What Is Rebate Trading?

Quote from Bison42:

Typically rebate traders play in highly liquid stocks. The y stay on the bid side or the offer side, never reaching across the market. They make virtually no money in P/L, Just rebates for remaining passive.

Keep in mind that these stocks have hundreds of thousands of shares at every single price point. Tons of shares may trade and you may not get an execution if you are at the back of the line.

If you are going to be a big player, you may want to use an Agency Execution firm as they can have "Parity" with the orders queud up on the book. That way if a ton of stock trades at a price where you have an order, you will get your fair share.
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Hi Bison

Great post - could you add some colour (color for US people) to that. Very interested in this parity idea.

I scalp for 0 to 3 ticks, so I am sensitive to rebates but they are not the be all end all for me. Maybe some guys can make it work on rebates alone but you need volume, big volume.
 
Quote from Bison42:

Typically rebate traders play in highly liquid stocks. The y stay on the bid side or the offer side, never reaching across the market. They make virtually no money in P/L, Just rebates for remaining passive.
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If the price goes against you, then you are screwed once. If the price keeps going against you every time you do that, you are screwed royally. So what are you talking about no money in P/L?

What is this non-sense about remaining passive? When you offer liquidity you are not passive. You are taking a risk.

Rebates compansatre for risk. Otherwise they would not offer them. I think some people here have never traded anything, just reading books and articles.
 
Quote from intradaybill:

If the price goes against you, then you are screwed once. If the price keeps going against you every time you do that, you are screwed royally. So what are you talking about no money in P/L?

What is this non-sense about remaining passive? When you offer liquidity you are not passive. You are taking a risk.

Rebates compansatre for risk. Otherwise they would not offer them. I think some people here have never traded anything, just reading books and articles.
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credit stocks usually move 3 or 4 cents a day...
So when credit trading you're basically betting that you'll be able to buy and then sell some 6 times on one of these flat stocks before you have to take a 1 cent loser. risk management is a must in such a strategy, since you're making 0 pnl you cannot affort to take any loss greater than $0.01 on a trade...
 
Quote from eusdaiki:

credit stocks usually move 3 or 4 cents a day...
So when credit trading you're basically betting that you'll be able to buy and then sell some 6 times on one of these flat stocks before you have to take a 1 cent loser. risk management is a must in such a strategy, since you're making 0 pnl you cannot affort to take any loss greater than $0.01 on a trade...
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...and you hope that market makers won't take a hit on you but watch you making rebates. Have you people ever traded seriously? I wonder? Are you all on simulation?
 
Quote from intradaybill:

...and you hope that market makers won't take a hit on you but watch you making rebates. Have you people ever traded seriously? I wonder? Are you all on simulation?
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I haven't seen a simulator that works for credit trading yet. You can't simulate queues.
I traded credits for little more than 2 years before the days of reg nms.
 
Let me see if I got it...

1. Trading fees need to be less than the rebate.
2. Stock needs to be going sideways in small range.
3. High volume.
4. Buy on bid and cover on ask.(vice versa)

Its that easy?
 
 
Is this a good stock for credit trading?(see attachment) It has 12M average volume and is going in narrow sideway range. I cannot find anything like how in the video C had 200M volume. The closest thing to that volume wise is BAC and SPY but, they are not in narrow sideway range...
 

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