You statement is misleading and I'll paste some comments below from our last earnings transcript (you can listen to the full call from our investor relations site) but first I'll give you another reason on the API. There is a network cost to routing and with the numerous exchanges in the US it is more efficient for us to allow our SMART router send the orders than have some clients potently flood our network via computer generated orders. Now before you point to that as evidence backing up your point, read the comments below which talk about the net cost of execution. Also, if we internalized as much as you say to the determent of our clients, would the 606 reports and execution costs stats point this out.
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http://seekingalpha.com/article/258...-2014-results-earnings-call-transcript?page=2
Customers are coming to our platform. A key differentiator that is driving this trend is our significant cost advantages over other brokers. Not only do we offer much lower commissions, our customers achieve the industry’s best price execution thanks to our superior order routing technology and
firm commitment to not engage in the practice of selling our customer order flow like most other Brokers do.
In August, I submitted a letter to the SEC recommending that they require all brokers to publish cost of execution metrics that would once and for all, allow investors to compare trading costs across brokers. This letter is published on our site under About IB and Comment Letters and Papers. While the SEC is currently evaluating payment for order flow and market structure issues that may favor high frequency traders over retail investors, it remains to be seen how the regulator will proceed. Their repeated call for transparency speaks in our favor.
Hopefully by now you’ve seen the Reg NMS execution data we’ve started including with our electronic brokerage metrics that we publish monthly. The bottom line is our customers have paid merely 1 basis point [or one hundredth of one percent] year to date in total trade costs as a percent of total trade value. Total trade cost is comprised of commissions, fees and market impact. The way we calculate this number is that we compare total, all-in trading cost with executing at the daily Volume Weighted Average Price, or VWAP, without any additional cost.
A key observation when viewing these statistics is that in certain months, and for the entire 9 months year to date, our customers’ execution cost or market impact is actually a negative amount. This is due to our SmartRouting technology, that automatically routes each customer order to the venue that will at any moment probabilistically produce the lowest net trade cost for the customer by taking into account accumulated, rolling statistics on potentially better prices and rebates or fees. One basis point of total trade expense is a remarkable result, especially if you consider the fact that from this we must pay SEC fees of 0.2 basis points on sales.
We are nowhere near finished with building this system. We keep refining it and updating it as new transaction venues and new rules appear all the time. While our competitors are trying to figure out how to maximize their income from selling their customers’ orders to others, who in turn, are trying to maximizing their income that they derive from taking the opposite side of those orders, we dedicate our software development resources to secure the best price for our customers.
