Question about VWAP Orders

Discussion in 'Order Execution' started by Cyrix, Oct 10, 2017.

  1. Cyrix


    For VWAP (best efford) orders, is there any difference between

    1. not specifying the End Time
    2. specifying the End Time + selecting Allow Trading Past End Time

    Are they effectively the same (i.e both will fill the order in the same way till close of market)?

  2. Assuming you are referring to IB's VWAP algo: not 100% sure, but I believe an empty end time will produce the same result as specifying 4:00pm. I do know if you specify an end time of, say, 11am, it will usually finish by that time or earlier, unless it's an illiquid stock or it has a 5-cent tick size.
  3. Cyrix


    Yes, I mean IB's VWAP Algo.
    My question applies to both liquid and illquid stocks. I thought 1 and 2 were the same for both liquid stocks or illiquid stocks (which might not be fully filled by the specified end time but continue to "Allow Trading Past End Time").
    I want to know if it's true. If it is, then why is there an "Allow Trading Past End Time" option? People can just leave the end time field empty to have the same result.
    Last edited: Oct 10, 2017
  4. The Allow Past End Time setting just means if the algo fails to get done within the specified time frame (happens more often in illiquid names, obviously), it will continue to try for the rest of the day. If you have it unchecked, the order is cancelled immediately upon end time.

    In general, there is really no reason to leave the end time empty. You either want the order spread throughout the whole day or you want it done more quickly. My assumption is that empty = 4pm, but that could be wrong.
  5. Cyrix


    Thanks for your input but this didn't answer my question: whether leaving end time empty = having an end time but selecting "Allow Trading Past End Time".
  6. The answer is no. But if you don't believe me, why don't you just contact IB?
  7. Cyrix


    Different IB representitives (at the trading desk) gave me different answers, some
    said yes some said no. It seemed like they didn’t often get questions about VWAP orders.

    I didn’t say I didn’t believe you. Could you explain how 1) and 2) are different, for example for an illiquid stock?

    If I specified an end time+”allow trading pass end time”, and if the order is not completely fill by the end time, it will then continue to fill till the end of day. How is that different than not having an end time at all?

  8. Pretty simple. If you have an end time, it will try to get done by that time. If it fails and you have the keep order active box checked, it will try to get done ASAP (while obeying your size and aggressivity specs). If you leave it blank -- again, no idea why you would do that -- it probably treats that as 4pm, and so would try to space out the orders from start time until 4pm.

    Liquidity matters because some stocks are easier to trade than others, esp. when telling the algo to be passive. So all else being equal, illiquid stocks are less likely get filled within the times specified.
  9. Cyrix


    Very clear, thank you very much.
  10. Cyrix


    One more question related to VWAP orders:

    What is the best practice for the limit price for a VWAP order?

    Setting it in the bid/ask range is usually too low because the market often moves outside of the range by the end time, and the order can't be filled except in the beginning.
    Setting it too high then it effectively becomes a market order.

    #10     Oct 17, 2017