This option on the trade ticket says they will look for hidden liquidity, I assume they try to fill you in some dark pools, is this correct? If so which dark pools are these?
Not really.Timber hill is the trading arm of IB parent company. They are a large electronic trading desk that makes markets in options. If your order can be executed against their values, either single leg or complex order, they will trade all or part of the order with you. The advantange is that they might do better for you. The disadvantage is that no one sees that order until it executable.
IB doesn't internalize. Actual clients who trade via IB can attest to the quality of their fills on both stocks and options.
Its not about internalization, if they tried to get a better fill by sending the order around a few dark pools I would have no problem with that as a long the price improvement was decent(1 cent or more)
It applies to stock. By default the stock smart router pings a few dark pools to get a fill. (The benefit is not only potential price-improvement, but also lower venue-fee). The few chosen ones are the ones that have the lowest latency and highest likelihood of a fill. If you chose the option you inquire about, the smart router will try all the dark pools we have access to before routing to an exchange.
Since IB has a relationship with these dark pools is it possible to send passive non-marketable orders to these pools?
When will you recognize Timberhill as part of the firm even though they have their own Finra Broker ID?
Our relationship is (for now) limited to liquidity-taking. Please note that our Smart router gives you some of the benefit you seek. If you post a non-marketable order (which we route to a venue) and IB then subsequently receives a liquidity-taking order for the same stock, we will cancel your order at the venue and cross the two orders within our platform. Hence, your order provides liquidity to IB customers.