I think it only applies to the directed orders because "smart" orders are not sent to an exchange until they are marketable (executable). Then they trade with Timber Hill, the market making side of IB electronically. Hence, they make money on the broker commission and the market making. Since the cacellation fee is only charged by the exchanges (I think the CBOE started this one), IB does not charge for holding the order then cancelling it in the IB system. (The order never reaches a trading floor, so no fee can be charged)