Registered: Sep 2011
05-02-12 12:44 AM
Quote from IB in 2006 regarding Timber Hill as a liquidity provider.
Quote from IBj:
I will address 2 points: (1) about the integrity of the IDEALPRO market place (I am NOT discussing IDEAL, which is like the odd-lot or small order facility, and is going to be subsumed soon); and (2) Timber Hill role in IDEALPRO.
SKEWED OR BIASED PRICES
Sorry, your observation must be created by something other than the empirical IDEALPRO activity. There is no quote biasing since IB is not a counterparty. We don't care about anything except how to route your order to the NBBO as quickly as possible. IDEALPRO is simply an assembly of prices provided by various liquidity providers (generally banks), and IB customers.
Customers can trade with the liquidity providers and with each other. The banks are order receivers, not order generators, and therefore are not able to see each other's prices, nor trade with each other (at least not over IDEALPRO; they trade with each other in the interbank market, for example using RDS or EBS)
If you see a situation where there is some crossed price, or other inconsistency, call Customer Service and report it IMMEDIATELY. Ask them to send the observation to the head of risk management. Or send me an email via E-T. I am in charge of the FX platform and if there is anything more than a straight assembly of liquidity provider quotes to make a quasi-order book, I would like to know because that would mean there is a technical problem of some kind.
Regarding the relationship between IB and its affiliate, Timber Hill, for Forex:
Timber Hill is treated as a both a liquidity provider and a customer of IB. TIMBER HILL Hill DOES NOT KNOW -- NOT ONCE, NOT EVER, NEVER -- ANYTHING PRIVATE ABOUT CLIENT POSITIONS, CLIENT ORDERS, CLIENT ANYTHING. NOT BEFORE THE TRADE, NOT AFTER A TRADE. NEVER.
The only interaction between a Timber order and a client order happens when a client wants to sell(buy) at a price where Timber is NBBO. Or Timber wants to trade where a client order is NBBO. At the exact moment of the trade, both parties know that someone else had an interest to take the other side. This is exactly the same information that any trader knows at the moment they do a trade, no more, no less.
If an order comes back with exchange=TMBR it just means the client hit a standing order that was the NBBO and was provided by Timber or other large institutional client. If the exchange=IBFX, it means the counterparty was another client and the trade crossed inside IB's systems. In other words, if a clients hits a Timber Hill standing order, the trade happens on TMBR. If Timber, or any client hits your standing order, the trade happens on IBFX.
THERE IS NO (ZERO, NONE) DIFFERENCE BETWEEN THE ACCESS, DATA FEEDS, PRECEDENCE, OR PRIORITY BETWEEN IB CLIENT ORDERS AND TIMBER HILL ORDERS. TIMBER HAS NO FOREKNOWLEDGE OR ADVANTAGE OVER CLIENT ORDERS IN ANY WAY.
I hope I make my point clear. I apologize if my presentation was somewhat blunt but I want to be completely unambiguous on this point. THERE IS NO, NONE, NEVER ANY CONFLICT OF INTEREST ON IDEALPRO OF ANY KIND. That is why we built it on the ECN model, and not as an FCM type like, for example, Oanda.
So maybe Timber Hill is no longer a liquidity provider or no longer takes the other side of a trade.
Below is an IB statement (current) stating that IB does not take the other side of forex trades. But the statement only covers Interactive Brokers, LLC
A significant difference from many other FX platforms is that Interactive Brokers LLC ("IB") acts as agent and does not take a position on the other side of the trade. Our only priority is to execute the order at the best possible price.