IB's Smart routing strategies

Discussion in 'Order Execution' started by fbell50, Jan 26, 2009.

  1. fbell50

    fbell50

    Recently IB implemented these user configurable Smart routing strategies:

    • Smart - allows the Smart router to choose the best destination to maximize the rebate.
    This is the default strategy if no other is selected.
    • Highest Rebate - Routes to the exchange with the highest rebate
    • Listing exchange - this is the current Smart process and routes to the listing exchange for the contract.
    • Highest volume exchange with rebate
    • Highest volume exchange with lowest taker fee

    The default is Smart. Smart seems to have worked better for me than their earlier strategy which was basically "Listing exchange", but even Smart sometimes results in being charged a taker fee when I would expect a rebate.

    Has anyone tried any of these other strategies?
     
  2. fbell50

    fbell50

    I tried the Highest Rebate strategy today. It routed NYSE stocks to ISE which resulted in a .32/100 rebate. I'm not sure how it affected my fill quality.
     
  3. The fill quality should not be affected since your order was at NBBO when got filled (per RegNMS).
     
  4. fbell50

    fbell50

    I don't think Reg NMS protects time priority between exchanges. I would expect a router to select among all the NBBO quotes in order of the cheapest take fee. So quotes on NYSE would get filled first since their take fee is cheapest, then the next cheapest, etc.
     
  5. It does if price/size are equal.
     
  6. Why would you just assume that?

    Everytime SMART routes me to ISE I cringe...
    Because it definitely affects my fill quality...
    Orders get hung up for even minutes, etc.

    For high volume scalping...
    You want maximum executions NEAR the NBBO...
    Not orders sent to Siberia in the hopes of getting an extra $0.01

    Don't listen to spectaculus...
    He's on my ignore list...
    Because he always shills for the exchanges...
    And lives in a fantasy world where people obey the regulations.

    In reality:

    (1) RegNMS has enough loopholes as to be virtually meaningless for retail orders.
    This is not really disputable.

    (2) There is no official NBBO...
    Calculated by a central authority using specific criteria...
    Every exchange and broker calculates their own NBBO...
    Including/excluding whatever liquidity pools they want.

    So making arguments on the basis of RegNMS and NBBO...
    Does not translate into real world scalping.
     
  7. 1. I don't live with fantasy, but by having implementing my own smart router for my black box (it monitors all 11 exchanges) I think I know what I'm talking about.
    2. If ISE is NBBO (which happens quote often since they offer one of the best rebates) and you send you order down to INET knowing the latter is faster - it's up to you since now you'll pay routing fee and even more delay your execution.
    3. If you work with shitty market data/broker it sounds like a personal problem. Get professional market data if you are professional trader.

    Cheers
     
  8. You guys should read some professional magazines...
    If you cannot follow your own order executions:

    The last line in this analisys of Reg NMS:

    "If I have a prediction for NMS, or the trade-through rule," Selway says, "it will continue to be whittled away by exemptions until it's essentially meaningless."

    http://www.tradersmagazine.com/issues/20_275/100123-1.html

    And Reg NMS is much MORE meaningless today than 2007...
    And no one EVER had a "right" to the NBBO...
    It does nor even officially exist in NASD regulations.
     
  9. Our statistics speak for themselves. Based on independent measurements, the Transaction Auditing Group, Inc., (TAG), a third-party provider of transaction analysis, has determined that Interactive Brokers US stock and options price executions were significantly better than the industry during the second half of 2008. Unlike other industry touted statistics that highlight the percent of orders improved but don't consider the dollar amount of the improvement, TAG's statistics factor in the amount of the improvement, including executions which had dis-improvement and no improvement.
    ----------------------------------------------------------------------------
    In reality:

    (1) RegNMS has enough loopholes as to be virtually meaningless for retail orders.
    This is not really disputable.

    (2) There is no official NBBO...
    Calculated by a central authority using specific criteria...
    Every exchange and broker calculates their own NBBO...
    Including/excluding whatever liquidity pools they want.

    So making arguments on the basis of RegNMS and NBBO...
    Does not translate into real world scalping.
    -----------------------------------------------------------------------------

    The first quote is from IB website and the second from a
    previous posting on this thread. As you see from the IB website, there is a difference in executions between brokers. A third party supposely reports on the executions that are "improvement, including executions which had dis-improvement and no improvement". This simply states there is no official NBBO.

    I have watched time/sale for years when I would have the best bid/ask on a security as reported on Level II and see transactions away from the NBBO sometimes by several pennies.
    The small investors buying/selling at the market are being screwed everyday thinking, and probably being told, they are trading at the NBBO.
     

  10. the formula for NBBO is.

    You look at the exchanges which do 98% of the volume, don't exclude dark pools you have access to.

    Figure out the ping time to those exchanges. Some are behind.

    You find a formula to take into account the differenes, and the range of variation, of the different exchanges' ping times. If arca is 5.2ms behind, you find a way to consider that. Highschool dropouts can figure this much out.

    Figure out - this might be taking it too far - who, and in what name, has displayed size, and reserves, and at what range do the reserve sizes become ridiculous. People trade through ridiculous hidden size very frequently. I'm talking jibberish, ignore it. Trade to the displayed NY Openbook Enveloping bots, like a retard.

    .....

    Who has the fastest connection? How can you get that, to apply your algorithm?

    "Holy shit I"m not getting beat on my fills now."

    I wish.
     
    #10     Feb 7, 2009