Why Would IB Want to Prevent Orders On Both Sides of The Market?

If anyone can give a good answer to this one I would like to hear it...

This is obviously why they have changed the green/blue status on TWS...

 

Certain exchanges prohibit orders on both sides of the market. AMEX prohibits it. A number of options exchanges (all?) prohibit it.

 

Exchanges are made up of members who make their living making markets- aka orders on both sides of the market. Allowing customers to do this would eat into their source of income.

BTW, this has nothing to do with IB.

 

No, that's not why they changed it. IBSoft explained why, and it made sense to me as one reasonable way of looking at it.

GLOBEX has no prohibitions on making markets, cancelling orders, etc.

 

"2. It is a violation of U.S. option exchange rules for a customer effectively to act as a market maker by holding itself out as willing to buy and sell securities on a regular or continuous basis. In determining whether a customer effectively is operating as a market maker, the exchanges will consider, among other things, the simultaneous or near-simultaneous entry of limit orders to buy and sell the same security; the multiple acquisition and liquidation of positions in the security during the same day; and the entry of multiple limit orders at different prices in the same security. "

IB is also a market-making firm ie Timber Hill, therefore you'd be competing against them with priority on exection since you're a customer.

 

The BOX changes that.

nitro

 

This is an interesting question.

I have actually recently had this issue brought to my attention as it relates to AMEX listings. Can anyone with intimate or near intimate knowledge of this subject (being on or posting orders on both sides of the market simultaneously) give us a definitive answer and explanation of this issue?

Thanks in advance.

 

Can't be on both sides of the market on AMEX. This is an exchange rule.

Post one side AMEX and the other on an ECN..then you can legally be on both sides of the market in an AMEX stock, as only 1 side is on the AMEX.

 

So exchange rules do in fact prohibit a person from placing a bid and offer with the specialist simultaneously .

What a crock of shit! This seems to me to be one more reason the SEC needs to break the backs of these thieving monopolies (specialists). It becomes clearer and clearer to me how the term 'specialist' came to be. And to think I once was naive enough to believe the term had something to do with the fact that the firm 'specialized' in trading a particular stock. Ha HA HA !!!!!

What is the logic of this rule other than to protect the monopoly of the specialist and his inefficiencies? I mean god forbid you actually place orders proactively, no you stupid traders should only be allowed one choice at a time. I guess the AMEX is worried that the public may actually be able to out trade the specialist without being handicapped.

Specialist=rapist

 

If it is such a good deal, why don't you become a specialist?

Members and member firms always get priviledges. But look at the requirements and the capital needed to do it.

It is like saying, "the SEC should come down on Donald Trump. I mean, look at all the buildings and casinos he can put up." Well, look at the capital investment and risk he takes.

But, yeah, in general, the more money you have, the easier it is to make more money because of the advantages and priviledges that money affords you. If it didn't, you wouldn't be chasing it in the first place.

nitro