Why Does IB Still Not Offer ECN Pegged Orders?

Discussion in 'Order Execution' started by giggollo, Oct 17, 2010.

  1. For years now, IB's platform does not support native pegged ECN orders. Instead they offer an alternative IB order type called the "RELATIVE" order. This order puts IB customers at a disadvantage as follows:

    1. Order limit price is updated by IB servers, which is slower than pegged ECN orders whose limit price is updated internally by the exchange/ECN servers.

    2. IB Relative orders do not "roll-back". Pegged ECN orders do. In other words, an IB Relative buy order will adjust its limit price higher as the bid rises, but if the bid falls, the IB relative order will stay at the highest price reached instead of adjusting its limit price back down to follow the declining bid. This makes the IB Relative order a mispriced "sitting duck" waiting to buy higher than the current bid, and thus, by definition, it is no longer "pegged".

    The issue was raised 5 years ago in the following threads, and is still unresolved (!) :

    http://www.elitetrader.com/vb/showthread.php?s=&threadid=46452
    http://www.elitetrader.com/vb/showthread.php?s=&threadid=45686


    My questions are:

    1. I'm not big on conspiracy theories but i wonder why IB has not in all these years allowed sending of pegged ECN orders through its platform and continues to offer only its own handicapped "RELATIVE" order? Could they somehow be benefitting from this? Is so, how? And if not, why not support pegged ecn orders to provide a true "direct access" platform and provide their customers with options that are readily available on other platforms?

    2. Is it possible to enter a "pegged native ECN order" via IB's FIX Gateway directly?

    3. In general, when you send an order via IB's FIX Gateway, are the tags first "interpreted" by IB's gateway and translated to a set of tags which they then send to the exchange, or are the tags you send via FIX sent DIRECTLY to the exchange as is?
     
  2. sprstpd

    sprstpd

    Just guessing but a RELATIVE order that "rolls back" in price would increase the potential number of modifications per order to an unacceptable level given that the RELATIVE order has the same commission structure as other IB orders. I.e., IB wants to keep its costs down and having an order type that could involve unlimited number of modification/cancellations is not in their best interest.
     
  3. Good point, and this might explain why their RELATIVE order does not roll back.

    However, it still leaves me wondering why they don't (also) support native ECN pegged orders, where the limit price updates would be done on exchange servers and would therefore be faster and not cost IB anything. They would just send the order and get back an execution report, true direct access.

    Here, IB for years has been doing the very opposite of direct access: denying use of a superior native exchange order type, the "native ECN pegged order", and offering instead their own handicapped version of the order which can be taken advantage of at their own customers' expense, to the tune of millions of dollars over all these years. I want to believe it's just an "oversight" for all these years, but I find that hard to believe.
     
  4. sprstpd

    sprstpd

    Do you know if ECNs charge more for you to enter an ECN pegged order versus a normal limit order?
     
  5. Whats actualy invoved in bypassing the broker altogether? Trade directly on bats

    Can average Joe afford that setup? Monthly fees? Account size?
     
  6. ECN charges/rebates are the same for limit and pegged orders as far as i know.
     
  7. moarla

    moarla

    what are then names of those 4 brokers and what kind of ammount they are asking?
     
  8. +1
     
  9. IB crosses your orders internally. Of course they are going to set their systems to make it harder for you to route to outside exchanges.
     
  10. From a retail trader perspective... What Do I need to Do in order to bypass the broker all together?

    Anyone doing that allready?
     
    #10     Oct 18, 2010