Stops are still lousy at IB

Discussion in 'Trading' started by Grabbit, Aug 29, 2001.

  1. def

    def Sponsor

    First: you imply IB is doing something suspicious with your order. I assure you (you can also look at an attestation from Deloitte and Touche that is posted on the web site) that this is not the case. If you are concerned about market orders, why not try stop limit.

    As for stating that your stops are not being triggered properly, why not send the details to the help desk at the time in question and ask them to run an audit. If you are not satisfied with your response, send me the details and I will personally make sure it is investigated. The double bid/ask rule is confusing and often is mis-interpretted. Nevertheless, if you provide the details and examples it will certainly help point to any problems.
    #11     Aug 30, 2001
  2. Grabbit


    OK def,

    Can I still do that now, the day after? If I find the time I will do that, unless you mean that I should have done that immediately when it happened.

    BTW I now remember that I did hit the chat and e-mail options in the help menu, but I got an error message (still do). I should then have sent a regular e-mail of course, but somehow I did not do that.
    #12     Aug 30, 2001
  3. def

    def Sponsor

    sorry not clear on last post. try to do it the same day so we can look at time and sales via the ticker services. If you desire, mark it to the attention of "Edmond in HK". he's on the HK help desk and if he finds a problem he can point it out to me and I'll moan about it and show the proof to the programmers.
    #13     Aug 30, 2001
  4. Grabbit


    OK thanks,

    Next time I'll do that immediately then.
    #14     Aug 30, 2001
  5. tntneo

    tntneo Moderator

    I mainly use stops for futures, but I remember stop for stocks.
    I find it better to use stop limit in both cases.
    That is, if you are daytrading and you stay in front of your screen. If you have a longer time frame [swing trading for instance] out is out, and I don't care, I use market.

    back to daytrading, I use stops as both a early warning and autoexec but not at any price. When futures become volatile [well stocks too] the stop might be trigger but just being cool and a little patient will get you a good fill [even flat]. My experience shows that using a stop market order almost always gives a bad fill, just because they are so FAST. they don't let bidders [or askers depending on the trade] to come back in and you are filled from Hell.

    Sometimes I am even nasty and use the stop in a reactive way. My limit part is much [or a little] higher than the trigger itself. Again, the speed of the stop orders puts me in front of anyone reacting to the action manually.

    All this is valid because I stay in front of the screen and I can see when a stop order goes live. So, I remain ready to modify the order [which is another great feature of IB. once active you can change the limit price very quickly and as many times as you want until you are filled].

    #15     Aug 30, 2001
  6. tradex21


    Grabbit I was short 400 Q's and was ripped .13 on a stop with IB a couple of months ago. Your complaint is not an uncommon one from other IB customers such as myself. Since you can't use floor trader bagmen anymore with electronic routing and executions, I'm sure the smart boys have figured a way to have electronic bagmen. And don't call their trade desk either, you're wasting your time.:mad:
    #16     Aug 30, 2001
  7. Turok


    >What level II info I get in QT depends on what
    >provider I choose. I just get the usual stuff,
    >ECN, size, price

    One thing for sure. With the IB trigger system based on prints in addition to bids/asks, one must have a real time Time and Sales window (and be glued to it) to determine when the stops should actually trigger. It is often possible for the bid/ask stop levels to be hit and for significant time to pass before there is any print activity at the respective level.

    >BTW I did not post this topic to apply for
    >help, but to complain and warn others who
    >think that the problem with stops has been
    >dealt with properly at IB.

    Point taken, no help with be offered. Let's say that this discussion and your examples may well be a help to others who are using or thinking of using these stops.

    >And I still think my complaint
    >is justified.

    With the problems IB has had in the past with stops, I'd be the last to say that you are wrong. It should simply be noted however, that much of the behavior about which you complain is often perfectly normal and in fact is a system doing exactly what you ask it to do. I may someday want to use IB stops so I want any problem fixed just like you do, but if we don't understand the rules, the systems and the algorithms we may at times in fact be complaining about behavior that is perfectly normal.

    >But bad fills have happened to me with larger
    >differences. Some weeks ago I reported
    >(somewhere on this board) the case where
    >I got filled .20 below the bid, on a very liquid
    >stock. That's what I call off the mark.

    I trade very liquid stocks (amat, etc.) I stare all day at LVL2 screens of these stocks. On these screens I have all the ECNs highlighted so at a glance I can see their position relative to the market. There are many, many times each day when there will not be a single ECN within .20 of the inside -- and you know what? - it's usually when I want the execution the most. That's the nature if liquidity. I call the ECNs the cockroaches scurrying from side to side as momentum shifts from bid to ask. When you come to realize that this imbalance happens often, you recognize that a BEST_ECN print .20 below the bid is most likely just that...the best ecn bid at that moment. Since I route my own orders, in that situation I am often sitting there trying to hit the flashes of ECN liquidity that show up closer to the inside, but dammit -- I often am not fast enough because hey -- everyone in the entire trading world is trying to grab that same solitary order at the same time and in the end I am left with nothing (or stock .20 off the inside)

    >And we all know that dirty tricks are being
    >played in this industry, so I think it's good
    >to be vigilant.

    You are so right. And the only way to be productively vigilant is through depth of knowledge, careful and studied analysis, and quality tools.

    >A market order is in a way indeed a carte
    >blanche, but it is also based upon a certain
    >amount of trust and confidence. If I get filled
    >far away from the spread on a market order,
    >I feel the confidence has been violated.

    I believe you may be confusing a market order to a MM, where there is some expectation of market fairness (arguably rarely achieved) with a BEST_ECN market order where the only expectation can be "through simple computer logic at the moment of order execution, grab the best ECN price whatever it takes ".

    With a MM market order, you hand off your fill wishes to another entity with "trust and confidence" that this entity will use every means to work your order and get you the best overall price. You have given no specific instructions to this entity regarding how to process it and thus it has complete flexibility. The resultant fill must withstand the scrutiny of the SEC (or arbitrator) if you complain. If the fill was .30 outside the momentary market they must justify this. If they hold your order for 5 minutes before execution, they must justify this (they are often able to do both of these)

    With a BEST_ECN market order, you have none of the above protection because you have specifically instructed a computer to send your order to a narrow market segment and additionally have specified that it will follow your orders *at all costs* and with great urgency. You are now completely at the mercy of a relatively small group of liquidity providers (ECN traders). Outside of an expectation that the computer algorithm execute as designed, all your "trust and confidence" has now been transferred from a arguably reputatable entity with regulatory oversight (MM), to a notoriosly fickle bunch of rampaging cut-throats with no oversight what so ever (fellow traders) . Best wishes with that "trust and confidence" my friend.

    >Thank you for your comments on best
    >routing systems.

    Thanks for your participation as well. It is great to exchange with someone who can relate their experiences.

    >My "bug or scheme" issue however referred to
    >bad fills and stops not going off properly, not
    >to the problem with ECN routing.

    Well, actually "bad fills" and "problems with ECN routing " can't often be separated. In the case of us daytraders, the most common source of "bad fills" is "problems with ECN routing".

    #17     Aug 30, 2001
  8. tradex21


    Turok Good Post I have also put in a Best ECN Order and had it batted back and forth beween ecn's for thirty seconds until I pay up .20 to .30 higher on the stock. This hasn't happened often but enough to make me point and click "on the money" at one ecn. What Gives. And to Call IB and complain you would just as well call the Pope and complain about birth control.:confused:
    #18     Aug 30, 2001
  9. Grabbit



    Thanks for your elaborate reply.

    - I'll open the T&S window more often and study it.

    With the IB trigger system based on prints in addition to bids/asks
    Where do I find that triggering system? I only found some general remarks on their website. Could not find the "double hit rule" either, or did they abandon that?

    - I do not precisely recall if there were a lot of orders between the bid and that .20 below. I do think there were, but I'm not sure.
    So you may be right, it may have been the case that -.20 just was the next best bid at that time, but if it was, I'm sure I would have noticed that sudden drop, unless that .20 gap got stuffed up again with new orders immediately afterwards of course. It can all happen faster than your L2 screen can monitor, I'm sure. I have no plans to test it any further as stops appear to be a lot more riskier than I already thought they were.

    - You are actually saying that IB nor any other broker has any control over the way the ECN order is executed, it is pure computer logic. So any tampering is out of the question? Well, you seem to know a lot more about it than I do, so I'll believe you, but I'll remain vigilant. They're in the market too, buying and selling, so they're not only my broker, they can be my counterparty as well. And I find that by its nature a combination that deserves suspicion or at least vigilance. (At Datek they state on the trade confirmation in which capacity they acted, including wether they were the buyer/seller of the stock - not that I ever cared a lot, but it made me more aware).


    Thanks. I'm glad I'm not the only one to find such bad fills not normal.
    ...calling the Pope... very funny! :)


    The way you handle stop limit orders seems smart. The way I understand it, it's like getting a reservation for the front row, only taking the seat when it's time. I like that. I'll try that.
    #19     Aug 30, 2001
  10. Turok


    >I have also put in a Best ECN Order and had
    >it batted back and forth beween ecn's for thirty
    >seconds until I pay up .20 to .30 higher on the


    I just engaged in an exchange with a couple helpful IB individuals where I described one situation that can cause the above:

    For the following example, we'll assume that an attempt is made to hit ECN liquidity through BEST_ECN limit order that is .05 out of the market (NBBO inside bid is 25.50 and highest ecn is 25.45)

    If you're a split second late with your order (and let's face it, we often are) the liquidity that you intended to get is hit by someone else and is gone. BEST_ECN now posts your order to the Island book at 25.45 limit

    While your Island order sits waiting for someone to hit it, Inca shows up at 25.46. BEST_ECN would recognize that this liquidity falls within your limit and would pick this buyer off for you --- BUT can't execute the order with Inca until it cancels the Island order and *receives confirmation* from Island that this order is in fact cancelled -- only then can it hit Inca. Any other action puts IB at risk of owning shares that you ordered and we know IB ain't gonna go for that (nor should they be expected to). Of course, in this worst case (but realistic) scenario, by the time the Island order is cancelled, the Inca liquidity is already snagged by someone else and with no liquidity available at or better than the limit, BEST_ECN will again post the order to the Island book.

    It's possible (but of course not likely often) for this behaviour to frustratingly continue for some time as ECNs flash liquidity above your limit and then get taken out quickly, reseting the process each time.

    One could argue that BEST_ECN shouldn't post the limit order to Island, but rather should lay in wait for an ECN to pop up and then wail on it like 'whack-a-mole' Well, for the stocks I trade (highly liquid), this would be an improvement, but for a less liquid issue with less frantic LVL2 ECN action, I would WANT them to post my order to Island in hopes of getting hit.

    >This hasn't happened often but enough
    >to make me point and click "on the money"
    >at one ecn. What Gives.

    What gives is there is no BEST_ANYTHING when it comes to routing algorithms. Everyone wants and needs something different. If you want the job done right, do it yourself.

    #20     Aug 30, 2001