new option cancel fees for IB
- Thread starter Free Thinker
- Start date
You stated previously:
"These customers have used computer order entry systems
to enter and cancel hundreds of orders per minute, in many
products, all day long.
Should they be allowed to do this?
I could argue either side.
The bottom line was that these orders were using massive
amount of systems resources with few executions.
They were slowing down the system and preventing the
exchange from operating properly."
It is ILLEGAL to enter automated orders!
If these orders were not receiving executions then by defintion; the trader(s) involved were acting as market makers which is also illegal.
Not only don't you know the rules but you act as if you do. Perfect!
Exchanges like yours have been losing market share to the ISE and will conitinue to do so when the BOX opens up and when the new PSE platform is introduced. At this time, half of the option Exchanges will have platforms where market makers have independent pricing. (Unlike your Exchange where everyone (M/M's) has the same market - an anti competitive market)
These fees, you see, are the equivalent of the House Rake in a poker game. Whether you place orders of less than 6 contracts, or more than 6 contracts, the House (broker) is going to make a small profit.
What you need to beat the House is a strategy.
Strategy: Try to avoid cancelling orders of less than 6 contracts.
If you cancel (or modify) an order of more than 5 contracts, when you re-enter the order, break it down to 6 contract orders.
If what Steve wrote about the Smart fees is accurate, then if you execute a SMART-routed order for 15 contracts for each cancelled order, then you would actually make $2.55 from the spread of the cancellation ($1.20) and the SMART execution reimbursement ($3.75). SMART, eh?
It's hard to determine what % of trades are winners.
MMs have theoretical edge on most trades.
but you can't get a check for theoretical.
The hard part of MM is holding
a position. I might make money buying options
and then lose it back and more in decay until expiration.
or sell options and make theoretical then lose on
a rise in volatility or stock move.
So the answer is most trades start out as winners,
but they often don't stay that way.
MMs have theoretical edge on most trades.
but you can't get a check for theoretical.
The hard part of MM is holding
a position. I might make money buying options
and then lose it back and more in decay until expiration.
or sell options and make theoretical then lose on
a rise in volatility or stock move.
So the answer is most trades start out as winners,
but they often don't stay that way.