I really don’t know where this “they sell my order flow so I get worse fills”. The NBBO is the NBBO. They have to seek that liquidity or a firm can jump that queue and fill at a slightly better price to jump ahead of NBBO. One issue could be them sending limit orders to venues that offer better ECN fees while it would likely get filled quicker on another ECN because of their ECN fee structure. They could also seek out darkpools either by your direction or with a smart router for better prices. NBBO is NBBO. The main issue with payment for order flow I see is you have all this invisible liquidity. If it was banned, this would all end up on the lit market where it would be more competitive for prices with small market makers able to compete against the giants like citadel. Until it’s banned, I don’t see how zero commission effects most traders with current model. Unless your using IB and directing orders,accessing API or benefiting from tiered commission structure and receiving ECN fees for adding liquidity,or your broker is routing through dark pools for your benefit, it probably offers no benefit. Maybe I’m missing something. When I had TD direct investing account ( Canada) I regularly got better fills when they sold it by .005 cents. Mind you in that case, a limit order probably would have been better then a marketable limit order. I feel like this “ how are fills” is some old remnant or the days when you called your broker and waited until end of day when you found out your execution.
Interesting. By the way, do these zero commission brokers allow orders to be placed at market close (at zero fees)?
No idea. I’ve seen many lack certain order types so that’s another trade off. MOC orders have a fee associated which these zero commission brokers can’t offset by directing orders elsewhere. Think I’ve seen some still offer but with a commission, think TD? First issue is most these brokers are American so you need to know your country and the brokerages laws on foreign accounts. If they have a EU branch they most likely won’t offer. As a Canadian, any broker I deal with must have shop setup here, so you have the big banks, Questrade, and IB Canada, which is not the same as IB in U.S. Cost of business, regulatory cost vs number of customers just don’t justify the competitiveness. Even some of the big banks were still charging 29.99 a trade up until a few years ago. 9.99 still the norm vs IB at .01 a share. I’m as EU citizen theirs similar hurdles.
Your forgetting about Price Improvement. NBBO is the minimum the Broker has to comply with. Just because NBBO is the minimum allowed, doesn't mean you can't get better. What was the average price improvement over NBBO at your TD account? Something quantitative, not anecdotal.
I worked at Questrade before. We sold our clients retail order flow to large High-Frequency Traders (Citadel, Apex) to trade against them. As long as the NBBO rules were followed, then the regulator doesn't care. You could see BIG differences in execution between Questrade/TD direct Investing and a proper broker like IB Canada. Run a Transaction Cost Analysis(TCA) between brokers and you'll see where margins are.
TD was.005 at best. Not very often but often enough. I always knew if I got that improvement theirs definerly a better deal elsewhere. However I’m confused as to how IB can be so much better unless most their fills are hitting dark pools. Questrade I’ve never seen a trade reported off any non lit ECN, which I guess doesn’t mean anything, could just be reporting trade through that venue? But I’ve never got a price improvement.
I'd h I'd have to see your orders to give you a clear answer. What the NBBO was at the time you sent the order and execution price. But generally what I find different is that IB will make more use of dark pools, They re-route resting limit orders, and will split orders across multiple venues. I was getting employee pricing with Questrade and it still wasn't as good as what IB Canada gave me in terms of execution & commissions. You'll see the biggest NBBO improvements with spread options, then large-volumes of options and smallest for stocks. TD is a bit better but not as good as IB and Fidelity.