Need help trading between the spread on 5 cent tick pilot stocks - IB TWS

[arbtrader]

I trade through IB TWS and need help how to set up my order on dark pools, like CSFB Crossfinder, in order to cut into the spread on tick pilot stocks.

As you hopefully know if you are going to try to answer this question, several small cap names (and some not so small) are trading with a min tick of .05 thanks to FINRA's tick size pilot program.

You can get executed in between the spread but you cannot post limit orders in less than .05 ticks, and here is the key part, on lit exchanges.

You can however get filled in less than .05 ticks as part of a price improvement, and I believe you should be able to post that <.05 liquidity on dark pools since it's not publicly displayed.

Here's the problem, I tried this using IB's advanced algo to select CSFB Crossfinder instead of SMART, for example, however when entering the limit it still required me to choose a price at the bid or offer, not in between.

Example
Say the stock is 4.75 - 4.80
I want 4.77 or better, using a dark pool. How do I do this via IB TWS?

*FYI, while I believe there is a subset of stocks where you cannot trade in less than .05 no matter what, this is not one of those. I see it trading at 4.77, 4.78 etc in T&S.

Thanks!

 

[Shadetree42]

One option is to place the order on Nasdaq or IEX with "pegged to mid" set. You put in the limit price to cross the spread, but it will never execute at a worse price than midpoint. That said, if the spread suddenly widens to 10 cents, you may get filled on a 0.05 level instead of a 0.025 level.

Also, AFAIK, there is no way to actually specify a limit price within the spread via TWS. It's either mid or full tick.

 

[MoreLeverage]

AFAIK, there is no way to actually specify a limit price within the spread via TWS. It's either mid or full tick.

Yeah, it can be annoying if the stock moves up since you can then get filled at the ask instead of the mid because you have to set your limit order set too high or it won't work at all.

 

[Mark Lapin]

Try selling it at the market. Usually your broker's market maker will fill the order in between the 5c spread.

 

[traider]

Try selling it at the market. Usually your broker's market maker will fill the order in between the 5c spread.

Don't you get killed by 0.001 ct improvements or fill for like 1 share instead of 99 from hft

 

[MoreLeverage]

Don't you get killed by 0.001 ct improvements or fill for like 1 share instead of 99 from hft

A market order isn't going to get filled for 1 share. But probably your broker will have sold your order to some market maker who will give you $0.001 or less in "price improvement" rather than filling you at mid even when there's active trading there. Good to be a market maker, bad to be you. Oh, and thanks to the SEC for their making spreads 5x worse with their pilot program...

 

[arbtrader]

One option is to place the order on Nasdaq or IEX with "pegged to mid" set. You put in the limit price to cross the spread, but it will never execute at a worse price than midpoint. That said, if the spread suddenly widens to 10 cents, you may get filled on a 0.05 level instead of a 0.025 level.

Also, AFAIK, there is no way to actually specify a limit price within the spread via TWS. It's either mid or full tick.

OK thanks I played around with the window and I chose PEG MID as the order type, but as you say, TWS still forces you to select a full tick.

So where do I put my limit? Say its 4.75 to 4.80 and I want to Buy at 4.775 PEG MID, do I put my limit at 4.80 even though I don't want to pay 4.80? That's a bit nerve wracking TBH.

 

[SoesWasBetter]

Markets pretty much rigged against you, in terms of spread and who gets to play it. worse than ever.

 

[Shadetree42]

OK thanks I played around with the window and I chose PEG MID as the order type, but as you say, TWS still forces you to select a full tick.

So where do I put my limit? Say its 4.75 to 4.80 and I want to Buy at 4.775 PEG MID, do I put my limit at 4.80 even though I don't want to pay 4.80? That's a bit nerve wracking TBH.

Yes. It will post at 7.775 as long at the bid and offer remain stable. If the 4.75 bid drops out before the offer fills in at 4.75, you'll have an order at 4.75. So it's pegged to the midpoint of the acutal bid/ask, not to the mid-tick price.

 

[MoreLeverage]

Yes. It will post at 7.775 as long at the bid and offer remain stable. If the 4.75 bid drops out before the offer fills in at 4.75, you'll have an order at 4.75. So it's pegged to the midpoint of the acutal bid/ask, not to the mid-tick price.

But if the ask moves up to 4.85, now you've got an order at 4.80, higher than you wanted to pay.