Can your broker follow you if you get good results?

Discussion in 'Order Execution' started by anders888, Oct 4, 2014.

  1. newwurldmn

    newwurldmn

    Brokers are not in the business if speculating. They are in the business of getting you to trade.

    Most brokers know that most of their active customers don't make any money consistently.
     
    #31     Oct 11, 2014
  2. a typical et question.

    a better question.

    what's the chance of the thread starter having a method that anyone would want to copy?

    .00000000000000000000000000000000000000000000000000000000000000000000001 %
     
    #32     Oct 13, 2014
  3. Why not use 2 brokers to eliminate this possibilty ?
     
    #33     Oct 15, 2014
    MajorUrsa likes this.
  4. Are you for real? You make a joke out of yourself not only in one forum but multiple?

    So, with 2 brokers his track record is now being analyzed twice? That is your solution? Sounds a bit retarded to me. Are you?

    Not sure how much OP trades but because he indicated he is retail I question in whatever way he trades will have a bearing on how he/she is seen by his/her broker. Unless of course OP generates a superior track record. Even then it really depends on the specific broker and asset class, traded, what would happen next. Most equity orders are electronically routed and no broker would build in a mechanism to front run client orders because it would be committing suicide in light of stringent laws and regulations. But OP mentioned small cap stocks. If the stocks are listed and traded electronically then same story as above else it depends on the broker's reputation. Multiple "bucket shops" come to mind...



     
    #34     Oct 17, 2014
  5. 1245

    1245


    It is highly unlikely that Timberhill will know what client the order came from. It is more likely that they get the order flow directed to them with just the name of the broker on the other side. Remember, they pay for order flow from the street, not just IB.

    So no, they have no idea if the account is making money or not, nor do they care.
     
    #35     Oct 17, 2014
    justrading likes this.
  6. not the firm that pays for order flow, correct. They only see which broker the flow originated from and if multiple brokers (yes it exists) then they see the broker trail. But not individual client identifiable data. But I guess the issue of OP lies with his own broker. And I believe it is a waste of time to speculate on whether a broker will analyze performance of each individual client and trail orders of profitable accounts. If anything it would bolster the performance of the originating order. What I strongly believe is not the case is that a regulated broker would ever dare to build in algorithmic capabilities to front-run an order. Nowadays it is very easily detectable whether emails have been deleted off servers or other data shredded. It is much easier to detect for regulators and investigators whether software has been in place to front-run orders of whatever size or type.

    Having said that, I know that large brokerage firms definitely discriminate between their larger clients by profitability, especially when the broker takes the other side of the trade, meaning it does not act as agent. Brokers widen spreads all the way down to talking to clients about adjusting the business arrangements if the broker perceives clients use superior information and knowledge to glean advantages. But if a broker acts as agent I do not believe profitability is used to interfere with client orders. If at all then it is used for statistical summaries on overall client profitability stats.

     
    #36     Oct 17, 2014
    .sigma and justrading like this.
  7. sma202

    sma202

    I can tell you for a fact that this is done. Hedge funds look at their top pms and replicate their strat in their own account. Brokers do the same. IB has a prop market maker (forget the name) but would follow you.
     
    #37     Oct 22, 2014
  8. technically possible. But again, if the broker front-ran the client this could potentially have so serious repercussions for the broker that it may get shut down altogether once found out. Most any regulated broker would not take such risk. It is one thing to front run a single client order (and even that in today's environment is a highly risky thing to do) but an entirely different to scheme a systemic environment and implement technology to do so on a large scale.

     
    #38     Oct 23, 2014
  9. They could. However, they couldn’t do it before they execute for you – this is known as front-running. It’s illegal, somebody would probably go to prison for that.


    So no, IMO, you’ve got nothing to worry about. They could do it after you’ve traded, but that would work in your favour by moving the price of something you’re already in, improving your returns.
     
    #39     Oct 28, 2014
  10. Your argument is only valid for market orders. It is perfectly legal for a broker to front run your limit orders as follows. Say my system believes Ethanol is going to go down over the next few weeks and I want to accumulate a large short position. Since Ethanol (futures) are not very liquid I use a limit order at the midpoint of the current Bid/Ask of 167 Bid 171 Ask. So I place a Sell order at 169 limit. If my broker (as market maker) wants he can place a limit order to sell at 168 or even at 167 before my order is filled, all without breaking any laws. In the latter case the new market is likely to be 165 Bid 167 Ask and I will have to move my sell order to 166 limit and may still not get filled over the next few hours.

    The only thing the broker is prevented from doing is having a limit order at 169 (the same price as the customer) ahead of the customer : If the broker placed such the limit order before the customer, he has to "yield" to the customer at the same price (by forwarding the first fill that is assigned by the exchange to the broker on to the customer's account until the customer's complete order is filled, before assigning fills to the broker's own account).
     
    #40     Oct 28, 2014