ECN Rebates

Discussion in 'Order Execution' started by trade-ya, Jun 25, 2003.

  1. trade-ya


    Just curious, do any of you guys trade for ECN rebates only? This seems like a major edge and I'm wondering if people are really exploiting it to the max. Thanks for any responses...Neal.
  2. search site under "liquidity trading" plenty of info on these boards about that scam
  3. Yes, although it is better thought of as.. reducing my costs of trading, rather then focusing your style on the rebates per se..

    For example, you can focus your style on the rebates and attempt to make your money by doing huge volume, so the focus of your trading is to add liquidity and just try to not lose.

    I have found that this is problematic, because when you are "trading to break even" your margin for error is very small.
    Better to trade and try to make profits, and look at the rebates as your cost cutting measures.

    To those who dismiss rebate trading and there are many of them on this board, I just point out that .001 on 1 million shares a month is $1000. It's not a fortune but I'm not going to turn it down either.

    I don't intend to promote rebate trading, but especially if you are trading Nas stocks, you should be aware of how the fees/rebates model of the ECNs fits into your style.
  4. trade-ya


    Thanks for your responses. I am searching the site under Liquidity Trading for more info. I personally think that it's possible to "trade to break-even" if your stock selection in proper. In other words, stocks like SIRI, CHTR, SUNW, since they trade so tight and so deep, I would guess you can automate a system to make or lose less than a penny (usually the spread is less than 1c in those stocks). Also, you should be effectively getting an "edge" by acting as a specialist or market-maker role. I think the rebates are $2 per thousand, if you can do 15 Million rebatable shares per day, isn't that like $30,000 per day, just in rebates? Obviously, you need to back out clearing costs, etc. Just curious about others opinions. Not trying to sell this idea, just thinking about doing it myself. Thanks!
  5. I tried rebate trading with a fly by night shop using ATTN ECN(what a joke) and found that in order to get hit you had to trade aganist the trend (bad for obvious reasons). Also going for flat you also had to worry about hitting yourself (ATTN) and losing rebate. Trading CIEN we got traded around all the time (ROFL).
  6. A few challenges doing this..

    Apparently many people have caught on to doing this because the spread in some of these low priced stocks is an unbelievable .001, so you are making a tight market. Any price move against you and you will have to bail out so you will also certainly lose the spread in addition to the price move.

    Even if you can get cleared at .005, that's $75k on 15 million shares, so you will certainly have to find someone to give you a gross payout, no (or very minimal) comm deal, so you will definately have to split profits with the firm.

    Adding liq, certainly you are a market maker, however the edge gained by making such a tight spread I would argue is more than offset by the directional risk against your position.

    In spite of this, there are some who are making it work - it would be interesting to hear how they deal with these issues.
  7. hate to burst your bubble but liquidity traders are usually happy to do a million shares a day
  8. trade-ya


    I know that you can do much better than .005 in clearing. I'm working to automate this system, however, i agree to some extent about the directional moves against. I think that even if you are selling lower (at hundreths of a cent) and you are adding liquidity, you can still make good $$. Thanks for the comments thus far!
  9. trade-ya


    Rawman, I hear what you are saying. I would say it's hard to do more than 1 Million shares per day, however, I'm speaking about a strictly automated system. I think with that, 15 Million is reasonable.
  10. very intriguing....i would like to present a real world example for feedback--- for starters, does anyone have the most recent data on ISLD rebates for "adding" liquidity & taking away liquidity. It seems that it changes often.

    Lets assume that your commission rate is .005 per share for this real world example. To me liquidity trading means a simple act of getting in and out. As someone pointed out, for the most part, if your filled on the bid with size or vice versa, the next thing you know your holding and hoping or averaging down, or cutting your losses, etc. regardless if its 60 minutes or 5 hours or 60 days- this is not liquidity trading -- its trading....i am only concerned with the mechanics of 60 seconds or less.

    Take SUNW:
    Bid: 3.105
    Ask: 3.108

    You add liquidity by taking out the ask for 3.108 and sell the shares to the bidder for 3.105 --

    yor loss is .003 + your commission of .01 for a total of .0013-- is the liquidity rebate enough to cover this and give you a margin for profit???
    #10     Jun 26, 2003