MKT Order Commissions - IB SMART (flat rate) vs Others

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Iggy_Type_R

Hi,

I am currently investigating our commissions management structure and coming up with a bit of :confused:

Current situation:
trading average 40 positions a day, clocking up on average of $30 per trade (both ways) using IB, flat rate and SMART routing (via API)

Having read other broker sites that run flat fees, some are offering $3 per trade, up to $9.95 per trade... but none are too clear about routing fees and any other fees that are put on top of the trade.

Does anyone know clear explicit numbers on cost of trading using these flat-fee brokers?

Thank you in advance
 
hmmm.... so if you are doing 30 a day, you have no issues with PDT and I would expect the account to be north of $30K... so the questions would be, why are you flat rate? why are you not cost plus? have you dont a comparison? are you always taking liquidity or adding? IB has SMARTs to maximize rebates (if you are adding) and to minimize costs (if you are taking)... you mention your number of positions, but nothing about your average ticket size or even your monthly volume... so why not create a model spreadsheet and input your own costs into it and then compare all the other brokers?
 
If I read correctly, the following Interactive Brokers press release about a 2010 study by "Transaction Auditing Group" seems to claim that IB smart routing saves an average of $.0047/share of stock, and $1.19/option contract, which, I infer, would make SmartRouting almost free for stocks and better than zero commission in some cases for options.

http://www.tagaudit.com/IB Stock and Options 10_20_08.pdf

The page describes TAG as "a third-party provider of transaction analysis", but appears to be on Interactive Brokers letterhead, which I guess is intended to indicate that the press release was written by IB, who I imagine rationally picked which results to publicize on this page and perhaps even helped design the study.
 
Thanks for the replies:

* MKT orders = always removing liquidity (no rebates)
* With MKT orders you're pretty much same as cost plus (as far as I've modelled) but flat is predictable and easier to model/track
* $40 commissions * 30 trades = $1200 per day in commissions, $1200 / $0.01 (120,000 shares a day) ... say average share price is $5, 120,000 * $5 = $600,000

I know the report mentioned, and I am not convinced. Thanks again.
 
Quote from ofthomas:

... then compare all the other brokers?
More...

This is what I am asking - if you enter it into a spreadsheet on face value there are 100 brokers cheaper than IB - but there is fine print in those that is not clear - hence my post.
 
Quote from Iggy_Type_R:

Thanks for the replies:

* MKT orders = always removing liquidity (no rebates)
* With MKT orders you're pretty much same as cost plus (as far as I've modelled) but flat is predictable and easier to model/track
* $40 commissions * 30 trades = $1200 per day in commissions, $1200 / $0.01 (120,000 shares a day) ... say average share price is $5, 120,000 * $5 = $600,000

I know the report mentioned, and I am not convinced. Thanks again.
More...

You should be using cost plus if you are really doing that amount of volume ~2M shares per month. The commissions get almost cut in half after the first 300k shares in cost plus.
https://www.interactivebrokers.com/en/index.php?f=commission&p=stocks1
 
well, clearly... you trade enough volume, but I am not sure why you are doing MKT orders... but that is your strat requirement I guess... in any event, you would benefit from Cost Plus and from customizing your platform a bit to take advantage of the features within IB...

You can always go to any broker that offers $10 or less per trade for unlimited shares and you will be fine in comparison for market orders... so keep that in mind... am not trying to convince you either way.. I always try to lower my costs for anything, so I am just sharing my thought process... given I looked at something similar...

is IB the best cost broker... given all I know, yes...

you are probably using porfolio margin, everyone else will be more $$$ to use it... perhaps that is not an issue if your account is 7 figures... who knows...

you can customize your platform to route where you want and lower your costs... even using SMART algo's... see the following..

35d3y9u.png


if you were to pick the lowfee and rebate focused SMART's, you can always hit the bid/offer and remove liquidity and pay the lowest possible cost, even make your trading cost free @ times if you route to CBSX or some other venues that will rebate you to remove liquidity...

see below...

vjj8n.png


and lastly, if you have a decent account and possibly qualify for PM, why not switch to the PTG side and get an account rep? that will get you something that is normally not available to 99.99% of retail trades with IBKR, the possibility to ensure you get your costs normalized...

if you need a recommendation on an internal rep, PM me... I will give you the guy I use... he is just awesome... because of him I can use the front end that I want vs being stuck with TWS... and it is the same front end being used at most prop shops... even ECHO... :)
 
Quote from Iggy_Type_R:

Current situation:
trading average 40 positions a day, clocking up on average of $30 per trade (both ways) using IB, flat rate and SMART routing (via API)

Having read other broker sites that run flat fees, some are offering $3 per trade, up to $9.95 per trade... but none are too clear about routing fees and any other fees that are put on top of the trade.

Does anyone know clear explicit numbers on cost of trading using these flat-fee brokers?
More...
Sticking with your original numbers of $30 round trip commissions per position x 40 positions daily (later you swapped the 30 & 40), at flat rate $15 each way is an average of 3000 shares per trade and 120k/day in share volume. If you switch to cost-plus, you'll be solidly in the second tier (20 mils) and your average cost will be close to that despite it tiering up since so much of your volume is in the second tier. even so, you're still definitely paying $6 per trade each way at 20mils * 3000 shares and that's before ECN fee/rebates and all the junk fees like SEC, etc. it's probably unreasonable to expect to get all your volume placed on a rebate-to-take ECN, and if you're hitting on NASDAQ or other expensive venues that'll cost an extra 30mils or so. So figure your costs are in the range of $6-15/trade + SEC fees even at cost plus. I would expect it to be in the middle to high end of this range, but it depends on exactly what kind of trade you're doing and you'll never know unless you switch to cost plus for a while and try it.

I think, unless you need other features of IB, you'd be better off on a purely commission basis switching to a retail fixed-price firm. In answer to your question about what's included at those places, typically you'll pay the SEC fees but not the ECN fee/rebate in these arrangements. I'm not sure about your automation or margin requirements, if any, but plenty of places will beat say $10/trade. Even places like Etrade or TD Ameritrade that start at $10 flat will negotiate down to $5 or less if you're doing 80 trades/day! OptionsHouse is $3 flat and I've used them a little and they seem fine.

One thing I will suggest is that you could probably cut your commissions to zero if you were willing to use limit orders and cost plus, since the rebates IB gives you are often about the same as the 20mils in the second tier (I regularly see negative commissions but I'm at 15mils and use more limit orders than market). That assumes of course you still get filled and don't have adverse market impact, but its something to consider.

Lastly, if you want to try cost plus, which is unlikely to be meaningfully worse than your present rates, do it at the end of this week. It takes effect overnight and the volume tiers start counting at the start of each calendar month so we're heading into Sept soon and you can get the full benefit of a month at the lower teir (after ~3 days).
 
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