No Commission Trading

S

spindr0

Interactive Brokers just announced that they will be introducing IBKR in October with no commission trading. The fine print says that orders will be routed for payment for order flow rather than via their Smart Routing system. My limited understanding is that PFOF may result in inferior fills.

Is there any way to quantify what slippage may be incurred in return for switching over? Or is this just an unknown?
 
Schwab receives USD 0.0030 per share when selling limit orders to Citadel.

https://www.schwab.com/public/schwab/nn/legal_compliance/important_notices/material_aspects.html

Citadel makes a profit on top of that. Otherwise they would not buy the order.

Consequently, it is tempting to conclude that whatever you gain on zero commission is lost on poorer execution. Also taking into account that IB - a DMA broker not selling order flow - claim to deliver a better execution to the tune of USD 0.0043 per share.
https://investors.interactivebrokers.com/en/index.php?f=1340

However, I am not sure it is as simple as that. I am sure retail client orders are also exposed to predatory HFTs even though a DMA broker is used. The payment for order flow is just a payment to make sure that the particular market maker buying the order will profit from the order instead of other market makers. It does not necessarily mean that the order wouldn't have been exposed to bad execution due to HFTs anyway.

A critical question is how much emphasis we can put on IB's claim that they improve price execution by 0.0043 as stated above. I believe Ameritrade claim they improve price execution as well. Let me look into that.
 
spindr0 said:
Interactive Brokers just announced that they will be introducing IBKR in October with no commission trading. The fine print says that orders will be routed for payment for order flow rather than via their Smart Routing system. My limited understanding is that PFOF may result in inferior fills.

Is there any way to quantify what slippage may be incurred in return for switching over? Or is this just an unknown?
More...
The same question was also asked in one of the other threads that talk about this new IBKR offer (and other brokers which have followed suit). I guess we'll have to wait until someone runs the same trades in both IBKR accounts (Lite and Pro) and reports the differences in fills they get. Only by then will we have an indication how much the customer is paying for commission-free trading.
 
Depends on your style of trading. With free commissions I’m assuming their going to send a limit order to the best exchange for kick backs ( ECN rebates). It might not be the best to find active liquidity. If you swing trade on the daily or something, your probably going to get traded through your limit anyway and get filled wherever it’s sitting at.

For a market order or marketable limit their might be a dark pool they could look st to find a better price, but they have to seek the best price on the visible ECN. Citadel or whoever could give a slight price improvement to jump queue.

The stock market is quite the mess of microstructure.
 
Maverick2608 said:
Schwab receives USD 0.0030 per share when selling limit orders to Citadel.

https://www.schwab.com/public/schwab/nn/legal_compliance/important_notices/material_aspects.html

Citadel makes a profit on top of that. Otherwise they would not buy the order.

Consequently, it is tempting to conclude that whatever you gain on zero commission is lost on poorer execution. Also taking into account that IB - a DMA broker not selling order flow - claim to deliver a better execution to the tune of USD 0.0043 per share.
https://investors.interactivebrokers.com/en/index.php?f=1340

However, I am not sure it is as simple as that. I am sure retail client orders are also exposed to predatory HFTs even though a DMA broker is used. The payment for order flow is just a payment to make sure that the particular market maker buying the order will profit from the order instead of other market makers. It does not necessarily mean that the order wouldn't have been exposed to bad execution due to HFTs anyway.

A critical question is how much emphasis we can put on IB's claim that they improve price execution by 0.0043 as stated above. I believe Ameritrade claim they improve price execution as well. Let me look into that.
More...
%%
I forget the exact numbers;
but most of them make a mint also by underpaying, or no pay on interest. I opened an account in WE Bull[ me bullish also], but when i discovered they can charge me for data like no one else+ thier ticker has no bid prices, decided not to fund it .:cool::cool:,:cool::cool::cool::cool::cool::cool:
 
not good thing for day traders, especially robot day traders. more volume will go to citadel. what ever citadel has more power, it is not good for us.
 
Me and my family & friends follow the same internal bot, manually trading/testing a few strategies, and sometimes they’ve got better fills (or faster) via Robinhood than I’ve got with IB. Sometimes I didn’t get a fill at all when the price ran away, while they were able to grab a few shares.
Of course this is subjective because we all place orders differently, while I never notice when I get the best fills or why/how they’re better. It’s just 2 or 3 times when i was surprised that for some reason their fills on Robinhood were clearly better, possibly due to Robinhood’s or Citadel’s internal inventory. At least it made me think that fills may not be so bad with free commissions.
On another hand, IB may be better than most brokers with shorting hard-to-borrow stocks (while Robinhood doesn’t support shorting at all), as most of my short orders do go through at IB without any specific locate fees or requirements, even though.sometimes i have to wait a few hours for other shorts to blow up and release some shares before some of my orders go through. (I usually short a few $0.50-$5 stocks per day)
But IB’s shorting ability may decline when traders move to other brokerages, even though hard-to-borrow locate fees and short %interest rates may be one of remaining opportunities for brokers to make money on.
 
murray t turtle said:
%%
I forget the exact numbers;
but most of them make a mint also by underpaying, or no pay on interest. I opened an account in WE Bull[ me bullish also], but when i discovered they can charge me for data like no one else+ thier ticker has no bid prices, decided not to fund it .:cool::cool:,:cool::cool::cool::cool::cool::cool:
More...

They charge for L2, not L1. And they do send bid/ask, they just don't show it in their web platform :) We hooked up to Webull in Medved Trader and show the bid/ask that comes from Webull's feed. We didn't hook up L2 though, since we don't really know if people are buying that. No user of ours asked for it yet.
 
terr said:
They charge for L2, not L1. And they do send bid/ask, they just don't show it in their web platform :) We hooked up to Webull in Medved Trader and show the bid/ask that comes from Webull's feed. We didn't hook up L2 though, since we don't really know if people are buying that. No user of ours asked for it yet.
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%%
IBKR had trouble with showing correct volume on their charts; but it tended to be consistent/consistent low LOL. I dont hold Robin[derivative of Robbing]Hood responsible for thier huge/unusual profit on order flows, but i wonder why they would be so honest to disclose that in thier Robbing/Robbin name ?? LOL
I doubt if any or many want L2. Commission free ETFs can work; but may not be as liquid as some . [SPY=liquidity leader, as the IBD ad notes]:cool::cool:,:cool::cool::cool::cool::cool::cool::cool:
 
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