Question about Hidden Orders

[d08]

95% is a massive outperformance.

As I understand it, IB does not sell order flow, so price execution should be IB's primary objective - especially as IB disclose price improvement compared to the competition. That IB has decided to move to IEX also goes to show that IB endorse and welcome IEX.

Bare that in mind, I do not understand why the IB SMART router wouldn't rout to IEX more often, if your experience is correct. What would be IB's incentive not to let the IB smart router place orders on IEX - speed of execution?

The "smart" routers are not that smart, you're very much overestimating what they do, I did the same before. They look at where the liquidity is, where the rebates are etc. (depending on your settings) and route there. They don't measure any price improvement to my understanding.

 

[Maverick2608]

The "smart" routers are not that smart, you're very much overestimating what they do, I did the same before. They look at where the liquidity is, where the rebates are etc. (depending on your settings) and route there. They don't measure any price improvement to my understanding.

After reading Flash Boys, I briefly looked into what Brad Katsuyama and co. suggested they would do to protect investors against predator HFTs. My conclusion was that IEX could slow down orders on their exchange, but that IEX would expose investors to sub-pennying to the same extent as everyone else.

Is that also your experience or do you believe they found a way to address sub-pennying?

 

[Robert Morse]

Here is a screen shot of AAPL just after the open. IEX is well outside the NBBO. Any order in AAPL will get filled on another exchange. They just have no liquidity there. SPY taken at 9:34am. 100 shares on the bid, no offer, on the ASK.

 

[d08]

After reading Flash Boys, I briefly looked into what Brad Katsuyama and co. suggested they would do to protect investors against predator HFTs. My conclusion was that IEX could slow down orders on their exchange, but that IEX would expose investors to sub-pennying to the same extent as everyone else.

Is that also your experience or do you believe they found a way to address sub-pennying?

I don't think they protect against sub-pennying or pinging or anything else that much but they're just better than the competition. I typically watch the tape around my order and how it behaves, with IEX orders I get actual fills when I'm at around the midpoint, with other routes I get nothing.

 

[sprstpd]

I don't think they protect against sub-pennying or pinging or anything else that much but they're just better than the competition. I typically watch the tape around my order and how it behaves, with IEX orders I get actual fills when I'm at around the midpoint, with other routes I get nothing.

This is conjecture, but isn't it possible that lots of people are using IEX's D-Peg, Primary Peg, and Midpoint Peg order types? These are all non-displayed orders and they are all not routable outside IEX (see exchange rule book, section 11.190: https://iextrading.com/docs/Investors Exchange Rule Book.pdf).

So when you route to IEX at the midpoint, you might be accessing this invisible liquidity.

 

[d08]

This is conjecture, but isn't it possible that lots of people are using IEX's D-Peg, Primary Peg, and Midpoint Peg order types? These are all non-displayed orders and they are all not routable outside IEX (see exchange rule book, section 11.190: https://iextrading.com/docs/Investors Exchange Rule Book.pdf).

So when you route to IEX at the midpoint, you might be accessing this invisible liquidity.

Very likely. Even if I don't route to midpoint but my LMT happens to sit around midpoint, I get a decent fill rate. I remember that with other routes, I used to get pinged with 3-4 shares and that was it, I had to wait for the price to trade through.