what is the purpose for IB to penalize orders with direct exchange destination?

Discussion in 'Order Execution' started by trend2009, May 14, 2020.

  1. trend2009

    trend2009

    I am TWS Pro user. yesterday I sent orders from TWS to ARCA directly instead of using SMART routing, the commission is 1 dollar for only 5 shares. if I use SMART order, that would be 0.2 dollars. from the webpage for tiered commission, IB says non SMART orders will have extra charge, which makes me think why IB charges non-SMART order. for IB Pro version, IB will not sell my order to third party. so what is going on here? it looks like IB monetizes on SMART Orders, does not it conflict with TWS PRO version commitment, that is, not sell order to third party?
     
  2. smart orders can be matched and often are with their own dark pools
     
    Statistical Trader likes this.
  3. qwerty11

    qwerty11

    Ehmm no, the commission can never be $1 for 5 shares and tiered. Conclusion: you're not on tiered commission. That's your own choice BTW...

    And there's no difference in commission between SMART and directed, so that also makes no sense...
     
  4. trend2009

    trend2009

    reread the tiered commission page, ie. the fine print at the end of the page.
     
    d08 likes this.
  5. qwerty11

    qwerty11

    don't need to read that page to know the answer.

    But I'm sorry, didn't ask which stock you traded. If you traded BRK-A then the commission for 5 shares could indeed be around $1. For other stocks, no.
     
  6. Wrong. Apparently you do need to read it. Such arrogance is not a good look, and probably won't help you in trading either.
     
    d08 likes this.
  7. IB could match against customer orders on the exchange and then cancel the one on the exchange, taking on risk of double execution.

    I suspect this limitation is a mostly legacy from the timber hill era when they were trading against customer orders. Now that that is in the past, they no longer have a conflict of interest, but at the same time they apparently don't have a ton of motivation to lift the restriction. They seem to have made a decision that they don't care about serving this segment of the market.
     
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  8. qwerty11

    qwerty11

    I think the arrogance is on your part (and the TS). It is only speculation (dark pools, PFOF) but that has nothing to do with it. Let alone your last post.

    On the mentioned page (from IB for tiered) you can see that there is no extra fee for directed (via TWS, as the TS said) and the exchange fee for removing liquidity (for 5 shares) is only a few cents (for all exchanges) so the commission for 5 shares can only be about 40 cents (max).
     
    Last edited: May 17, 2020
  9. qwerty11

    qwerty11

    That's only a note that (i) if you use the API and (ii) directed orders then you cannot use tiered commission structure. Has nothing to do with your original question (because you use TWS)...
     
  10. Nice try. If you knew about the API thing to begin with, then it would've been obvious to you that he's using the API to achieve that result. Protip when you get called out for not knowing what you're talking about, just learn from the mistake and move on. Don't double & triple down.
     
    #10     May 17, 2020
    d08 likes this.