I don't think you got the gist of my remark. I never questioned your results. I questioned the honesty and competency of the rest of the Wall Street, other than IB. Also you didn't address the psychological benefit of not having to endure a given expense of 50k to 100k. To me paying that amount of money is liking paying dues for a club memberships and concluding that the benefits of membership is worth more than that amount. My conclusion is that it is not for reasons given.
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No fee order on IB
- Thread starter misterkel
- Start date
I don't think you got the gist of my remark. I never questioned your results. I questioned the honesty and competency of the rest of the Wall Street, other than IB. Also you didn't address the psychological benefit of not having to endure a given expense of 50k to 100k. To me paying that amount of money is liking paying dues for a club memberships and concluding that the benefits of membership is worth more than that amount. My conclusion is that it is not for reasons given.
I don't think you got the gist of my remark. I never questioned your results. I questioned the honesty and competency of the rest of the Wall Street, other than IB. Also you didn't address the psychological benefit of not having to endure a given expense of 50k to 100k. To me paying that amount of money is liking paying dues for a club memberships and concluding that the benefits of membership is worth more than that amount. My conclusion is that it is not for reasons given.
The cost savings I referred to were net of all commissions and exchange fees. I agreed with you that questioning the honesty of parties you interact with on Wall Street is important. That's what prompted me to put them to the test regarding my order fills.
If you are having a hard time with psychology then I'm not really the guy to help you. All I can say is that adopting an objective thought process is helpful. The intentions of all the parties involved in a trade are not nearly as important to me as the end result.
The cost savings I referred to were net of all commissions and exchange fees. I agreed with you that questioning the honesty of parties you interact with on Wall Street is important. That's what prompted me to put them to the test regarding my order fills.
If you are having a hard time with psychology then I'm not really the guy to help you. All I can say is that adopting an objective thought process is helpful. The intentions of all the parties involved in a trade are not nearly as important to me as the end result.
Your methodology involves error an extrapolation in drawing a conclusion. Your sample of two is too small when considering the knowns of how Wall Street operate. Firms can tell me that they are saving me a given amount while paying a commission, but except for IB I will continue to doubt them
1) All my trades and order fills were real. Nothing was simulated.
2) I don't trust IB either, which is why I tested them.
3) If you don't like their smart router you can send directed orders to your favorite exchange. The cost savings is not so much a factor of their router as it is the dark liquidity you pick up inside NBBO and outside NBBO if you are taking liquidity.
4) "Psychologically" you don't have to use or trust IB or their order router. You just trust the objective testing of reality.
This isn't complicated. When you have a hypothesis you test it. That's the very foundation of science. Math, engineering and science have created far more wealth than Jedi mind tricks and unproven beliefs.
btw, it would be very appropriate for you to question my results. That's also what science does. In that event you would devise your own objective test with measurable results and see if you can get a repeatable result that proves me wrong.
Interesting study that you did. Did you do any study of non-marketable limit orders, IB vs. "free" others, by any chance?
Your intuition is understandable but several months ago I wrote software to test this. I did pay a measurable and significant amount more for PFOF orders.
The tests sent identical orders to TD and IB in separate execution threads so that they left my network within the same millisecond. TD is "free" and uses payment for order flow. At IB I used the default SmartRouter configuration and the tiered commission structure. All orders get routed directly to an exchange in that scenario.
Every order executed cheaper at IB. The difference was anywhere from a few dollars to $130 more expensive with the "free" trades at TD. If you don't like the SmartRouter at IB you can configure it and even send directed orders that bypass it and go directly to the exchange, but most will simply be sent to NASDAQ or NYSE.
The main thing you miss with PFOF is dark liquidity. You will find bids/offers inside NBBO at all the exchanges. There's a bunch of hidden orders plus all the partial lots that are not reported as part of NBBO.
I know this is an older thread; but may I ask what kind of equities you used for your test? I'm asking because my long-run tests show the opposite result - almost always better execution at Schwab (formerly TD Ameritrade) than at IB.
Also, how does your result reconcile with the study "The 'Actual Retail Price' of Equity Trades" https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4189239 that also shows the opposite?
Lastly, you are saying "the cost savings I referred to were net of all commissions and exchange fees". So you must have used less liquid equities with more than $0.01 bid/ask spread; otherwise the roundtrip commission and fees alone (ca. 2 x $0.0067 per share for market orders at IB) would be higher than any potential savings from price improvements, correct?
I hope you can clarify how you set up your experiment.