IB SMART STOP Orders Manipulation on European Exchanges

Discussion in 'Retail Brokers' started by mel_pub, Mar 5, 2009.

  1. mel_pub


    First , I have to say that market orders are always sent to the best exchange, national or Chi-X (MTF), and the fill is always less than 1 second

    Hower, i noticed that when I placed stop orders in SMART, they were executed 20 (YES Twenty) seconds after the price (last) was crossed (many times), always at a disadvantage to me of about 5 cents. Each time the order were executed on Chi-X

    But the beauty of this is that IB has found a way to rip you off making it look legal and in accordance with MiFID (European BBO regulation)

    Let's say you're long and put a sell stop at 15.23, it is executed internally using smart routing in less than one sec, IB is filled at say 15.21
    Then... IB waits 10 sec, if the price has drop further so that there's an opportunity, they buy back the shares at 15.18. And guess what ? You're affected the shares at 15.18...see it's on the tape!

    I dont see any reason why when I send a market smart order it's filled instantly, and when it's a stop (stop market on last price of course) it takes 20 seconds to get filed, always on chi-X, and always at a disadvantage to me.

    The Rep said something like ...you know..sometimes it takes time to route an oder (Yeah sure!)...but if you route your stop to an exchange (directed order) it will work (= we're fisting the noobs but you can avoid it by routing your orders wisely).

    I'm talking about trades done on very calm periods of the day of course

    It's easy money for IB, but not very fair, and way too obvious...

    IB has a good routing system there, but use it against the (unsophisticated) european customer. Sounds perfectly logic as a way to get the returns on a new investment (routing on european MTFs born a year ago) in programming and infrastrucure.

    Just wanted all of you to know it, the availability of MTFs (only Chi-X for now) is not such an advantage over the local competitors (still routing everything to national exchanges). Especially if you consider that the cost is still 0.1% and the .002 adding liquidy rebate is never passed to IB's customer because european exchange are BUNDLED only.

    (Chi-X is european arm of Instinet)
  2. I don't know anything about European stock order routing, and I can't understand most of your post, but I can identify one particular weakness in your argument.

    You assert that your stop orders should be executed with the same performance as your market orders. This is not a reasonable expectation. Stops tend to be triggered under special conditions, when the market is moving rapidly against your order. Market orders, by contrast, are executed on a much more random basis, when your own finger pulls the trigger by hitting your keyboard or clicking your mouse. This is why execution sof stop orders, on average, are generally not as favorable as executions of market orders.

    My lack of knowlege about European stocks prevents me from assessing whether you have any evidence of any weaknesses in IB's order routing. It has been my extensive experience, in identifying and reporting bugs in IB's order routing for U.S. equities, that weaknesses and bugs are the result of design or programming errors or omissions, which are usually fixed if you can prove your case, and that such weaknesses are never the result of any scheme by IB to cheat the customer.
  3. I also doubt IB is trying to cheat you, unlike shady forex brokers.
    You said "stop market on last price of course", did you validate that some trades occured between you stop price and execution.
    Also, if your stop is at an obvious xx.98 then there may be a lot of stops trigering at the same time.
    Another thing, european are not as liquid as US markets. So if you trig xx.98 and on trade occur at xx.98 your stop trigs and there is nothing that tells where is the next buyer for your market order.
    Just trying to help here. I just dont see any proof of IB wrongdoing.