Is IB designed to just feed liquidity to Timber Hill?

clearinghouse · Jun 18, 2011

Quote from def:

TH DOES NOT INTERNALIZE CLIENT FLOW FOR US EQUITIES - PERIOD. Just because other brokers do does not mean all choose to do so. Our clients know how good their fills are, our clients see where their orders are executed and our clients are benefiting from the greatest price improvement amongst all the major brokers.

Can it be stated more clearly than that? Your second paragraph doesn't jive with best execution. But I'll run with that anyway. In IDEALPRO - (FX) IB clients can trade with other IB clients as client orders become part of the book. But execution is determined by routing to the best price. This includes the IB client quotes along with the other 10-15 other liquidity providers who combined often form a market that is often 1/2 to 1 pip wide for many of the majors.

If you guys (and I know some posting on this topic are competitors) are looking for a conspiracy or somewhere to knock IB down, this is not your optimal target. Best execution is the core of IB's business model and it is taken very seriously at all levels.
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So why can't we trade against each other at the NBBO in US equities? Client A posts a passive order at "IB Internal", client B uses SMART, and SMART checks "IB Internal" first and, you rebate the adder .0010 and charge the remove .0015 (or whatever), instead of now where we end up paying .01 or .0050 per share. "IB Internal" can be a dark pool.

tropicalknight · Jun 18, 2011

I am reasonably satisfied with the current way that smart operates.

However, there are some exchanges that pay me to take their liquidity like CBOE. When I use a marketable order, I would like to take that liquidity first as preference. I would like to take that liquidity even before routed to Timer Hill. It does not make sense to leave this money on the table.

..as well as checking for midpoint match on ice etc.

IB, maybe can add more options for preference on marketable orders with smart.

LeeD · Jun 21, 2011

It's a shame if this thread is slowly dying out. I was hoping for further comments from IB.

Some of us, like me, are actually happy clients. We are just trying to figure out what is going on.

Peternam · Jun 21, 2011

Quote from Occam:

Yet your own company's Web site states precisely the contrary -- or at least it did, up until today. The FAQ on Timber Hill's auto-execuition was just taken down after I posted the link to it. Interesting, to say the least.

http://www.interactivebrokers.com/en/general/education/faqs/timberhillAutoExeService.php

Fortunately, Google's cache still has it:

That is internalization, to the letter. Are you still going to deny this? Or did IB's policy of internalizing against its clients trades (as per its own FAQ, up until June 17) change? Just today?

I think that any high-volume trader would be reckless to trade with IB, unless they were VERY careful about monitoring their own executions. Even then, I'd have my doubts, because it's so easy to silently lose a few cents/share of what would have been the true best execution, which isn't really even knowable unless you send the order to a real exchange.
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Def caught with his pants down ...

bone · Jun 21, 2011

People love to bitch about IB, but it would appear that they have a market niche. Personally, I had a much easier time finding shares to borrow short at IB than Goldman Sachs, but I am no big equity trader by any means.

Cdntrader · Jun 21, 2011

Quote from bone:

People love to bitch about IB, but it would appear that they have a market niche. Personally, I had a much easier time finding shares to borrow short at IB than Goldman Sachs, but I am no big equity trader by any means.
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actually I wish IB had a few worthy competitors to choose from. I don't like the idea that if IB disappeared there would be no one to switch to.

bone · Jun 21, 2011

Quote from Cdntrader:

actually I wish IB had a few worthy competitors to choose from. I don't like the idea that if IB disappeared there would be no one to switch to.
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And that is the central tenet to this entire thread, IMO.

J.P. · Jun 23, 2011

Some of the valid points on this thread notwithstanding, in addition to TAG has anyone here ever placed a series of identical trades at IB and Broker X and found the latter to be superior?

DeeDeeTwo · Jun 25, 2011

Quote from Cdntrader:

actually I wish IB had a few worthy competitors to choose from. I don't like the idea that if IB disappeared there would be no one to switch to.
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It's amazing what this says if you read between the lines.

(1) Only one Canadian broker has infrastructure to charge IB rates.

(2) Only one Canadian broker is motivated to build such infrastructure....
As opposed to just ripping off their Clients, that's the easy road.

(3) People feel lucky IB bothered to come to Canada.

This cannot be reconciled with IB Conspiracy Theories.

And Canadians can trade with any broker in the world...
Unless they too lazy/cheap/unsophisticated...
To set up a simple US or offshore corporation for $2,000.

clearinghouse · Jun 26, 2011

Quote from J.P.:

Some of the valid points on this thread notwithstanding, in addition to TAG has anyone here ever placed a series of identical trades at IB and Broker X and found the latter to be superior?
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All the time, but only because IB is retail. If I compared IB to everyone else in IB's bracket, they are the best.