I tend to take liquidity, and don't do enough volume to get into the cheaper tiers, so I think the flat-rate works out better for me.
So far in my tests IEX is a bit better than IB Smart, I'm having a smaller price impact with that then with IB's router. I haven't tested extensively but as a loose observation it is working
Thanks for the discussion here. Would like to try the IEX Thor also. Is changing order routing to IEX instead of Smart enough, or are there other settings? (as I recall there are some orders that reside on IEX system while others get routed out in case they become marketable). BTW, have read your book. Good job! Havent paid much attention to HFT until the Lewis book, but I am now determined to reduce my losses/ tax/ leakage to them and your book provides a good understanding of the problem and some potential solutions.
Thanks. Just sending to IEX is enough, if they don't have the shares they will re-route to other places while preventing the HFTs from getting ahead of them (through the 350ms delay) and not going through dark pools (as far as I'm aware). Sometimes they do have the shares and you can get 'price improvement'. I'm not 100% sure that is what is going on but I notice that some of my IEX orders are getting filled with 'shaved prints', like 11.345 etc. Subpenny trades but offering decent price improvement. These cost savings can add up. I think they come from IEX resting orders AND IB orders that are on IEX as well (since they operate with 'broker priority', they try to match trades when the broker has both sides even if one side is on the back of the line). Don't quote me on all of this, I'm just experimenting and thinking out loud here. I would appreciate comments from others
I noticed that IEX has a new order-type geared towards retail orders: http://www.iextrading.com/insight/retailfaq/ RouteToRestAway - When aggressive, the order will behave like âRouteToTakeâ described above, but when passive, it will choose a single lit Reg NMS âprotectedâ market center and rest the entire order there displayed. No idea if IB will implement this, but personally hoping they don't or at least make it optional. If I want to route a passive order to a lit market, I'd prefer to do it myself. From an information standpoint, also don't like the idea of any market participant being able to determine that an order is from retail, either directly or indirectly, and not sure if this new order type will leak this. On another note, DirectEdge seem to be doing just this - seems like orders from Retail will be marked as being from retail. http://www.sec.gov/rules/sro/edgx/2014/34-72292.pdf
I just called IEX market desk to ask about their router. They told me they don't use Thor but that there is no need to. What they do is to slow down their own HFTs by the 350ms then send out the order to all the displayed exchanges and ECNs (plus Lava Flow) in a specific order (their routing table is proprietary and they said they don't disclose the sequence that they hit). They say they have a 98% fill rate (they will email me the data). It appears that they don't need Thor because there is not enough time for the HFTs in one exchange (say at BATS) to send out his cancel/change to another exchange, by the time the cancel reaches the other exchange (say ARCA), the IEX order will have hit there anyway. It doesn't have to be timed exactly like Thor because IEX has a large headstart advantage with the HFT lag. Even if the orders hit the multiple NMS exchanges/ecns at different times, those time differences are likely to STILL be lower than the time it takes for HFTs to spread out their cancels/changes across the other exchanges/ecns This makes me think their router is likely to be superior to IB's smart and certainty to the vast majority of other brokers routers due the simple fact that in theory it makes a lot of sense and their data backs that as well (98% fill rate). They also seem to be more aware of these issues than other folks I'm going to be writing an article to add to my book on how IEX works and how to use it this weekend. If anyone has any data or done tests on this, let me know
I thought that's basically what Thor was doing? Maybe they don't call it Thor since it's property of RBC?
I'm asking them over email for more detail. It seems that they have their own proprietary system (they are trying to patent it) where they don't hit all the exchanges/ecns at the same time but roughly at the same time in a certain sequence. Maybe its an improved Thor because it takes into account execution costs as well as not tipping off HFTs
Just a correction. Its 350 microseconds not milliseconds. I'm not sure yet how they built their system as to not violate the Thor patent. Probably has to do with the language from the patent They have some more info here http://www.iextrading.com/insight/router/