Interesting post about IB's MM vs. Broker conflicts.

Discussion in 'Retail Brokers' started by urep, Oct 6, 2009.

  1. urep

    urep

    Some more to think about w/ IB. I'm sure this will bring out IB's ET attack dogs. But I post it as food for thought as I would love to see it's accusations disproved with something other than an IB spokesman (trust me or chinese wall fluff) i.e. outside, independent verification that IB doesn't data mine customer accounts/order flow en mass etc. etc..

    (at the bottom of this page)
    http://wilmott.com/messageview.cfm?catid=38&threadid=65730

    {Wed Nov 19, 08 04:30 AM


    No surprise if IBKR will face SEC investigation into front running, data mining customer order flow, throttling order flow to manipulate one side of the market etc. This occurs in spot as well as derivative markets. Some of this is alluded to in the customer waiver but there is much we don't know about their practices. They are using this information in their market making activities, using dark pools to cross trades against customer orders.

    Of late the few large prime brokerage customers are getting wind of this and fleeing IB much like Lehman and Morgan Stanley, combine this with the inventory they must keep in their market making activities in this very illiquid market and it's a recipe for disaster.

    Other outstanding issues relate to the current corporate structure which renders shareholders powerless in relation to Thomas Peterffy and has been detained in SEC filings. Try to formulate the logic in "longterm" ownership once you read about that. The best you can do with the equity is short term scalping.

    Then there the issue last year of failing to supervise "compliance staff" for further reading here:
    http://www.cftc.gov/newsroom/enforcementpressreleases/2007/pr5354-07.html
    If you call and ask there really is not a compliance department at IB at all, even employees know this. There is no real chinese wall at IB between customer order flow and market making activities, hence "Interactive". I encourage you to call IB and enquire about the nunaces of simply calculating p&l on their platform. Seems simple but not even the progammers there really know how it is done because they time slice data and induce network latency in their plaform data feeds to create small profits for themselves at customer expense sort of a technology induced payment for order flow.

    Further, they are trying to create an introducing-broker arrangement with MF Global but MF wants no part of it because of the type of business IB is engaged in.

    See here:
    http://www.bloomberg.com/apps/news?pid=20601103&sid=al0iBVv90ltQ&refer=us }
     
  2. you just reposted some guy's post on wilmott finance, why don't you just pm that guy and try to know more about his allegations.

    Personally I wouldn'tcare if IB datamined my trades and most of us shouldn't care even though the thought is upsetting and it should not be left unpunished. IB has addressed that issue repeatedly though . Now if their MM's are as good as their TWS programmers then probably yes they must be datamining all our stuff like hell , otherwise they wouldn't make much money.