This is a post from Bill Cara's blog 10.2.2006 {(Humungous Bank & Broker's) H B & B trades against the order flow of its clients, including the hedge funds. It's basically a no-risk business because the broker-dealers hold the collateral, analyze the holdings and the strategies, and use this all-important info for their own gains. And, in the futures business, for every gain there is a loss. Would any casino player play 21 (blackjack) if the dealer's knowledge of all the cards on the table was a rule of the house? Would anybody play poker if one of the players knew in advance everybody's cards and how they would play them (and was the banker)? I have been saying this for years but too few people listen. ... ... HB&B is the player that is keeping government regulation out of "their" capital market, and that's because they are the winner and everybody else the loser. But, except for the fact it is the People's capital market, they get away with it because the People have stopped thinking -- they've been brainwashed into believing that "our" market needs to be under the control of HB&B.} This is from his Bio on the Blog: {Bill Cara has extensive experience in the Canadian securities industry. He was the co-founder/CEO of Qtrade Investor (Canadaâs leading online broker), founder and President of Security Traders International (offshore trading broker), President of William Cara Investment Bancorp (registered Ontario securities dealer), founder/CEO Canaccord Capitalâs Eastern Canada Operations (Canadaâs largest full-service independently-owned broker-dealer) and broker and portfolio manager with Dominion Securities and Dominion Securities Investment Management (now RBC).}
You obviously haven't undergone a regulatory audit or understand market making. In any event, as someone deep in the know of the TH side of things, if you don't want to take my word for it along with everyone else at the Group (past and present) so be it.
I've got a suggestion here for IB. Why can't they give IB clients the choice of excluding 'Ideal' from Smart routing. Those who want to include 'Ideal' can do so and those that don't should be able to exclude. Imho, this would remove all misgivings and trepidations that clients have. This is merely a suggestion. IB can do whatever it wants. If there is purportedly a "Chinese wall" so to speak then IB should have no problem implementing this measure.
First, there is Smart the routing choice. This is the one you see play so many times on CNBC where they show IB's smart router diligently and meticulously making the most efficient routing decisions from the clients' point of view. Now, assume that you have chosen Smart as the routing choice, and placed an order to buy 1000 shares of ABC. Your order is filled by smart in the following manner: Example 1: 200 shares - Arca 300 shares - Inet 500 shares - smart Example 2: Assuming the same situation above you can alternativley be filled in the following manner: 1000 shares - smart In both of the examples above there is a distinction between Smart the route chosen and Smart the venue where the order was filled. The venue smart where your order was filled is actually Ideal. You will see this in your activity statements when you are notified by IB the following day. Go and look at those statements. Your orders page in TWS will only show what I've outlined above. For instance the orders page for example 1 will show 200 shares - Arca 300 shares - Inet 500 shares - smart Nowhere will you see the words Timber HIll. You will not see this either in the orders page on TWS or in the activity statements produced by IB. My understanding is Ideal = Timber HIll. I called several IB reps over the phone and asked them what Ideal stood for in these order fills and they said that Ideal meant Timber Hill. I hope I have given you enough data so that you can clearly understand and not have any more doubts as to Timber Hill, Ideal, Smart the route and Smart the venue
def just gets paid to come on here and defend IB, I have used Ib, and yes once you cut the marketing bs, they game the system, for the small stuff, the problem is, the small stuff can cost you big losses. You need to factor on any order that you put in (A tip) or cushion, b/c if you are waiting/expecting the best possible price in the market from IB or any other broker, you will not be filled until they can make money off your order, NBBO is a marketing joke. IB is a total crook when it comes to option fills, we have nothing even remotely close to a free market in options trading right now. Some of the worst abuses take place with options fills, I have just adjusted my strategy, to take this in account on any option order I want filled (I need to build in a sur-charge)!
So long as the rules of the game are spoken out clearly. The rules also include that retail traders should know MM's--regardless of which MM (I believe??) will try to rook him. With this information, if he decides to "play the game" anyway, then fine--but we must be informed including it's full implications. In addition, it would be nice to know what are our best choices in terms of mitigating this problem.
On any option trade period, the market maker/ the place where the options are cleared is going to take .05 cents, if you have your order in to be filled at .75, the transaction will not take place until somebody can take your order and sell it to somebody else. Ergo, if you get hit at .75 it is going past you by atleast .05 cents to .80, unless a mm is strapped portfolio wise and he needs your stuff to rebalance his portfolio, but this is a small percentage of the time, fidelity sends their options NBBO to IB, which then makes .05, fidelity obviously gets something as well for order routing despite what they say. Scottrade is really bad. Direct order routing to the exchanges is an option, but still deal with a market maker at the exchange. Its one of the ways they can take the inevitable hits when things move 3 standard deviations from where they were positioned, by taking a lot of risk free stuff that builds up a huge bankroll to draw from!
Feel free to explain or show reference to, the part of a regulatory audit which deals with ensuring "Timber Hill and Interactive Brokers share no customer data". I quote Bill Cara as he has been through regulatory audits and knows market making very well and says (in case you missed it) {(Humungous Bank & Broker's) H B & B trades against the order flow of its clients, including the hedge funds. It's basically a no-risk business because the broker-dealers hold the collateral, analyze the holdings and the strategies, and use this all-important info for their own gains. And, in the futures business, for every gain there is a loss. Would any casino player play 21 (blackjack) if the dealer's knowledge of all the cards on the table was a rule of the house? Would anybody play poker if one of the players knew in advance everybody's cards and how they would play them (and was the banker)? I have been saying this for years but too few people listen. ... ... HB&B is the player that is keeping government regulation out of "their" capital market, and that's because they are the winner and everybody else the loser. But, except for the fact it is the People's capital market, they get away with it because the People have stopped thinking -- they've been brainwashed into believing that "our" market needs to be under the control of HB&B.} Am I supposed to take your word, who is in the business under a non-disclosure agreement with your employer; or Bill Cara's, who is out of the business and free to reveal? Can an IB customer say "just trust me I have the money to back up this purchase of stock ?" Of course not, IB knows better. Just trust me is not proof. You can always say I'm unable to provide any proof as well.