The supervisory requirement comes from regulators so applies to all exchanges/ECNs. The NYSE specialists just got the issue on the table. At least, that is my understanding. I agree we should have communicated better.
How can I, as a retail trader, make my voice heard to the "regulators"? I would gladly bombard them with my thoughts.
NASD and SEC both have commentary mechanisms well marked on their web sites. But this case is not really the place to complain heavily about IMO. The fact is that there are abusers of the system via odd-lots so it is not unreasonable for the regulators to require firms to police for things where people are breaking the spirit of the rules even while adhering to the letter of them. It is just that IB does not think of odd-lot trading as a core part of our business so we didn't want to get into a compliance project that seems like it is on the periphery of our business model. We actually did not anticipate that many people would care much, although as another poster has said, we certainly could have communicated the policy change better.
I have never heard of abuse of an ECN via odd-lots. I just hear NYSE specialists complaining about abuse because there are special rules associated with NYSE odd-lot orders. If the NYSE specialists are complaining about odd-lots for the *entire* industry, including on ECNs, then that is an overstep of their bounds.
OK, thanks IBj. About 50% of my transactions involve opening a position with an odd lot < 100 which i may add 1 - 3 lots. This will hurt for sure if the policy stays in effect. The effect on me is that i will initiate fewer trades, and that will mean less commish to IB.
IBj, Can you please give us a summary of what the odd lot changes are? Are all odd-lot orders now rejected? Thanks.
We are rolling back the whole odd-lot restriction to the way it was 1-2 weeks ago. It is likely we will not restrict opening odd-lot orders except for the NYSE restrictions already in place previously. The roll-back may be in even tomorrow but in any case should be very soon. People playing games with odd-lot orders (like sending multiple odd lot orders instead of a round lot) will get shut off. That seems to be the easiest solution to satisfy our clients who want the ability to trade odd lots and to also satisdy the regulator supervision requirements.
This may or may not be germane - I read somewhere that the large institutions use bots to get in and out of large positions. The bots look at volume and predict the anticipated volume in the next few minutes. The bot then adjusts the buy/sell size of its orders such that the orders should not disrupt the market. Perhaps some of them started using odd-lot sizes as well. You can see where the NYSE specialists would get upset with 10 99 lots vs one 1000 lot. I'm glad to see IB has fixed its customer's problem. Jack