Interactive Brokers vs Apex Clearing?

Discussion in 'Options' started by ferrycorsten, Dec 19, 2012.

  1. 1245

    1245

    Option Exchanges with a maker-taker model DON'T have PFOF.
     
    #11     Dec 20, 2012
  2. JackR

    JackR

    1245:

    DEF is probably asleep in Hong Kong. The following is from the options portion of IB's quarterly report on Order Flow:

    Payment for Order Flow – Options: IB receives order flow payments in varying amounts from U.S.
    option exchanges, specialists and/or market makers pursuant to the mandatory marketing fee programs
    that have been adopted by the exchanges and approved by the SEC. If multiple exchanges are quoting
    at the NBBO for an option order and IB has discretion as to where to send the order or a portion of it,
    IB generally will “break the tie” by sending the order to an exchange where it will receive the most
    payment for the order or to an exchange designated by the firm from whom IB will receive the most
    payment (typically IB’s affiliate Timber Hill LLC – see below).
    Several options exchanges, including BOX and NYSE ARCA have adopted a “maker-taker” market
    structure, in which exchange members are charged for orders that take liquidity from the exchange
    (i.e., marketable orders that trade against a posted quote or limit order) and receive a rebate for orders
    that provide liquidity to the exchange (i.e., non-marketable limit orders that are posted and then trade
    against incoming marketable orders). The charges imposed or rebates offered by these exchanges
    affect the total cost of execution, and IB’s Smart Routing System may take this into account in
    determining where and how to route options orders.


    So as I read the above, IB may or may not be paid for order flow, but they route to the exchange that maximizes their profit per trade while doing the customer no harm.

    Jack
     
    #12     Dec 20, 2012
  3. def

    def Sponsor

    Big difference where an exchange pays for flow vs. a firm paying you for flow. The firms paying for flow obviously do so because they believe they can make more by trading against the the brokers order. This shows in the price improvement and quality of execution stats which IB publishes. In addition at IB, on some exchanges you may be eligible for a rebate.
     
    #13     Dec 20, 2012
  4. Options12

    Options12 Guest

    def, doesn't IB / Timber Hill also pay other firms for order flow?

    For example, Natixis reports that 30% of AMEX non-directed customer orders are routed to Timber Hill for execution: http://www.blr.natixis.com/Rule_606.pdf
     
    #14     Dec 22, 2012