's price improvement stats are real and are significantly better than the industry. Unlike many of our competitors, we don't measure price improvement in terms of % of times price was improved, we measure it by actual $'s saved. These stats are audited and confirmed independently. This talk above implying clients aren't getting the best available price in the market and front running is pure nonsense.

 

[Occam]

Quote from def:


Third, as mentioned numerous times in other threads, all TH does is provide a market to IB which becomes part of the IB NBBO. It is no different than another ECN adding a source of liquidity.

Evidently you disagree with what's posted on Interactive Broker's own Web site:

Timber Hill provides an automatic execution service for certain eligible IB customer orders in certain Nasdaq stocks and NYSE and other exchange listed stocks. When IB's Best Execution order routing system searches the available market centers for your order, if Timber Hill is willing to provide an execution at the best available national price or better for that stock, IB may send your order to Timber Hill for an immediate automatic execution.

 

[def]

Quote from Occam:

Evidently you disagree with what's posted on Interactive Broker's own Web site:

I'm not. I'm explaining how it works.

Let's assume ECN ECNxyz. The same language can be used.

ECNxyz provides an automatic execution service for certain eligible IB customer orders in certain Nasdaq stocks and NYSE and other exchange listed stocks. When IB's Best Execution order routing system searches the available market centers for your order, if ECNxyy is willing to provide an execution at the best available national price or better for that stock, IB may send your order to ECNxyz.

 

[RedRat]

Second, SMART routing determines where to send an order based upon where the client can obtain the best price. If a better price is available on an exchange or ECN, the order is immediately sent to that venue. There are no free looks as the poster states. There is no withholding of orders as the poster states.

Could you explain the reason, why sending orders via SMART results in lower commission in comparison to sending orders to the specific ECN? If I send the order to SMART and finally it goes to ECN, will I get rebates?

 

[def]

Quote from RedRat:

Could you explain the reason, why sending orders via SMART results in lower commission in comparison to sending orders to the specific ECN? If I send the order to SMART and finally it goes to ECN, will I get rebates?

It may or may not depending on the ECN rebate and of course execution price. If you use unbundled, you receive the rebate whether or not you use SMART for non-api orders.

 

[JamesL]

Quote from jeb9999:

Suprised that no one has posted that Lightspeed has raised all their commissions.

Minimum commission is now $1.00 per trade.

Stocks are $0.0045 a share up 12.5 % from $0.0040.

Options are $0.60 a contract up 20% from $0.50.

Futures are $0.60 a contract up 20% from $0.50.


Not good for traders that a broker is jacking up commissions.

Well, he did just buy a rally big (and expensive house):

http://blogs.reuters.com/felix-salmon/2009/08/11/steven-schonfelds-conspicuous-consumption/

 

[LEAPup]

Hope we can keep this thread going (and civil!)
And def, thanks for chiming in. That shows some integrity whether or not everyone on the drama board...er, I mean ET agrees or not.

 

[Midas]

Quote from def:

It may or may not depending on the ECN rebate and of course execution price. If you use unbundled, you receive the rebate whether or not you use SMART for non-api orders.

Def, correct me if I am wrong Timberhill (like other teir 1 broker dealers) gives sub penny price improvement for internalized orders. For instance Bid 10 Offer 10.05. If a sell order is sent the order is filled at 10.0001.

Calling this price improvement is techinically correct, however, in reality this practice is done to provide an edge for IB Timberhill not to save their customers 100th of a penny in price improvement.

 

[stock777]

Still dont quite understand why an order being internalized is so demonized.

Can one of the idiots explain?


I mean you sent the order, IB doesnt hack your tws and enter one for you.

If you're on the wrong side or the right side of the trade, wtf diff does it make?

 

[Rodney King]

If I can ask a dumb question: When orders are internalized by IB/TH, do those fills print at any exchange? Thanks.