Why are there fees for cancel/modify?

Discussion in 'Options' started by surfer25, Sep 4, 2012.

  1. Just wondering why are there are fees for canceling or modifying options orders, since stocks don't have them.
  2. 1245


    When electronic option markets opened the pipes up to HFT, many electronic market makers would flood option markets with a large number of orders all going after the few customer orders left on the book that are good, or after a market maker that had stale markets. This extreme volume would often shut down exchanges like the AMEX or PHLX. The exchanges had to build an infrastructure to deal with this. So, any trader that has excessive ratios of canceled orders to fills, get charge for the bandwidth there are using. Most customers don't receive any cancellation fees unless you earn them, except at IB which charges everyone.
  3. Thanks for the response.
    Is there an option broker with commissions as low as IB that doesn't charge cancellation fees?
  4. 1245


    If you have enough assets and volume to use an Introducing Broker, yes.
  5. smile


    What are enough assets and volume to use an Introducing Broker?
    Just a ballpark. Thank you.
  6. Daal


    Doesn't BATS routing enable one to bypass cancel/modify fees?
  7. I believe that Interactive Brokers does not charge cancellation fees for options spread orders, so that is a way around it.
  8. donnap


    Apparently not. See IB website.

    But the fees are negligable on that and several other exchanges.

    It's the direct routing comms. that are the killer to that idea.
  9. 1245


    IB does not charge cancellation fees for options spread orders, because when you use SMART ROUTE for Complex Orders, your order DOES NOT rest on the COB at the exchange. It rest in their system until they deem it executable. Single orders on the Smart Route make their way to an exchange.
  10. Does that mean that complex orders submitted via IB smart routing have to match up with a posted bid/ask combination in order to get executed? In other words, no one can see your bid or offer of a complex order submitted via IB and accept it, you just have to wait until some combination of bids and offers matches your price?
    #10     Sep 6, 2012