I've gone through my MKT order executions (for stocks) and see that I'm getting considerable improvement over NBBO, which is good. However, all else equal, I'd like to use marketable LMT orders instead to prevent getting crazy off-market fills....question is, will all else be equal? Does anyone know if the routing logic / dark pool access / internalization differs when using MKT vs. a marketable LMT order at IB? (I've tried support on this - person I spoke with wasn't able to answer)
Are you choosing SMART route or using DMA. If your choosing SMART route, only IB can tell you. If your using DMA, you choose the exchange and any marketable order should be done the same. Unless those trades are being filtered to a dark pool first which I don't believe they are. A typical SMART route looks in the dark pool first, then the ECNs, then the Dark pool, then back again until complete. It will always favor the dark pool.
Yes, I'm referring to SMART routed orders. I'm asking the question because I thought I read somewhere that LMT orders had to be posted within a certain period of time...although I can't find where now...maybe I have it wrong. Anyhow, even if LMT orders cannot be held as long as MKT orders before being routed to an actual exchange, is the time limit restrictive enough to prevent the same dark pool / MM checking that a MKT order would experience?
IB's SMART is designed to obtain the best available price and thus whether you submit market or lmiit orders, you should still get the same price improvement and fills if the order itself is marketable. (you mention internalization but please note IB does not internalize orders). Personally, I hate market orders as you don't have total control of your order. Proof of course is in the pudding, change to marketable limit, check your fills and you should still see roughly the same level of price improvement you're seeing now. Hope this helps clear things up for you.