"I hate when a trade is done and you paid more then the quote price"

Discussion in 'Retail Brokers' started by eagle488, Nov 24, 2006.

  1. This is Ameritrades new commercial on CNBC. This is funny. I think Ameritrade has been making cash on the backend for years with people's trades although I have only anecdotal evidence. Now they are advertising that they try to get the best price. I think they do try, the best price for themselves that is...
  2. it's called a LIMIT ORDER

    no broker, to include AMTD can charge you more than the limit price entered
  3. I dont know about that. Anyone here with a different opinion?

    I once emailed TP at IB and asked him if a high volume trader could get a discount. He replied back to me explaining that all of the other brokers make cash on the backend while IB doesnt do that sort of practice.

    TP sounds like a nice successful respectful guy, but to be honest, Im not sure if I trust TP either. All these guys make cash somehow on the backend of the trade, but I do believe brokers like Ameritrade and ET are some of the worst offenders in this practice.
  4. if you "don't know about that", then that's great, but you are admitting complete ignorance.

    i'll say it one more time.

    AMTD cannot give you a fill at a price greater (for a long entry) than your limit price


    whether or not they get paid for order flow, etc.

    i have an AMTD account (2) and 2 IB accounts. one (IB) is a direct access broker, which means instant (near) access to quotes on ECN's.

    AMTD is not a direct access broker. but AMTD cannot charge you more than your limit order price. period

    and if u don't understand this, then you probably should not b e trading.

    i also challenge you to show me one trade where you got a worse price than your limit order price.

    i would *never* use a market order with AMTD otoh
  5. This is the primary reason for giving online traders such "good" prices for "market orders" - heck, they could let you trade for free if when they keep the spread or sell the order flow in some fashion.

    I agree with the poster above..."Limit Orders".

    Good Luck!

  6. exactly, don

    i use my AMTD account for Buy and holds and swings and stuff

    heck, sometimes my limit order takes days or weeks to fill. i let the price come to me. works great, and with $3 for unlimited shares,it's great.

    i use my IB accounts for intraday futures trading (primarily) and intraday stock trading. there, i want instant access to the CBOT book and the ECN's . and i get it

    but it is true that both brokers cannot fill an order at other than the limit price.

    as a matter of trade efficiency, I also intraday scalp dow futures with the vast majority of my trades being limit orders, and i would suggest that this is part of my edge - not giving away the spread.
  7. Look at the target market they (TD) are after....LOL!
  8. No they can just not fill you and force you to go market or market-limit if you really want in. Just like NYSE specialists do.
  9. When an online brokerage receives an order, it can be routed to many places. If its routed to the market maker, then then the brokerage receives a payment on the backend. This is known as "payment for order flow". If its routed through an ECN, then the direct opposite occurs. The brokerage is charged a fee for ECN usage.

    There are also multiple bids and asks in the market at any given time. The bid or ask on your Ameritrade system might be higher/lower then on your buddy's IB system. The IB system uses a method called the "Smart" system. This is where they utilize all possible avenues at once to come about the best bid/ask price. This is their own system that they made up and Im sure some other pro-trade setups have such a system. However, some more discount brokerages might utilize the method of going through the market maker.

    Lets say you place a trade with an online brokerage. The online brokerage might route the order to a market maker with a non-competitive bid/ask. The bid/asks you see may not represent the best out there at the current time. So in fact, some online brokerages are selling you shares through a market maker where the price was manipulated upwards or downwards. Later on, without you knowing, the market maker pays a fee to the online brokerage.

    If your a swing or longer term trader, then you might not care about a few pennies here and there on the pricing. However, if your an active trader, then this might be more of a concern to you.

    Lets take the limit order example. Im looking at the level II quotes and bid/asks on a cheaper online brokerage system. These bid/asks are being provided through a market maker. You place your limit order based upon what you are seeing. Unknown to you, there are competing bids/asks on the ISLAND and BRUT that the online brokerage is not using or not routing the order through.

    IB is very popular because it does not engage in this type of conduct (cross my fingers). You can choose where your order is routed or let them choose.

    I have never used Ameritrade so I am unaware how the order flow is routed.

    I thought that this was common knowledge to everyone here. Its a practice that has been going on for as long as I can remember.
  10. lescor


    The point made in the earlier post is that with a limit order you will never buy a stock at a price higher than the limit you specified.

    You are arguing that you may pay more than the lowest offer out there.

    Both points are correct, but not related.
    #10     Nov 24, 2006