IB's option cancellation fee

Why it seems IB is the only firm charging it? I want to place limit order, but also want to be able to cancel the order when underlying moves against me.

Any other low cost option broker to recommend? I probably will do over 100 contracts a day.

njrookie

 

look into eoption if you're doing high vol ($3 trade fee plus 0.10 per car) so make sure you submit orders for multiple cars at once to overcome the $3 fee. working the order and saving money usually saves much more money than you'd ever pay in cancel fees. plus there are credits for any executed orders.

 

Do they charge these fees on both equity and futures options?

 

The exchanges charge cancellation fees from hitting a ratio of cancellations to executed orders and is monitored at the broker dealer level.

Because IB hits those levels from their own trading, it's easier to charge everyone than just charge the account that creates the fees.

The fees come from the option exchanges because they cause bandwidth issues. When I was on the AMEX, trading firms could shut down the system by sending millions of IOC orders in during a short period of time. We had to add system capacity to cover these orders which were making it difficult for our customers to trade.

 

Lightspeed, for example, does not charge this fee.

 

Do they charge these fees on both equity and futures options?

 

I do not know about future options. Definitely for equity options.

 

As rmorse point out, it's the option exchanges that charge the cancel fee. IB passes it along if you incur it.

Those trading at Ameritrade, Scottrade, etc. are paying far more in commissions (eg flat fee plus fee per contract) so the brokers are willing to eat it because they're already ripping you.

 

Neither Nasdaq Options nor Arca Options charge a cancel fee. This is possibly true of others now, as well (Nasdaq PHLX?).

That said, I'm sure IB doesn't like "the little people" competing with their own Timber Hill market making unit, and cancels being an essential part of liquidity adding (expecially for options), it's all rather convenient that they charge their customers cancel fees regardless of whether there really is a fee.

 

Correct..they charge cancel fees to all clients even if the exchange they route your order to do not charge. So, IB is charging for using their bandwidth. As far as I know, no other firm does that.