If I route to BATS I get rebates and save on commish, SMART routes me to all kinds of places which ends up costing me money. Since its a limit order there are rules against trade troughs it seems that is superior to always route limit orders to BATS
I've observed this quite a bit and I save money always everytime I manually set BATS instead of SMART. Seems that the only smart thing about SMART is its PR campaign
I typically trade options and I've noticed that BATS doesn't always have the best bid/ask prices, so that may be something to consider. BATS is pretty nice, though, especially if the bid/ask is fairly wide. A lot of the other exchanges have some pretty ridiculous cancel/modify fees which can really add up when you try and work to get your fill with a wider spread.
What TheGoonior said. When dealing with liquid instruments and not using the API, BATS is a no-brainer. When sending orders through the API, direct routed orders incur a penalty. SMART is nasty at times though, today it sent a small odd lot order to ARCA and I paid much more than I should've as there was plenty of liquidity on other ECNs.
I don't get why liquidity should be an issue. Limit orders add liquidity and the price is not allowed to trade trough your price without hitting you
IB addresses the problem with odd-lots here (emphasis added): There are numerous guidelines for the routing of odd-lot orders: Odd-Lot orders to initiate positions will not be routed to primary exchanges; Odd-Lot orders can be routed to primary exchanges, but only if the order in question is to close out a preexisting position; IB will not direct-route odd-lot orders which initiate positions to primary exchanges, therefore these type of orders should be Smart Routed so that IB's routing system can send the order to an ECN for execution. The exception is that odd lots can be routed to NYSE/ARCA/AMEX, but only as part of a basket order or as a market-on-close (MOC) order. http://ibkb.interactivebrokers.com/node/1062
Not true. If, for example, you have the high bid of 10.00 at ECN X and the high bid at ECN Y is 9.99, it's possible that someone will sell shares by directing a market order to ECN Y. Your order will remain unexecuted despite offering a better price. This is more likely to happen in a thinly traded market.
Wouldn't SMART have moved to ECN Y to get the better fill in that example? IB quote from: http://www.elitetrader.com/vb/showthread.php?threadid=219683
The Stock Smart Router has several possible configurations for handling non-marketable limit orders that you can chose from: Default Highest Rebate Primary Exchange Highest Volume Exchange with Rebate High Volume Exchange with Lowest Taker Fee The Default aims for a compromise between maximizing the likelihood of a fill and maximizing the rebate for the fill. e.g. when many venues are at the NBBO, then joining highest rebate venue (especially when it already has a large size posted) will not necessarily give you a fill, as the brokers that hold marketable orders are likely to send them to venues with lowest take fee