OTC smart routing using IB

M

Maverick2608

I do not have a lot of experience trading OTC stocks.

Yesterday I traded NXTTF. I used Interactive Brokers’ SMART routing which send my limit orders to: OTCLNKECN

When I placed limit orders - e.g. a buy order with a higher limit than the current best bid, my order was not reflected in TWS as the best bid. The best bid stayed unchanged.

My orders were executed, but given the volume of NXTTF yesterday of 8,653,000, the execution seemed sluggish.

Can anyone explain why my limit orders were not reflected and instead the level 1 best bid and offer stayed unchanged?
 
To get a good price you need to buy shares slowly , as a one large order , doesn't matter if its IB or TDA , for otc stocks I don;t think that IB is the best option.
 
OTC Link is a fairly new exchange for trading otc stocks, while the vast majority of volume is done through market makers. IB execution has suffered since they started sending most of their orders to this new exchange. I don’t know if the market makers don’t want to take orders from IB or if IB thinks the fees are cheaper or rebates are better at OTCL or what.

You would probly get better otc execution at a different broker.
 
What was the status color of your order while it was pending?
If blue then IB Smart Router was probably holding your order until it can be filled at OTCLNKECN or ARCAEDGE. In such case your bid wouldn't be displayed.
If the status color was green then the order was sent directly to an exchange.
I think that you can select specific exchange and bypass SMART, as SMART may be better for more liquid stocks.
 
guru said:
What was the status color of your order while it was pending?
If blue then IB Smart Router was probably holding your order until it can be filled at OTCLNKECN or ARCAEDGE. In such case your bid wouldn't be displayed.
If the status color was green then the order was sent directly to an exchange.
I think that you can select specific exchange and bypass SMART, as SMART may be better for more liquid stocks.
More...
The status color was green.

It is correct that I can select a specific exchange instead of SMART. I will try to do that and see if that makes my limit order appear in the level 1 quote.

With regards to liquidity, the volume was 8,653,000 - so highly liquid.
 
I also experienced something similar trying to fill a chinese ADR that wasn't very liquid. I saw lots trades past my order before it looked like free money for a market maker to hit me. I'm guessing that smart router is not smart for everything and one has to probably learn the best route for each type of security to optimise the dollars.
 
I have been told by various brokers that OTC market makers have no obligation to fill an order, even at their quoted price. I stopped trading OTC due to being raped over and over. I thought my time would be better spent trying to get a job as an OTC market maker than trying to figure out how to beat them. I'm surprised this isn't criminal yet.
 
Strange. Today it does work. My orders are reflected in the level 1 quote despite still using IB SMART routing and still being directed to OTCLNKECN.

I added a data subscription Friday. Consequently, the explanation could be that the level 1 quote was stale. However, data subscriptions usually take effect immediately, and it did not solve the problem Friday after adding the subscription.
 
Maverick2608 said:
Strange. Today it does work. My orders are reflected in the level 1 quote despite still using IB SMART routing and still being directed to OTCLNKECN.

I added a data subscription Friday. Consequently, the explanation could be that the level 1 quote was stale. However, data subscriptions usually take effect immediately, and it did not solve the problem Friday after adding the subscription.
More...
OTC markets have a minimum quote size, if you submit an order bellow that minimum your order will not appear. that minimum varies with the price of the stock
 
Maverick, MoreLeverage and remoteControl,

I've noticed these things as well (slow or no executions, my non-marketable limit orders not appearing in the quote, asks (bids) moving up (down) apparently in response to my marketable buy (sell) order while I do not get an execution, etc.)

My impression is that the new exchange has improved things.

On the main OTC market maker system, only small orders go through immediately. It appears that for larger orders, someone over at IB still needs to work the phone. Sometimes then you get an execution with price improvement. Sometimes that working the phone seems to pick off the MM's to the presence of a larger order (large for the liquidity in the stock), and they adjust their quotes. I am not really sure what's going on behind, that's just my interpretation of what I see on TWS.
 
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