Has anyone ever experience this? I placed a LIMIT price order to buy a high-yield corporate bond (GRAND CANYON UNIV, CUSIP: 38528UAC0), waiting for a fill. The liquidity is low. There might not be no trade all day. Suddenly a seller (market maker??) kept placing a lot of small orders (1k quantity) one by one. I used IB and its "smart" routing routed my order to that exchange (MuniCenter). The issue is this bond exchange (MuniCenter) charged USD 7.00 per trade for 1 to 9 bonds of trades. I consistently got 1k (1-bond) trade fills. I kept being charged USD 7 per trade. USD 7.00 for 1k (1-bond) trade only! It was so expensive! The yield of my order dropped from ~12% to ~6.6%! Darn! Luckily I noticed such abnormal trades and quickly stopped my order. Otherwise I might have more than 200 of those small trades, resulting in a huge fee (over USD 1,400!). I reported the issue to IB but received no response, not even an acknowledgment. Viewing the trade history of that bond, it hadn't been happened before. Why did that seller (market maker??) kept placing so many 1K (1-bond) trades? It didn't make any sense to me. Is it a collusion with that bond exchange? What could I do to avoid similar ripoffs in future? Any advice? Thank you very much.
You must be a rare breed trading illiquid bonds. We are not foolish enough to trade those things. Well. At least the market maker can bring home the bacon for that day. Even if you can buy 200k bond with a low commission, you are going to have a problem closing your position. There are thousands of bonds in this world with very high liquidity. Yet .... You might be interested in trading MSCI Morgan Stanley Capital International indices. There are hundreds of MSCI indices with zero or almost zero volume.
From the image you provided, I'm not sure this is a valid inference. Yes, someone was selling the bonds, because you were buying them. But I'm not sure you have enough data or evidence to conlude that a seller (or sellers) placed multiple orders in which each order was to sell just one bond. I think it is possible that there were only one or two sell orders out there, or that maybe one or two or possibly three or four different sellers accepted your bid... And that IB or possibly the broker on the other side of the transaction experienced some sort of technical glitch that caused the order to somehow get filled one bond at a time, and that this glitch had the unintended effect of charging a separate commission for each bond. If I was in your shoes, I would demand a coherent explanation from IB. I would take the time to send a letter by certified mail, with screenshots or other documents showing what happened. I would demand an explanation and a refund of most of the commissions. And I would explicitly threaten to bring an arbitration case if they don't respond. If they provide a reasonable explanation but refuse to refund any fees, then I'm not sure I would bring an arbitration case over $7.00 times ten or twelve trades, or whatever it is. But I'm also not sure there is any explanation that I would consider reasonable. I really think they need to answer some basic questions, like whether any of those trades that have the same fill price were from the same seller. If that is the case, I don't see how they can justify treating them as separate trades with a separate commission for each one. If they can't or won't answer questions like this, and engage in a meaningful conversation about they this happened, then I might bring the arb case as a matter of principle, because if they lose this kind of case, they will have to pay all the arb fees. Once you file the case, you'll be talking to their lawyers--not some clueless customer service rep who got his Series 7 less than a year ago. And in an arb case, you have discovery power, which means that they have to answer your questions. BMK
I trade high yield bonds. They are illiquid and normally have large spreads. The quotes are just indication of interest. You don't really know exactly the actual bids and asks. I'm afraid Fill or Kill orders don't work in such cases.