does IB have a conflict of interest as a market maker and a broker?

Discussion in 'Interactive Brokers' started by cognitivefun, Apr 18, 2004.

  1. I have been using thinkorswim for options trading and I am very happy with their support and their trading platform. )I am a beginner. )

    thinkorswim bills themselves as the only broker that doesn't accept order flow money.

    Execution seems to me to be more important than commissions. IB is both a market maker and a broker, and to me this is clearly a conflict of interest. They have more incentive to internally route orders, don't they? They don't need order flow money, they already are on the other side of the order and collect the full pop.

    What do you think? Is this no big deal?
  2. Don't worry: you can count on a Chinese Wall between the two (no garantee of thickness though) :D Trust the Ethic in some Business I say :)

  3. ktm


    A lot has been posted here about the topic over the last few years. By all my research...which is quite a bit...all appears very much on the level and even conservative on IB's part.

    If you have any concerns at all, simply use a limit order.
  4. def

    def Sponsor

    IB will route to the exchange where it will get you the best price. As timber hill is one of the largest market makers in the states, there is a good chance that any option order from any firm will have timber hill on the other side.

    Read the order routing details that IB sends to the SEC each quarter. It states: "IB receives order flow payments from U.S. option exchange specialists and/or market makers pursuant to the MANDATORY marketing fee programs that have been adopted by the exchanges and approved by the SEC".

    Thus if you are a member of an option exchange you will receive flow if the exchange provides payment. You have no choice. As TOS is not a member of an exchange, they can state that they do not accept flow. I believe their statement is thus somewhat misleading. They are a good firm and can see why they would try to emphasize this point but it is a distortion of the facts and not really correct.
  5. No.

    IB is an island of credibility in a dirty business.

    (I mean, granted, they're options traders, which doesn't exactly make them angels :D, but they're a first rate, honest firm, who, INCIDENTALLY, has taken many initiatives to bring electronic trading to the US markets, which has saved me personally a ton of cash, since I am not a floor trader).

    AND, they even made a big effort to make their phone reps friendlier.
  6. traderob


    When did this happen? I gave up trying to talk with IB on the phone last year, have they improved?
  7. I used to work in customer service as well as on the floor

    of several major futures exchanges in NYC for a well

    known ( in the industry ) FCM

    IB's reps are doing fine .... I think some of the people who are complaining about their cust reps have not been in the business working with traders all day long ...

    believe me ... it is not easy ....
  8. Very much so.

  9. As long as it is an electronic interface which gets you the best bid or offer the conflict of interest remains theoretical. You get all different names on multiple executions of stock. I have retirement money with Fidelity and notice that I always get their name as the give up if they make a market in stocks!

    Far as the phone support......the only time I have called is when I have done something DUMB!
  10. Yes, greatly.
    #10     Apr 19, 2004