IB - NYSE directed orders

Discussion in 'Retail Brokers' started by flbum, Oct 12, 2007.

  1. flbum

    flbum

    Does IB charge any fees for direct routing to the NYSE using the bundled commission structure?

    For example, do NYSE directed orders (NOT SMART routed) still get charged a fee if they remain directed to NYSE for more than 5 minutes?
     
  2. flbum

    flbum

    I forgot to mention that I am asking with regard to using TWS to place a direct routed NYSE order and not the API interface.

    Thanks.
     
  3. Please correct me if I'm wrong, but it looks like specialists don't charge this fee anymore since Hybrid takes care of the order executions.
     
  4. The 5 minute fee is long gone.

    All my stocks trade primarily on the NYSE...
    And a Limit Order for that type of stock...
    Will almost always be routed NYSE by SMART.

    It's in IB's interest to get your order executed.

    So overriding SMART routing is of no importance to me...

    But what is crucial...
    Is to have a good NBBO quote... wherever it may be.

    SMART almost always hits the NBBO quote if you explicitly enter it...
    But if you rely of the default price TWS tries to sneak into your order...
    SMART will route your order to IB's advantage...
    And I would guess about 20% of the time...
    You will be fleeced for $0.01 or $0.02 or more.

    People who send market orders using SMART...
    Or Limit orders using TWS data...
    Do not pay $0.003 to $0.005/share...
    But, unwittingly, pay two or three times that.

    It's no accident that IB makes $500,000,000/year net profit with margins > 50%.
    It's all baked into SMART and their "Market Data Farm" and their ECNs.
     
  5. flbum

    flbum

    Thanks for the reply. I thought the fee was gone, but I wasn't sure. I've been avoiding NYSE stocks due to concern about that fee since IB still shows it in a few places on their website.

    I called IB twice with the same question that I have posted here. I got a "yes" the fee is charged on my first call. I got a "no" the fee is not charged on my second call (today). I was thinking about calling a few more times and going with the majority response. :D

    Actually, I've been trading a couple of NYSE stocks which SMART routes poorly. It was costing me an extra penny on each side to get my trades due to the inappropriate routing. The stocks are listed on NYSE and the liquidity is usually lifted off of NYSE before other exchanges on these stocks. There is always someone making a market on ISLAND with big size on the order of the daily volume on both sides on one of my stocks. That spread is usually narrower than the NYSE spread. SMART seems to be attracted to the tighter spreads and bigger size on ISLAND and puts me there. I am behind that huge order which will never be fully executed even though I could be first in line on the NYSE at the same price... and consequently also get executed first. The only way to get executed without direct routing to NYSE was to go inside the spread by a penny or to hope the market moved.

    Late morning, after I made my second call to IB on this issue, I decided to be brave and direct orders to NYSE since I got the answer that I wanted. It worked exactly as predicted. I had a much better day on my two NYSE stocks. I was able to get first (or close to first) in line for execution on both of them at the same price as the large size on ISLAND. Woohoo!!!

    Since I'm scalping, IB gets a large percentage of my profits in the form of commissions. So, they had a better day also! The only difference is that their take is risk free. So, maybe they might be able to enhance the SMART router to fix this issue if they believe that it is beneficial to others and that my couple of stocks aren't special cases.
     
  6. flbum

    flbum

    Quantplus, P.S. I forgot to mention... I agree with you about the quotes. I get data from several other sources and am able to put together a much better picture of the market including depth when I put it all together in my mind. IB just seems to build a composite from whatever data you have authorized for your account to create the SMART quote. I don't believe that they advertise the SMART quote to be NBBO.

    I can live with that and other minor inconveniences to save big $$$ on commissions.