Some commision realities about IB and Tradestation

[def]

Ofcourse we take into account the cost of ECN and SEC fees when with our pricing. But most firms charge these fees and as you should be aware, SEC were raised recently and we didn't raise our fees. What I was trying to get across is that I don't see anyone complaining about that and if we wanted to be deceptive, we could advertise a lower fee and tack on those prices in the small print.

My point is that you make it sound like we are trying to pull the wool over clients eyes. We simply aren't. There are order types available to get you a complete fill and I think your thread is trying to make something out of nothing.

 

[jay123]

Quote from kowboy:

So Jay, are you saying you are an IB customer, and there is no better alternative that you could recommend? Or What?

I am saying that after all this posting that I am an IB customer. However I use them for trading futures only. In that respect they are truly competitive in terms of pricing. In fact probably one of the best around without constraints of having to do minimum volume per month. I do use another broker whom I won't mention because I don't want to be told that I'm a "salesman" pushing for that firm. However, I will say that the firm I'm with uses Realtick and I negotiated per ticket charges at 7 per trade. Ecn Fees are rebated back at .02 for providing liquidity on INCA, ISLD, or ARCA. (Regular ECNS fees apply of .003 .003 and .003 respectively for taking liquidity) (Now this would tell you that I am larger lot trader) The point is after all is said and done, that for a small lot trader IB is truly the way to go. In the end absolute commission savings would still be greater if all you traded was 100-700 shares per trade with IB then if you traded with my broker. However once you reach the higher threshold IB is no longer that alternative place to trade stocks through if you were only concerned with some sort of commission savings (not taking in to account multiply other factors etc etc). I will say once again that IB does have an incredibly fast direct access platform and I think its performs wonderfully. Plus a universal account is a remarkable achievement. Furthermore, in items of where commissions stand in this day and age as to where they were when I began trading a decade ago, anywhere you trade now is 1/6 the price in terms of commissions. However, I am trying to point out mathematical facts that are built in to IB's commission structure that are not readily apparent.

 

[jay123]

Quote from def:

Ofcourse we take into account the cost of ECN and SEC fees when with our pricing. But most firms charge these fees and as you should be aware, SEC were raised recently and we didn't raise our fees. What I was trying to get across is that I don't see anyone complaining about that and if we wanted to be deceptive, we could advertise a lower fee and tack on those prices in the small print.

My point is that you make it sound like we are trying to pull the wool over clients eyes. We simply aren't. There are order types available to get you a complete fill and I think your thread is trying to make something out of nothing.

Def your focusing to much on the metaphor "pulling the wool over clients eyes" as a reason to negate my original post. Lets say I negate that statement. Does my post now have more credibility to you? Either way your right you did not increase your price when SEC fees went up this is true and I will acknowledge this. What you just said is a mathematical fact as well and I agree with it. In this regard your firm decided to remain with its costs and not pass along adiditonal mandatory fees to its end customers. Agreed.

 

[kowboy]

Please tell us who you use for an alternative broker. I promise I
(and hopefully we at ET) won't complain about you pushing your broker. But do you really pay only $7 if you scale in and out of a trade, or do you incur the 7 bucks each time you change a limit order and scale in or out with a smaller size order?

 

[arnegr]

all scams

 

[jay123]

Quote from kowboy:

Please tell us who you use for an alternative broker. I promise I
(and hopefully we at ET) won't complain about you pushing your broker. But do you really pay only $7 if you scale in and out of a trade, or do you incur the 7 bucks each time you change a limit order and scale in or out with a smaller size order?

I do not incur additional ticket charges when I modify the price of an order. However, as is stated back and forth between myself and Def even my broker has a commision model that it has developed that handily adds in a built in profit in order to keep it's business alive. Its good business, its called capitalism. I just felt that when it comes to IB and to TradeStation...and let me say its more TradeStation than IB that really advertises their "cheap" commision structure as if they are just giving away the food off their plate. Its all in the marketing, and as we know marketing is another form of corporate deception. Madison Ave at its finest. Lets put it this way, I am no saint and if I ran a broker/dealer I would be doing the exact same thing. However, in this case I dont so I am on the other end of the sprectrum and will speak against it. Its like saying that an IB or Tradestaion employee when going to buy a car will say to a salesman hey just give me the sticker price because I know thats your cost and I dont want to take food off your plate. NO they would haggle down knowing what the true costs are of a car dealer after manufacture incentives and rebates. Does the car dealer get mad and make you feel bad about yourself for haggling? Of course they do its their job to keep the dealer costs up and profits maximized. Should you be ashamed to hagggle and save money from the dealer because of this no way! In the end the dealer knows that for each educated consumer there are 100 suckers in the end that will pay sticker price. However with the advent of the internet I can now just compose a post like this and in one click of the submit button I can reach 18,000 people and let them know what I think. Internet its a crazy medium.

 

[jay123]

USD 0.01/Share USD 1.00 For up to 500 shares

USD 0.005/Share Incremental shares > 500

USD 0.003/Share Additional API fee for equity directed
orders.

As you can see from what I copied from IB's website they add on .003 as additional fees for those that execute with equity orders via an API. Example Ninja Trader or Button Trader or even Esignal. Thus now the true costs of doing business are a bit higher than I thought for those who would rather use a more accomodating interface than the barebones one provided by IB.
In other words this would mean that each 1000 shares gets tacked on 3 bucks, which is the going rate of any trades done through ISLD, INCA, and ARCA. Keep this in mind as well fellow traders as I know many of you are using these platforms to place trades through to IB. These costs also add up fast. No diifferent than an ECN fee.

 

[OldTrader]

Quote from jay123:

Let me explain why:
The reason is one simple gimmick that both IB and Tradestation both employ and keep hush hush and that is.......
When you change the price of a limit order you automatically reset your trade back to square one and the .01 applies again.

Now IB is in the background snickering as they just charged MR TRADER 10 bucks for this trade instead of 7.5. Why? Because once MR TRADER changed his price he automatically reset his order according to boths firms policies and thus they charge MR TRADER .01 on the second 500 share fill instead of the .005. This is a fact of how IB and tradestation both pull the wool over their customers eyes as they both advertise how their commission rates save their customers money.

A whopping $2.50 extra when you change an order??? An extra charge I might add which could have been avoided either with a market order, or a limit order with the limit set somewhat higher above the existing offer.

Ever had this one happen? Put your trade in at the offer....get filled on a quick 200 shares, and the price moves away immediately, and not just .01 away, to a point where you don't want to make the trade. IB charges $2 for the trade. I don't see how they make a dime on this trade personally. But in any case, there are any number of places with a minimum ticket charge...like the one you mention for $7 (or higher).

Not sure really what your point is here. Chances are if you compare IB with many of the other competitors, it's cheaper....ESPECIALLY if you know how they work their charges, and simply alter your trades to fit their system. But if it is not, then you should change.

Personally, I'm thrilled with the commission structure, along with all the other advantages that IB offers.

OldTrader

 

[FX-Trader]

Quote from jay123:

I am saying that after all this posting that I am an IB customer. However I use them for trading futures only. In that respect they are truly competitive in terms of pricing. In fact probably one of the best around without constraints of having to do minimum volume per month.

Now this is a surprise ! I expected you to complain about futures commissions with IB. Didn´t you notice that with sufficient volume you can get lower commissions somewhere else ? BTW, you´re not one of those 1-lot-traders, are you ?

 

[FX-Trader]

Quote from jay123:

Listen we all know that IB advertise their commission structure for U.S.stocks as .01 for the first 500 and .005 for everything above that per order. Now we also know that as of right now tradestation is .012 for the first 500 then .006 for everything there after as well for U.S. Stocks.

Here is the actual reality of what commissions really cost you with these places when applied to real life trading. Its basically .01 per share for IB and .012 per share for tradestation plain vanilla. They are actually both quite expensive brokers, yes you heard me quite expensive for these times anyway.

Let me explain why:
The reason is one simple gimmick that both IB and Tradestation both employ and keep hush hush and that is.......
When you change the price of a limit order you automatically reset your trade back to square one and the .01 applies again. Let me illustrate as an example.

MR TRADER wants to buy 1000 shares of NTES and it's trading currently at lets say at 60 x 60.1 . So MR TRADER places a limit order to buy 1000 shares at 60.1 because he wants to get in on the momentum so he is willing to take the offer and get in on the trade but he places a limit because MR TRADER is not a dummy. Well MR TRADER in real life as it will happen most times gets filled on 500 shares and then the market moves up on NTES to 60.1 x 60.2. Well MR TRADER wants this stock he knows its good for a big run intraday so he is not going to sit there and passively bid now at 60.1 so he changes his price to 60.2 and gets filled on his remaining shares at 60.2. He is now in NTES with an average price of 60.15 for 1000 shares nice job MR TRADER.
Now IB is in the background snickering as they just charged MR TRADER 10 bucks for this trade instead of 7.5. Why? Because once MR TRADER changed his price he automatically reset his order according to boths firms policies and thus they charge MR TRADER .01 on the second 500 share fill instead of the .005. This is a fact of how IB and tradestation both pull the wool over their customers eyes as they both advertise how their commission rates save their customers money.

Now in a real world situation I have been trading for many many years and I can say changing price on a limit order happens on average in around 80% of my trades, thus its very safe to say that on average the true cost of trading at IB is nearer to .01 per share and at Tradestation its .012 per share.

Now I called while I had accounts at both places and spoke with managers about this scenario and said how very deceiving it was to have the commission structure reset on the same order simply because a limit price was moved up or down due to a partial fill. I said to both managers that it must be a very fattening revenue builder and boom to your bottom line to not allow orders that are changed to be kept as one order that is being changed at .01 for the first 500 and .005 for each there after. Both managers at both firms each said to paraphrase, "thats the way its is something we don't publicize but I know its pretty awful when you think about it."

Anyhow, this is the truth as to how I now view these brokers as far as commissions are concerned. Let me say IB is a very fast broker and quite useful with the Universal Account and I do like them. TradeStation as well has tremendous usefulness; however I think its really overdone how both these firms paint a halo over their heads as being the savior of the retail trader in regards to commissions savings. I find it quite offensive when you total up your true commissions at the end of each day.

You can thank the inability to change an order without it reseting as a new order in IB's and Tradestaions "eyes" for this. Is IB and tradestation aware of this? OF COURSE...do they care of course not Its their unadvertised way of making the real money on their customers.

These are my rants on both of these companies.....It may not be what some want to hear but this is the truth. Look at your statements month to month. Give them a Call and talk to them about it. It will certainly open your eyes.

Happy Trading!

Why don´t you just accept the definition of an order ?
Modifying an order means:

1) Cancel old order
2) Submit new order

So what ?