SPY options problem at IB

Quote from roncer:

So Zack at IB, after calling the exchange regarding a 13 second time lag on my most recent order, had the following comments to make. I taped what he said and will try and duplicate his comments exactly:
" These SPY options are not fully electronic traded like the emini's. The exchange receives the order and if none of the market makers there step up then the order is often sent to another exchange. They are re-routing the order to get the best price. In your case is was sent to the NYSE but it was not filled there and came back. This delay took several seconds. This is called a linkage order and there are some delays with linkage orders. When the order came back it went par (or to the crowd) and then it came back from the crowd and was almost immediately filled electronically. I don't beieve that this is set-up to be exclusively traded electronically. There is a croud invloved, their is an auction involved, and they're market makers involved so it's not going to be traded like the emini S&P. I asked the exchange if this kind of delay could happen mulitiple times in one day and they replied yes. I don't know why you think this has something to do with IB!"

So these were the comments. What to do?

Ron
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Roncer, I sent you a PM.
 
Quote from xflat2186:

You get the NBBO no matter what exchange you send the order to.
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That's not been my experience. I've placed limit orders just worse than the NBBO (because, especially with penny-denominated options, it takes too long to keep changing the order price) and sometimes I get filled at that worse-than-NBBO limit price if it was within the bid-ask spread of whatever exchange they routed to. I once called one broker (Ameritrade) to complain about it and was told that they do not guarantee the best execution price with options, and that they route the order to exactly one predetermined exchange per series.
 
Thanks to IB for the info about SPY options not being fully electronic. I knew SPX index options were like that, but didn't think it was the case with options for an ETF like SPY.

Were you placing the order at the open? I often have problems doing cancel-replaces and seeing late reports of fills during the first few minutes after the open. One issue may be if the broker sends the order to an exchange that isn't open yet, canceling can be a problem. So if I see that not all exchanges are open (i.e., not all showing quotes on the L2), I only send a small order, then wait for it to get filled before placing an order for the rest.
 
Quote from xflat2186:

There is no advantage for any exchange to hold up an order
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Does anyone remember the good old days when PHLX wouldn't let you cancel or change an order for 2 minutes?
 
Well just maybe IB or the folks at the exchange are trying to play it a little straighter as I traded SPY options a few times Friday and the fills were right on, no delays, no problems. Maybe it's good to post problems in detail as soon as they start.

Thanks again to all who shared including IB employees.

Ron
 
You are fully guaranteed the NBBO no matter who your broker is and which exchange your orders are routed to. If Ameritrade says otherwise I would move to someone else.

Whom ever posted that SPY was not fully electronic was wrong, the SPY is fully electronic and part of the NBBO.

In the past the rules were such that you were allowed 2 minutes for cancels and such and the floor took full advantage of that.

Ron posting your issues here, although helpful to you and others may learn from it, has NO effect on your fills or broker.
 
Can you explain what NBBO is?

Even with an IB employee stating exactly to me what the exchange people were expalining to him you are insisting that this is false or untrue??

Mighty confusing???

Ron
 
NBBO is the National Best Bid / Offer. A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities. Which means you as a retail investor is guaranteed the best bid or offer in all listed equity options as well as just about all the ETF options and so on. Therefore if you’re looking at XYZ Aug call’s and the market you see on your screen is .35 / .42 and you enter a market order you can do no worse then buying at .42 or selling at .35. IF you split the market and for example bid .40 in a limit order then you are subject to market fluctuation. The markets you see on your screen are basically compute generated and all participants on all exchanges honor them.

I believe you either didn’t hear your broker correctly or he misunderstood your original question. I could be wrong but I don’t believe the NYSE even has a US equity options business at the current time so your order would never have been sent there. Nor would any “exchange” help desk tell you their exchange routed your order to a different exchange, only your broker can rout orders. The SPY is FULLY electronic and listed on 6 different options exchanges, and its been that way for years.
 
Quote from xflat2186:



I could be wrong but I don’t believe the NYSE even has a US equity options business at the current time so your order would never have been sent there.

Nor would any “exchange” help desk tell you their exchange routed your order to a different exchange, only your broker can rout orders.
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You are wrong, the NYSE offers options via ARCA.

You are also wrong about routing. The exchanges have linkage agreements and if they are not NBBO, they will route the order to other exchanges.

Should you have any doubt, all this and more is available from the NYSE web site.
 
Thanks for correcting my on the NYSE. I know they are very interested in getting back into the listred options business. As I said... I could have been wrong. Since leaving the floor I have not been involved with retail order flow issues.
 
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