In my latest disclosure on IB they go over the fact they internally match Buy and Sell orders rather than place each out on an external exchange. IB rightly notes this eliminates exchange fees. What IB does NOT say is whether or not the sides to the trade see no exchange fees charged for the trade, or whether IB pockets the cash. IF IB pockets the cash after using this rationale to get traders to agree to internal matching, this would be a fraud. Not accusing them, as I don't trade Equities there.
They will raise margins when you are squeezed and liquidate you at the worst price.. they internally have the first option to take the opposite side of the trade so just go figure how that system of incentivizes is set up to screw ypu
When IB matches orders internally, they won't charge you exchange fees. Actually, I like it when they match my order internally (it doesn't happen very often) because I always get a price improvement on them and no exchange fee. IB internally filled orders are called IBRATS. If you don’t want internal matching, just go to the global configure and uncheck the dark pool option.
See the problem is that you have no idea if IB gave you a "price improvement". It may have been an improvement on your limit order, or an improvement on the NBBO. But you might have also gotten a better price if they'd shopped it to all the dark pools, so by internally matching it they actually gave you less than the best you could have gotten. They're shutting down their market making operation, but before they did it would have in fact been both rational and in keeping with their fiduciary duty to their shareholders to maximize profit for them to internally match you to their market making operation when they believed that you were offering for a suboptimal price and they could give you a slight improvement but still capture some of the value you could have gotten if your order had been shopped to all the dark pools. That's the reason we don't like it, it sets up an incentive and indeed a duty for them to act contrary to the best interest of their customers. Sometimes it may work out for you, but in the majority of cases, by definition, it isn't in the best interest of their customers. It's also BS that if you want access to the darkpools you have to also submit to their internal matching.
The biggests are usually slightly corrupt in some way, shape, or form. Power corrupts. IB kind of reminds me of Bernie Madoff and Steven Cohen's SAC capital.