Some commision realities about IB and Tradestation

jay,
you're pointing out a fee structure that you disagree with and that's fine. We think it's fair and I really haven't heard anyone else complain about this before.

API fee: note the key word "directed" if you use SMART, we do not tack on the fee. Why? simply because say if two venues offer the same price, we'll route to the one that cost's us less.
 
another commission reality is that without ib no one would be getting 1 cent per share fees. ib is the driving force behind lower rates for trading.
 
I have two things to say:

1. Since def has already kind of confirmed it, I am hesitant to contradict him, but I am pretty sure that I occasionally change the limit of a 600 to 1000 share order between partial executions and still receive the .005 for all shares in excess of 500.

2. Jay, you really lost my ear when you tried to argue that customers pay indirectly for the SEC fee, and therefore it is not really free. Let me just say this: If you win $100M in the lottery, will you complain that you don't really get that money, but you are paying for it indirectly, because of course the lottery has to make a profit, so its customers in total always pay more than they are getting out of it? Or when you get a free sample of merchandise, do you complain to the company that gives it to you, on the grounds that since they are profitable, you somehow must be paying indirectly for the free sample? Do you complain to TV stations for broadcasting free programming because they are profitable? We all know that you can trace any cost, any expense that any entity has, back probably 20 steps until you reach someone extracting ore from the earth or being compensated for having had a patented idea. But what difference does it make? If one store offers you a hammer for $28.99 and another store offers the same hammer for $14.95, will you attack the cheaper store for still turning a profit?
 
Quote from FX-Trader:


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 ?

:p
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When it comes to futures I usually trade between 3-4 contracts of the naz and between 2-4 contracts on the spx futures on average per trade. Interesting you seem to have an underlying disdain for 1 lot-traders with that tone "you're not one of those 1 lot traders are you?". I will briefly say I am not. However, its the 1 lot traders that are probably now are a large % of IB's retail customer base as their commission pricing caters towards their style. For both Futures and Stocks.
 
Actually, Jay, let me rephrase that:

If you believe it should be possible to offer what IB offer at a better price, go ahead and do it. This is America, nobody is keeping you from trying. This post will be read by several thousand traders who would switch to your company in an instant.

On the other hand, if you are not willing to do it yourself, who do you think you are to demand it from IB management?
 
Quote from Lobster:

I have two things to say:

1. Since def has already kind of confirmed it, I am hesitant to contradict him, but I am pretty sure that I occasionally change the limit of a 600 to 1000 share order between partial executions and still receive the .005 for all shares in excess of 500.

2. Jay, you really lost my ear when you tried to argue that customers pay indirectly for the SEC fee, and therefore it is not really free. Let me just say this: If you win $100k in the lottery, will you complain that you don't really get that money, but you are paying for it indirectly, because of course the lottery has to make a profit, so its customers in total always pay more than they are getting out of it? Or when you get a free sample of merchandise, do you complain to the company that gives it to you, on the grounds that since they are profitable, you somehow must be paying indirectly for the free sample? Do you complain to TV stations for broadcasting free programming because they are profitable? We all know that you can trace any cost, any expense that any entity has, back probably 20 steps until you reach someone extracting ore from the earth or being compensated for having had a patented idea. But what difference does it make? If one store offers you a hammer for $28.99 and another store offers the same hammer for $14.95, will you attack the cheaper store for still turning a profit?
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Lobster...sorry to have lost you on the replies. Would I attack the cheaper store you ask for turning a profit? I will assume your talking about IB as the cheaper store. Answer is yes I would make known to others that their pricing is not that "cheap" when viewed properly. Is this attacking in your eyes I don't know. I call it expressing an opinion. Furthermore, don't be hesitant to ask DEF anything I will confirm it for you now. Go to any monthly statement look at an order for 1000 shares and add up the commissions its quite simple.

If the order price was not changed during the fill the price will be 7.5

If it were changed during the fill it will be 10.

You can tell what the commission of a purchase or sale was by subtracting or adding back the base price x share price on your monthly statements. The fact that your not sure of it means you were not aware of it. Now that makes me feel a little better because thats the one and only one point of starting this thread is to make people aware of a subtle unknown commission structure that adds up to the end customer because of cancel/modify fees to a limit order.

Funny how when threads about cancel fees are posted about the options markets those threads are filled up with plenty of people who understand that its a pretty cheesy cost to pass on. Its not as if they don't know that its going to be a major revenue generator for their business as they charge way in excess of what the true cost of the cancel/modify actually is.

However, I knew that when I mentioned the almighty IB or tradestation here that people would have a cow. IB and tradestation are the preferred brokers of this site and most just don't want to face the mathematically reality.
 
Jay,
you started another thread, mentioning you were worried about your "extremely cheap" broker going bankrupt and you losing your funds. I think I'll stick to worrying about the big bucks than the pennies. You get what you pay for bud.
 
Here's a case where I think IB is truly amazing: Let's say someone trades 1000 share lots of SPY on ARCA. Popping off 1000 shares is not a big deal in that very liquid market, so a trader could lift an offer and quickly do the 1000 shares. For the second 500 of those shares, IB charges 0.5 cents per..... Wow! SEC fees on the SPY work out to be about 0.25 cents per share (dividing the selling charge assessed across both the buy and sell side, for example's sake here). I believe the ARCA ECN fee for taking liquidity is 0.2, or possibly higher. So, I can't see how IB even gets paid on those trades greater than 500 shares!

Now, most other firms will charge you the SEC fee on top of the commission, so when you see prop firms talking about 0.5 or even lower rates, you've got to figure some SEC fee added on, and even in some cases, the ECN fee.

I'm glad IB has an aggressive business model, and I like that they are run by sharp business people. I want them to stay in business and be profitable. I just don't see how anyone beats them, anywhere, on their commission structure for equities.
 
Quote from Spiderman:

Jay,
you started another thread, mentioning you were worried about your "extremely cheap" broker going bankrupt and you losing your funds. I think I'll stick to worrying about the big bucks than the pennies. You get what you pay for bud.
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Hey Spiderman, I agree. This place I was worried about has an extraordinary cheap commission structure. So I thought to myself hey let me move over 100k+ to this place and see how it is for daytrading purposes. Turned out its pretty darn fast and good interface. Anyway since daytrading isn't my main style of trading its swing trading I have my main account with the bulk of my money in the broker that I pay per ticket charges with. I definitely am a top down trader, meaning I chunk out the months and look at the big picture (aka good trading). However, when 2 things are the same I do tend to choose the cheaper alternative. As for firm reliability and getting what you pay for...your correct but are we to assume this also applies to IB? Are we saying IB is cheap thus we have a cheap firm or are we saying IB is expensive thus they are a quality firm and ranked 25 largest broker in the world for a reason? Thanks
 
This Jay123 guy is just pulling your leg. I know who he is. He likes to pretend he has been trading for years and has made millions of dollars, but actually he is a paper trader who lives in his mothers basement in Oak Harbor Mich.

Reality is IB is great, and even if you don't use them they keep their competitors in line. These days your profit problem will not be your commissions, it will be your trading.
 
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