The problem with IB

P

ProgrammerGuy

IB really is a great broker... good interest paid, good comissions, pretty good customer service, HOWEVER what kills me is that I use the IB API. If you enter in orders routed to SMART, it's only .005 / share, however if you route to a specifc exchange say ARCA it will be .013 / share.

So it is possible where if you route to SMART it goes to ARCA then... it'll be .005 / share, but if you route directly to ARCA it's .013 / shares.


I like to select my exchange because I like to provide liquity to ARCA and lift liquity at the NYSE, however this really is not possible at IB. Is there any way around this? Or is there another broker as good as IB that doesn't what this chop shop arrangement?

Thanks
 
Quote from ProgrammerGuy:

IB really is a great broker... good interest paid, good comissions, pretty good customer service, HOWEVER what kills me is that I use the IB API. If you enter in orders routed to SMART, it's only .005 / share, however if you route to a specifc exchange say ARCA it will be .013 / share.

So it is possible where if you route to SMART it goes to ARCA then... it'll be .005 / share, but if you route directly to ARCA it's .013 / shares.


I like to select my exchange because I like to provide liquity to ARCA and lift liquity at the NYSE, however this really is not possible at IB. Is there any way around this? Or is there another broker as good as IB that doesn't what this chop shop arrangement?

Thanks
More...

I don't like the extra fee increase for direct API orders either, but I can see why IB needs to do that. Their bundled stock commissions probably use statistics that are based on SMART routing. I.e., they know their cost of providing order execution when they control the routing. Once a person starts directing to specific exchanges, this cost structure may break down. They know that manual orders take long enough that a person will probably not be able to abuse the cost structure even if they do direct routing. However, if you allow the API users to have no extra fee for direct routing, then the API could be used to send in a ton of orders very quickly, thereby destroying their cost structure.

I wish IB would just not charge anything extra for direct API orders *if* the API user is not abusing the commission structure. If they are, then IB could charge extra for that user. However, this suggestion involves a lot of monitoring on IB's part so it probably won't happen. If I could route directly through the API with no extra cost, it would definitely make my life easier. Currently, if I must route directly, I do it manually because I don't want to pay up for the direct API order. So in my case, the extra fee is really annoying because I'm doing the same orders that my API program would have done anyway (just manually). From IB's perspective, the cost is the same either way. So why not let me direct route through the API at no extra cost?

Sorry, I don't know of better alternatives.
 
sp,

thanks for that lengthly description. I guess that makes sense now. Do you think that other brokers have the same deal?

I'm kinda thinking so...
 
Quote from ProgrammerGuy:

sp,

thanks for that lengthly description. I guess that makes sense now. Do you think that other brokers have the same deal?

I'm kinda thinking so...
More...

I have not investigated other brokers very much. Most don't have APIs. The ones that do usually pass along exchange fees on each order. Since I mostly take liquidity, IB's all-inclusive rate is a great deal for me. I have yet to find a place that offers the same things they do that fits my particular trading style.
 
It's more a payment for order flow issue than a "costs more" issue. They'll route you to whatever exchange is paying them the most at the time for their orders.

Quote from sprstpd:

I don't like the extra fee increase for direct API orders either, but I can see why IB needs to do that. Their bundled stock commissions probably use statistics that are based on SMART routing. I.e., they know their cost of providing order execution when they control the routing. Once a person starts directing to specific exchanges, this cost structure may break down. They know that manual orders take long enough that a person will probably not be able to abuse the cost structure even if they do direct routing. However, if you allow the API users to have no extra fee for direct routing, then the API could be used to send in a ton of orders very quickly, thereby destroying their cost structure.

I wish IB would just not charge anything extra for direct API orders *if* the API user is not abusing the commission structure. If they are, then IB could charge extra for that user. However, this suggestion involves a lot of monitoring on IB's part so it probably won't happen. If I could route directly through the API with no extra cost, it would definitely make my life easier. Currently, if I must route directly, I do it manually because I don't want to pay up for the direct API order. So in my case, the extra fee is really annoying because I'm doing the same orders that my API program would have done anyway (just manually). From IB's perspective, the cost is the same either way. So why not let me direct route through the API at no extra cost?

Sorry, I don't know of better alternatives.
More...
 
Quote from sprstpd:

I don't like the extra fee increase for direct API orders either, but I can see why IB needs to do that. Their bundled stock commissions probably use statistics that are based on SMART routing. I.e., they know their cost of providing order execution when they control the routing. Once a person starts directing to specific exchanges, this cost structure may break down. They know that manual orders take long enough that a person will probably not be able to abuse the cost structure even if they do direct routing. However, if you allow the API users to have no extra fee for direct routing, then the API could be used to send in a ton of orders very quickly, thereby destroying their cost structure.

I wish IB would just not charge anything extra for direct API orders *if* the API user is not abusing the commission structure. If they are, then IB could charge extra for that user. However, this suggestion involves a lot of monitoring on IB's part so it probably won't happen. If I could route directly through the API with no extra cost, it would definitely make my life easier. Currently, if I must route directly, I do it manually because I don't want to pay up for the direct API order. So in my case, the extra fee is really annoying because I'm doing the same orders that my API program would have done anyway (just manually). From IB's perspective, the cost is the same either way. So why not let me direct route through the API at no extra cost?

Sorry, I don't know of better alternatives.
More...

My understanding is that "unbundled commissions" = Flat IB Fee + 3rd Party Charges.
The Flat IB Fee goes down with volume... 3rd Party Charges are static.

But it's never that simple...
SMART is carefully designed to pad IB profits.

For example...
IB is rapidly expanding it's Listed market making...
Via it's IDEAL ECN...
Using a strategy where they often shave and fill 100 or 200 shares off your order...
Then send the rest to primary market.
This is ultra-low risk way to exploit BOTH the primary market and the Customer.

Everything fuzzy enough to be perfectly legal.

The last 6 months...
Based on about 3 million shares/month...
SMART + IDEAL has gone from 3% to about 13% of my Listed volume...
And NYSE has gone from > 90% to about 80%.

I'm doing very well at IB and am not really complaining...
But there are endless conflicts of interest here...
And one must remember that your broker is NOT "your friend"...
That they are in business to steadily, methodically take away your money.
 
I do 8-10m shares a month. Agreed IB is dramatically stepping up their internalization if you're taking liquidity and spread is over X cents.

#1-If I choose to take liquidity, I don't care who it's from...but when it's from IB, it's typically faster and cheaper. So feel free to give me that liquidity, IB...thanks.

#2-The biggest killer for IB is their recent speed in credit checking orders--it appears their applications for doing so are HDD based--not memory based application checks. I've had ECN orders hang on my API for 18-22 seconds -on the high end ,at the open. This is clearly an auto system killer.

#3-IB Is shunning one of the fastest growing brokerage growth areas --API/FIX...by instituting the direct order charges. Their fees for such well exceed what should be adjusted for.

#4-IB is losing ground quickly to those who can handle real auto API/FIX applications...sad to say as a diehard IB fan,...but, I'm shopping for a low latency broker.

#5 Your broker really isn't out to get you--they're working off their own models that tell them to provide liquidity if spread is X and your taking liquidity--not rocket science. They've got their algos....we've got ours.
 
Mr NBBO,

On one of those I might be able to help you - #2.

I run some of my apps on Ramdisk. Why not get the superspeed ramdisk and install jts and any other required software folders to ramdisk (ss will back it up on exit)?
 
An excellent suggestion Kiwi, but these are IB server side checks.

My drives are striped raid 15k SAS, but that doesn't help this situation.


Quote from kiwi_trader:

Mr NBBO,

On one of those I might be able to help you - #2.

I run some of my apps on Ramdisk. Why not get the superspeed ramdisk and install jts and any other required software folders to ramdisk (ss will back it up on exit)?
More...
 
Quote from MR.NBBO:

#2-The biggest killer for IB is their recent speed in credit checking orders--it appears their applications for doing so are HDD based--not memory based application checks. I've had ECN orders hang on my API for 18-22 seconds -on the high end ,at the open. This is clearly an auto system killer.
More...

MR.NBBO, I would like to look into this; can you please PM me with details? Thanks!
 
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