Can your broker follow you if you get good results?

IB is not going to copy your strategy. They have built a global trading system that has been there for years. And,yes, IB has another broker dealer called Timber Hill that only does prop trading. In fact, they probable take the other side of many of your option orders.

1245

 

Correct de jure, but wrong de facto. IB's complex parent structure, in addition to the retail broker/dealer, owns a massive proprietary trading and HFT operation. It is called Timber Hill, and its ability to capture customer flow for Timber Hill to trade against is likely the main reason IB was created in the first place.

"To the extent permissible under exchange rules, IB may direct customer stock, option, futures, or security futures orders to its market making affiliate Timber Hill LLC, or to another affiliate, for execution. In such cases IB's affiliate may act as principal in the resulting transaction and may earn a profit or incur a loss in connection with the transaction. The source and nature of any compensation received by IB in connection with any transaction is available upon written request of the customer."

https://www.interactivebrokers.com/en/software/reportguide/reportguide/noteslegalnotes.htm

 

I'm curious, would the transmission be in the form of individual orders with associated customer account details, or would it be amalgamated? I always thought they'd match internally what they could, then route whatever else to MMs. If they don't route streams of small orders, but amalgamate, then TH can't know what's coming from the very successful traders.

Of course beyond a certain size there'd be no need to amalgamate, but we hear that big players spread orders around to avoid attracting too much attention.

 

No, your broker will not follow you. Not enough money for them to care.

 

IB makes $2 - $5 in commission per trade. If they front run trade, they will make at least $500 per trade. I fail to see your logic.

 

This is precisely what I've been saying about MetaTrader software. The traders get the software "for free" and the brokers pay for it. But the software doesn't work until the trader connects to his broker. So all the broker has to do is wait for a trader with a good track record to come along, then bam, your MT strategy becomes your broker's MT strategy. Traders who trust MetaQuotes are fools imo.

 

Seriously, mate, i wouldn't worry about it.

 

It's what I'd do if I ran a broker, feed the best traders to a off shoot account and copy the trades, but that delay wouldn't make it front running and even if it was, there is a enough liquidity to not make it a huge issue, unless there like trading with a multi Million $ account ofcourse.

Also in the don't worry about it, if you worry about everything you'll go MAD!!

 

Then don't use passive orders if you are so suspicious.

 

This is not something 99% of traders should worry about. The few good ones could use two or three brokers and distribute trades.