I'm trading options through IB's direct order routing. They have a list of destinations you can route your orders to: AMEX, BATS, BOX, CBOE, EDGX, GEMINI, ISE, MIAX, NASDAQBX, PHLX, PSE. If I want my orders to be exposed to the dark pool liquidity, which ones on the list provide that possibility?
IB have IBKRATS which I presume is a dark pool where all orders go through before hitting an exchange. I was filled on large cap stocks at IBKRATS recently. Not sure if it works with options though. Dark pools are usually operated by brokers to save transaction costs at an exchange and to hide orders. An exchange wants as much flow to go to their market. Ask IB and report back.
IBKRATS isn't part of the smart routing though: https://www.interactivebrokers.com.au/en/index.php?f=4485 IBDARK as a routing destination does seem to be part of smart routing: https://www.interactivebrokers.com/en/software/tws/usersguidebook/ordertypes/ibdark_orders.htm Welcome to the murky world of "who wants to be the counterparty to my trade"!
I default to IB smart and traded at IBKRATS, presumably if there is nothing to lift at IBKRATS then my buy order will pass through to the exchange. The IBDARK page links to IBKRATS so are they the same thing?
No dark pools for options at this time. There is dark liquidity - non displayed liquidity on a number of the exchanges and preferenced orders can fill from the dark liquidity. There is also a very robust upstairs market. The idea of non displayed liquidity is to keep the order from shipping under linkage for customer who's flow you want to keep.
Can you tell me what route destinations I should select to access the dark liquidity? Does CBOE or AMEX have any dark liquidity?
It's brokerage firm dependent. Not up to anything you can do. Preferenced orders are generally used when a firm sets a routing deal with an MM who only wants to show "10 up" , but would actually fill more for a preferenced firm so as to not have to ship the balance.