Lightspeed vs. Interactive Brokers/IB

Discussion in 'Retail Brokers' started by azzzy, Jan 1, 2009.

  1. azzzy


    I am about to open a daytrading account and I narrowed it down to 2 brokers: Interactive Brokers and Lightspeed. I'm wondering if there are people who prefer Lightspeed to IB and why?

    Lightspeed appears to be slightly more expensive but I do like their platform better (perhaps because I practice on it since it works in real time as opposed to the IB's demo, which seems to be totally random).

    Also IB is giving me a lot of grief with financial suitability requirements bullsh!t with approving my account for margin. (What does it matter how much money I have overall if I'm giving you 25 grand? - really pisses me off!).

    On the other hand I hear a lot of great things about IB and I'm wondering if it's better than Lightspeed when it comes to functionality/speed/ease of use and other things that matter.

    I intend to trade stocks only. Thanks.
  2. Euler


    I think they're both fine, provided you're trading relatively small volume (<1m shares per month?), taking liquidity, and using non-directed (IB calls them "smart") orders.

    On the other hand, Lightspeed may be cheaper for exchange directed orders ("NSDQ" vs. "ARCA", etc.), and also may negotiate more for very high volume clients. Then again, if you were a higher volume customer, the you'd probably also be considering Genesis, Assent, or "proprietary trading" outfits, which may also be good choices and which I consider to be more direct competitors to Lightspeed.

    I'm not sure I can make more specific recommendations without knowing more about how you're placing orders, but it sounds like you're doing your homework.
  3. What is the comish in lightspeed for ONE contract ONLY? The answer to this will determine hype vs. truth.
  4. Euler


    I don't think this is relevant to the OP since, as OP's post states, they're only trading stocks.

    But even if that weren't the case, I think the question is a lot more complex than that. Unless, of course, all you do is trade one [contract/share/whatever] per month and don't care about routing or anything else.
  5. azzzy


    Thank you for the answer. Yes, I will be doing a relatively small volume (at least to start). The account probably will have around $25-30K and at that amount I doubt I will excede a million shares a month.

    As for what I will be doing... At the moment I am practicing on the Lightspeed demo trading stocks in the range of $5-$50 per share. I tend to favor cheaper stocks (like C) because of the faster gain but I'm researching still for the best strategy (faster gain also means faster loss of course). Trade $0.05-0.07 movements several times a day. What I like about IB's pricing is that half a penny is such a nice easy number. You know that your first cent movement is the broker's fee, and your profit starts with the second cent - easy to figure out how much you made (or lost) and when you want to exit.

    By the way, what is the benefit of exchange directed orders vs. SMART orders? (sorry, I am still very new to this and am in the learning stage).
  6. Euler


    Basically, there is a lot to learn with exchanges and how they charge fees, so this may be more than you need to know, starting out.

    Exchange directed orders allow you to control the fees you're charged/rebated. The major US equity exchanges have similar pricing/rebate structures, so this probably won't affect you much, unless you opt for IB's "unbundled" pricing structure, which I haven't used enough to have an opinion of.

    With many of these pricing plans, unless it's an "all in price" (which I think IB offers), your ultimate trading costs may be affected by feed or rebates for "adding" or "taking" liquidity -- roughly, whether your order gets added to the book or is executed immediately against a resting order. This can get complicated, quickly, as these pricing structures are complex and differ from one exchange to the next; the scheme for any given exchange can also change on a monthly basis. Maybe best not to worry about it, at first.

    Another aspect of "smart" types of orders offered by brokerages is that they may be subject to something called "internalization", or the broker basically jumping in and taking the other sides of your trade rather than sending it to a public market such as Nasdaq. Provided your broker is honest (and I think most of the big ones are), internalization won't adversely affect the price you get (much). It DOES, however, affect prices for the market as a whole by widening the bid/ask spread. Personally, I think it should be banished as it adds to the "hidden costs" of trading and investing (and even for investing in mutual/pension funds).

    All that said, I think IB is a good choice for what you're describing (and so, I think, is Lightspeed), so what you could do is just see how the costs break down at the end of your first month. It's possible the costs aren't much different, and may be small compared to your trading profit (hopefully!) or loss. In that case, other factors, such as the trading platforms you're testing, might outweigh commissions in importance.
  7. azzzy


    Thank you, very much, for this info. At this point I am open to any advice or piece of information. The more the better. Feel free to share any trading-related bit you'd like.

    So to recap, the SMART vs. exchange specific order differs mainly in fees, not in speed of the execution, correct?

    Yes, IB does look like a perfect choice but they are being somewhat dick-ish to me with the stupid financial suitability requirements and it certainly irks me. Also I haven't had a chance to work with their platform much - it's not in real time, and in fact possibly has nothing to do with reality at all, which means one can't realistically practice daytrading on it. Ah, decisions, decisions... :)
  8. Euler


    Speed of order placement should be pretty much instantaneous for both directed and "smart" order types; millisecond-granularity autotrading is probably the only thing that would notice the difference.
  9. IB "irks" even their longtime customers at times BUT execution speed for orders remains one of their strong points for using them as a broker, IMO..
  10. azzzy


    Do you know whether their execution speed is better than Lightspeed's?
    #10     Jan 2, 2009