does hidden order that provides liquidity receives rebates from exchange?

Discussion in 'Order Execution' started by trend2009, Feb 21, 2020.

  1. jeb9999

    jeb9999

    You clearly don't understand how PFOF outfits like Citadel operate.

    A buy order that is a limit order at the current bid or a sell order at the current offer is quite valuable to Citadel.

    Citadel gets to lean on those orders. That is why when a stock is 100.00 bid and 100.01 offer you see order fills at 100.0001 and 100.0099.

    Citadel's risk is limited to only .0001 on the buys and sells.
     
    #21     Dec 30, 2021
  2. Can you please elaborate on your test? Did you use market or non-marketable limit orders?
    With the cheapest commission based broker that I know of, IB, orders routed to the major exchanges are about $0.0067 per share in commissions and fees - most of it are the exchange fees. For are liquid stock with $0.01 bid/ask spread this could not possibly beat a $0 commission order filled at NBBO at the prevailing bid or ask, could it? The round-trip cost in commissions alone would be 2 * $0.0067 = $0.0134 per share (more than the round-trip indirect cost of $0.01 for commission-free fills at NBBO), even if BUY market orders were filled at the bid and ASK market orders at the ask (very unlikely).

    My use case scenario is a small retail order.
     
    #22     Aug 2, 2023