Why are there fees for cancel/modify?

[surfer25]

Just wondering why are there are fees for canceling or modifying options orders, since stocks don't have them.
Thanks.

 

[1245]

Quote from surfer25:

Just wondering why are there are fees for canceling or modifying options orders, since stocks don't have them.
Thanks.

When electronic option markets opened the pipes up to HFT, many electronic market makers would flood option markets with a large number of orders all going after the few customer orders left on the book that are good, or after a market maker that had stale markets. This extreme volume would often shut down exchanges like the AMEX or PHLX. The exchanges had to build an infrastructure to deal with this. So, any trader that has excessive ratios of canceled orders to fills, get charge for the bandwidth there are using. Most customers don't receive any cancellation fees unless you earn them, except at IB which charges everyone.

 

[surfer25]

Quote from 1245:

When electronic option markets opened the pipes up to HFT, many electronic market makers would flood option markets with a large number of orders all going after the few customer orders left on the book that are good, or after a market maker that had stale markets. This extreme volume would often shut down exchanges like the AMEX or PHLX. The exchanges had to build an infrastructure to deal with this. So, any trader that has excessive ratios of canceled orders to fills, get charge for the bandwidth there are using. Most customers don't receive any cancellation fees unless you earn them, except at IB which charges everyone.

Thanks for the response.
Is there an option broker with commissions as low as IB that doesn't charge cancellation fees?

 

[1245]

Quote from surfer25:

Thanks for the response.
Is there an option broker with commissions as low as IB that doesn't charge cancellation fees?

If you have enough assets and volume to use an Introducing Broker, yes.

 

[smile]

Quote from 1245:

If you have enough assets and volume to use an Introducing Broker, yes.

What are enough assets and volume to use an Introducing Broker?
Just a ballpark. Thank you.

 

[Daal]

Doesn't BATS routing enable one to bypass cancel/modify fees?

 

[comintel]

Quote from surfer25:

Just wondering why are there are fees for canceling or modifying options orders, since stocks don't have them.
Thanks.

I believe that Interactive Brokers does not charge cancellation fees for options spread orders, so that is a way around it.

 

[donnap]

Quote from Daal:

Doesn't BATS routing enable one to bypass cancel/modify fees?

Apparently not. See IB website.

But the fees are negligable on that and several other exchanges.

It's the direct routing comms. that are the killer to that idea.

 

[1245]

Quote from comintel:

I believe that Interactive Brokers does not charge cancellation fees for options spread orders, so that is a way around it.

IB does not charge cancellation fees for options spread orders, because when you use SMART ROUTE for Complex Orders, your order DOES NOT rest on the COB at the exchange. It rest in their system until they deem it executable. Single orders on the Smart Route make their way to an exchange.

 

[surfer25]

Quote from 1245:

IB does not charge cancellation fees for options spread orders, because when you use SMART ROUTE for Complex Orders, your order DOES NOT rest on the COB at the exchange. It rest in their system until they deem it executable. Single orders on the Smart Route make their way to an exchange.

Does that mean that complex orders submitted via IB smart routing have to match up with a posted bid/ask combination in order to get executed? In other words, no one can see your bid or offer of a complex order submitted via IB and accept it, you just have to wait until some combination of bids and offers matches your price?