IB vs Questrade (9.95$max commission) and order routing question

Hey,

IB commission is 0.005$/share or minimum 1$ with max 1% of the trade value. If you are trading 10,0000 shares with IB that would be 50$ commissions but with Questrade it would be 9.95$.

But the question to why more traders and professionals use IB rather than Questrade or any other broker, is it because of the order fill?
So had you bought 10,000 shares a stock that is 10$. IB would give you a 10$ fill whereas other brokers might give you a 10.01$ fill. On top of that, IB might route your order in a way to add liquidity rather than take liquidity resulting in overall better commissions structure than other brokers.

Am I right?

 

IB is a MUCH larger broker and more secure. IB has a much wider set of tools and markets available.

A quick look at Questrade show fairly high option commissions as well. Fees for data monthly.

Questrade might be right for your situation though.

 

I don't trade that big size but I am talking from a perspective point of view as to why pro traders use IB and not cheaper commissions structure brokerage. It wouldn't make sense to pay 50$ when you can pay 10$

 

Questrade is Canadian so the usage will be limited relative to a very large broker like IB. I use both, but IB in particular for the API and trade automation. I wouldn't trade stocks less than about $10 on IB due to the high potential commission. For higher priced stocks, IB wins out as you can keep the commission below $5.00 if you're trading higher priced stocks (i.e. you can trade about $100,000 worth of a $100 stock for $5.00). I'm not sure if Questrade does payment-for-order-flow -- if they do IB is a better choice in this regard as well since they don't do PFOF.
In terms of order execution, I don't have as much experience with Questrade but I haven't been concerned with the trades I have made on their platform.
Bottom line: if you're trading low price stocks using limit orders Questrade is a much better option.

 

Even for high priced stocks. Let's say you have 1million dollar account and you want to trade AAPL (127$), that would be 7875 shares. 7875 * 0.005 = 40$ IB commissions. So it would make more sense to trade with Questrade. So the only logical thing is that IB gives you better fill resulting in cheaper trade cost. I assume

 

1. People having 1mil accounts wouldn't go all in on AAPL. Any reasonable bet would be below 10$ commission in that case. To face the kind of problem you described, realistically, you need to have 5-10mil account. So not a problem for most of us.
2. IB trades everything. In fact I am not sure what they don't trade. One stop shop for me and that's a huge benefit.
3. Margin interest rates are some of the best.
4. Borrowing costs are reasonable.
5. Short availability is one of the best.
6. API. Basically there are not other options if you are in Canada
7. Reliability. IB just works. Their outages are nothing comparing to a lot of brokers out there
8. Like you already mentioned - rebates / tiered commission structure. The more you trade the less it cost with IB. Rebates are very helpful. Can significantly cut your costs.

Val

 

The sale of order flow can make a huge difference over a large set of orders over time on price improvement and execution quality. It is the same reason why most active clients choose SMART routing over firms that offer free commissions. For an extreme example, read the cases against Robinhood which are in the news and discussed on this forum on how they rec'd maximized their payments at the expense of price improvement.

 

Thanks a lot for your reply.

1. If you are day trading and want to trade any high priced stocks, you can go all in with 1M$
2-7. I can't argue with you on that. You are on point. My main question though is only from the commission part.
8- This is my question, even if it costs more to trade with IB (if you are trading very big size and commissions are more than the Questrade max of 9.95$ or any other broker), I am assuming that rebates/better fills will in the end result in lower costs than trading with other brokerage.

 

Thanks a lot for your reply. Yes this is what I was asking exactly. I was just making sure.

 

IB has a formula for rebates, you can do quick math to see. I've done it for my trading and came up with a <1.0 multiplier that I use for commissions forecasting in my models. Basically, I consistently pay a fraction of the listed price. But you will need to do your own math on that. Depends on a few things.

When is comes to execution quality comparison - unfortunately, no one here will share this with you. Mostly because most people don't do such comparison and simply don't know, those who do - keep it to themselves. That kind of quality information is very hard to get and it can make or kill your strategy and that might be part of your edge.

Like someone else suggested - there are some edge case trading scenarios when it is indeed might be better to go with another broker. Maybe that's a case for you.

If is really anyone's guess what you gonna lose on executions quality. One penny difference might cost you the commissions benefit plus some. But if you end up trying - let us know how it goes.

Val