Cboe blasts 'draconian' plan to test banning stock exchange rebates

Discussion in 'Wall St. News' started by ajacobson, Apr 19, 2018.

  1. mbondy

    mbondy

    Oh I see what you're saying.

    Well, brokers have to make money somehow and they do that through commissions. With IB, I pay around $3.00/1000 shares on tiered for adding liquidity so I'm not complaining.

    I've got a big binder at home from an old job that shows how much the rebates are coming from all the exchanges and it's really not much different than IB passes through, just so you know.
     
    #11     Apr 19, 2018
    312 likes this.
  2. JSOP

    JSOP

    How do you do that? I switched to Tiered and I paid $100/10K shares and $100/100 contracts of options. I was using combo orders and even though both legs are supposed to be limit orders but somehow I always get charged the highest commission and I set my routing as "SMART" routing with Max rebates. I have been trying to ask IB support and so far they have not been helpful.

    Like I said before, brokers are already making plenty of money via commissions, miscellaneous fees, interests, and borrowing charges. They shouldn't be receiving kickbacks when they are working our orders.
     
    #12     Apr 19, 2018
  3. mbondy

    mbondy

    That doesn't sound right...
    One sec, let me track down the IB commissions and rebates list.
     
    #13     Apr 19, 2018
  4. mbondy

    mbondy

    Okay I see the problem you're having (with stocks, sorry I don't know anything about options). I think that I mentioned this before to someone on the forum that was having a similar problem - the whole point of tiered is that you route your own orders. Smartrouting is like routing for dummies and has no advantage: your order will get sent to the best quoted price exchange. If you've selected 'max rebates', all that does is differentiate between which high priced exchange to send your order to.

    "When using SmartRouting, clients should be aware that IB may route the order to an exchange with a better quoted price but with substantially higher fees."

    In other words, route your own orders. Have a look here:
    https://www.interactivebrokers.com/en/index.php?f=1590&p=stocks2

    Scroll down to US Exchange Fees and click on any exchange and you can see what they're offering you. Anything in brackets is a negative value (a rebate). So for example, ARCA and EDGX (direct edge) rebate you for adding liquidity and charge you for taking it. Or you can get an inverted exchange like BYX that rebates you for taking and charges you for adding. You should familiarize yourself with all of that and decide what's best for you depending on how you normally enter and exit the market. Keep in mind that the exchange which offers the highest rebate is not necessarily the best exchange to use - if no one hits it (with market orders) then your order is likely to sit in the queue until price finally passes through it.

    All in, by smartrouting, you're being charged the base $3.50/1000 share commission + at least another $4.00/1000 share in exchange and passthrough fees depending on where your order is getting routed and what the price per share of the stocks are that you trade. Higher priced stocks = higher fees. You can avoid all that extra cost by routing your own orders to the exchange of your choosing.

    That help?
     
    #14     Apr 19, 2018
    JSOP likes this.
  5. JSOP

    JSOP

    I really should've talked to you about this. IB support is completely clueless. So how do I do this for combo orders? When I am setting up the combo orders, many of the exchanges that I want to route the order to is not even available. And also I want to route my option leg in the combo order to a different exchange because option exchanges have different fee structure but I don't see an option to do so. All I see is an option to direct both the stock leg and the option leg to the same exchange.

    Thanks a lot for your help. :thumbsup:
     
    #15     Apr 19, 2018
  6. Metamega

    Metamega

    Sounds like a bad plan considering most retail orders never hit an exchange. Most get passed to shops paying for retail order flow. They give a small price improvement, pay the brokerage a little, their all happy.

    This would really only effect limit orders. Which I don’t think that is the issue.
     
    #16     Apr 19, 2018
  7. mbondy

    mbondy

    I wish that I could help you further, but I'm not familiar with how orders are designated or executed on IB's software. Perhaps someone else who uses tws can chime in here. I use a completely different front end (das trader) that is reminiscent of a platform that I was accustomed to, and all of my routing and order structuring is done there.

    If IB support fails you, and no one else here is able to help, perhaps as a last resort you also might want to look into third party software to make your life easier. The link below includes all of the allowable software able to be connected to IB's servers and I know that there's some stuff there that is specific to options trading:

    https://gdcdyn.interactivebrokers.c...softwareTools&selectedClient=tradersInvestors
     
    #17     Apr 20, 2018
  8. JSOP

    JSOP

    All I want to know is just how combo orders transmitted and how each leg of the combo order can be direct transmitted to separate exchanges. I shouldn't have to use 3rd-party software for that. Oh well, when worst comes to worst, I just won't use combo orders. I will just sent each individually.

    Thanks for your help. Good trading!
     
    #18     Apr 20, 2018
  9. ajacobson

    ajacobson

    This would also ruin the Robinhood business model.
     
    #19     Apr 21, 2018
  10. ajacobson

    ajacobson

    Access-Fee Pilot: Fewer Fees, More Fragmentation?
    Traders Magazine Online News, April 19, 2018

    Rob Daly
    inShare
    The access-fee pilot proposed by the U.S. Securities and Exchange Commission may increase fragmentation in the equity markets as Cboe Global Markets considers launching two additional order books to offset the pilot's fee caps and prohibitions.

    "We have six exchanges, but we use four for equities and four for options," said Chris Concannon, president and COO of Cboe, during the National Security Traders Association's 2018 Market Structure Symposium in Chicago. "I promised the industry previously that we would not light up those books, but with the access-fee pilot, that is off the table."

    [​IMG]


    However, SEC officials seem more intent than ever that the pilot will move forward.

    "While there might not be consensus on some element of a pilot, it is one of the few areas where there is significant consensus around market participants that something needs to be done," said Brett Redfearn, director of the Division of Markets and Trading at the SEC, during the symposium.

    The SEC's now-defunct Equities Market Structure Advisory Committee recommended most of the pilot's design, but it was the SEC that inserted a no-transaction-fee test bucket into the proposed pilot.

    "Given the comments we were given in connection with the EMSAC recommendation and all of the related issues at stake, I believe we would be missing a very important opportunity to fully evaluate exchange pricing models without proposing this feature within the scope of the pilot," said Redfearn.

    The SEC expects to use the data from the pilot to help it understand how rebates and rebates at various levels affect order routing, liquidity provisioning, order-book depth, and the size of the spread across various segments of securities.

    Redfearn would like to see how low or no rebates would affect whether institutional traders would be more or less likely to obtain queue priority and capture the quoted spread as often as they do now.

    "Would there be more or fewer retail limit orders displayed on exchange and what would the net effect be on market quality," he asked.

    Potential outcomes of the pilot may be a single access-fee cap or a tiered access-fee cap structure based on stocks' liquidity characteristics, according to Redfearn.

    "This scenario also would require a hard look at the appropriate role of regulation in transaction-fee pricing," he said. "In contrast, the test bucket without exchange rebates we would like to understand better whether competitive market forces could successfully cap access fees without a government imposed cap."
     
    #20     Apr 21, 2018