Does IB trade against our orders or otherwise sell/share/use information about what kinds of positions we are taking? If not, do the Nasdaq market makers, in general, trade against any order that they perceive as being "retail," and if so, how do they know it's a retail order (I normally use SMART, TWS). I'm not complaining, but sometimes it seems like stocks move in exactly the opposite direction after I establish a position. I've been trading for years and years, profitably, so I'm not whining, I just wondered if IB trades against us or shares our information with anyone else who would potentially use it to trade against us.
All the time. Where else do you think the low commissions come from? Free lunch? Never. Whenever "they" find their chance to offering free lunch increase, they change to prevent it happening.
IB DOES NOT !!!! NoMore, just when you were getting back in my good graces you once again make a fool of yourself by making a completely inaccurate and false statement. newest: take a look at the SEC routing report IB files quarterly. http://www.interactivebrokers.com/download/1Q_2003_IB_QOR.pdf I'll quote: "IB does not generally accept payment for order flow for stock orders. For certain orders routed to ECN's, however, subscribing broker-dealers are paid liquidity rebates. These rebates are credited against fees charged by the ECN's to execute other orders....... IB receives order flow payments from US option exchange specialists and/or market maekrs pursuant to the mandatory marketing fee programs that hve been adopted by the exchanges and approved by the SEC. IB affiliate TImber Hill LLC makes markets in stocks and acts as the specialist or market maker on all US option exchanges..... For non-directed IB customer stock orders routed using IB's Smart Routing systems, if an IB affiliate is willing to provide an execution at the best available posted price or better for that stock, IB generally will send the order to its affiliate for an immediate automatic execution. Orders sent to IB affiliates for automatic execution are eligible for price improvement. Only orders that are immediately executable are eligable to be routed by IB to an affiliate for automatic execution by that affilate. Likewise, if an IB affiliate is a specialist or market maker on an exchange that has posted the best bid or offer for an option contract for which an IB customer has placed an order, and another exchange is also posting the same best bid or offer, IB generally will break the tie by sending the order to the exchange where the IB affiliate is acting as specialist or market maker"..... Read the report, there is a link to the statiscal quality and speed of fills.
excellent question, i wonder the same all the time. it seems like there are probably laws which prohibit the use of this non-public information.... perhaps a chinese wall ala IBs where the buy and sell side businesses are vaccuum sealed. still, if brokers are legally allowed to use customer order info for proprietary trading, this is potentially some of the most valuable information around. what about futures trading, can IB analyse customer orders and accounts for it's own futures trades? I know from an aquaintence/specialist on the amex that firms like sesquahanna do just that, mimick their best customers' activity. it is his full time occupation, monitoring his highest performing customers' activity for proprietary use.
paranoia strikes again, do you really think the market maker will try to move the market against your position because you just traded a 1000 shares with him when a big institution can come by and do 200000 ten seconds later on the opposite side ? Of course the market maker "trades against you": if you sell to him, he buys, if you buy, he sells, but he tries to ofset his position as quickly as possible so normally he trades in a different timeframe as most poeple trying to maintain his positions as small as possible. This is essentially what the market maker system is all about, in Europe it works differently on most exchanges with a centralised market place. You can like it or not, but this is how it works, or you can become a market maker yourself ...
Maybe you misread vanilla2: "I know from an aquaintence/specialist on the amex that firms like sesquahanna do just that, mimick their best customers' activity. it is his full time occupation, monitoring his highest performing customers' activity for proprietary use." That is what I suggested must be "wildly illegal"
While I am reasonably sure that IB is not doing anything illegal or even semi-legal like datek used to, there is one thing that I have observed, and I believe it happens at the NYSE: Often times I see a trade the second after I put in my order, and it is exactly the price and size of my limit. Yet, I never get that fill. At first I was thinking IB gets the fill and decides later whether to allocate it to the customer account (mine) or to one of its own accounts (like datek used to, didn't they?). But when you think about it, such behavior wouldn't really make sense. It appears much more likely that someone at the NYSE (probably the specialist) is the one who executes the trade against "my" trading partner, but holds it in his own account while deciding whether to give it to me or not. He is almost allowed to do that, isn't he? I mean, he is SUPPOSED to trade based on order flow... Now, the other thing is, once your order has been routed to the exchange, it is (usually) visible to anyone, therefore it is still possible that TMBR trades against it or makes other trading decisions based on the information contained in your order, just like thousands of other market participants, isn't it?