I have been receiving notices from IB complaining about my order-to-execution ratio being too high. I'm sending/modifying/canceling about 2000 limit orders a day and getting 10 to 20 executions. So this "ratio" they are complaining about is 100 to 200 in my case. Has anyone received similar notices from IB or other firms? and in general what is the acceptable ratio by most brokers? IB does not tell me what's the acceptable ratio but keeps telling it's too high. I'm also willing to pay for placing an order (like 2 cents/order). Do any brokers offer this type of plan or has anyone made such arrangements with their brokers? Any info is highly appreciated!
It is not always the quantity that plays a role, but the timing of the cancellation. The duration between your limits and cancellations must be very short.
Yeah I got these for a while. They want a fill ratio of 1% (100:1 or less), preferably lower. If you add some timing delays in your algo logic so you avoid getting into fast place/cancel loops under certain market conditions and/or other algo interactions, you can often cut down on the your non-executed order activity. In my case, it was when someone else's algo was doing something dumb and that was right on the threshold of mine wanting to do something. Have a differential or a time lag in your place vs cancel thresholds can also help. The emails from IB are automated but start sounding increasingly stern about what might happen if you don't address this. I would guess they are more worried about someone using tons of their system bandwidth and resources rather than some guy who's algo is placing 20 orders a day and only getting 1 fill.
I suppose IB is not too keen on eating surcharges from exchanges, for example on ES it was 30:1 message to fill ratio over a session, if they didnt change it. It varies by contract. Not sure if they count this by customer-account or firm-wide.
This question is in the option forum. I don't know, because you did not tell us, if the question is about equity, option, futures or options on futures. If you are sending 2000 orders per day you have a bigger problem than your clearing firm. You can lose priority customer status by entering more than 390 order per day on average over a month. March had 23 trading days, which is a lot. That means if you entered more than 8970 order in the month, you status can change. Read about Professional Order Designation. https://www.cboe.com/publish/RegCir/RG16-064.pdf Bob