Fraud: Broker kind of "frontruns" client order. Reporting to SEC?

Discussion in 'Retail Brokers' started by thecoder, Nov 26, 2021.

  1. thecoder

    thecoder

    A client limit order to buy a Call option for $0.35 gets forwarded by the brokerage firm to the orderbook of the exchange as an order with a Bid of $0.30 instead of the $0.35. Every site shows the highest Bid as being $0.30.
    Is this not highly criminal? Should this be reported to the SEC or an other watchdog?
     
  2. I've seen them do this, especially when I'm about to get mad profit on the trade.

    I figure the scam is just the cost of doing business. I check the order, it is transmitted but not acknowledged until (magically) price moves favorable and I can no longer get in.

    My guess is there are "preferred" market makers who get to decide if an order gets acknowledged. They want you to pay the full spread when they're about to get fucked.

    Just a guess.
     
    thecoder likes this.
  3. rb7

    rb7

    How this is supposed to be front-running?

    Front-running would be if the broker sends an order before yours (but after seeing it) in order to get filled with your orders.

    If you send an order at .35 and the bid is still showing at .30, then there is something else going on.
     
    thecoder likes this.
  4. MrMuppet

    MrMuppet

    ...the monkeys when they blindly mash buttons on the colorful platforms of their PfoF brokers.

    Get direct access, learn routing, problem solved
     
  5. thecoder

    thecoder

    This is IMO even a VERY BIG FRAUD SCHEME!
    It works as follows:
    Broker replaces Client's order with its own order whereby changing the Bid to $0.30 from $0.35 (the original order never gets to the exchange!). If that new order then gets filled in the market, the broker "sells" it to the Client and makes a profit of the difference, ie. $0.05 !
    The broker can never lose, it's a guaranteed profit for him, even more: when also the commission paid is considered... Client pays the commission AS WELL this kind of slippage fraud.
    Gangsters!
    I just wonder why none of these sleeping market watchdogs themselves catches such obvious fraud crimes committed by one of the biggest brokers in the industry...
     
    Last edited: Nov 26, 2021
  6. I don't think IBKR does this, but I've seen it often enough to feel something is up. What that thing is, I don't know.
     
    David's faith likes this.
  7. thecoder

    thecoder

    I can't judge IB... :)
     
  8. 2rosy

    2rosy

    You're order is still 35 just not displayed
     
  9. Arnie

    Arnie

    It's happened to me in IB. I go high bid and it still shows the lower bid as best.
     
    nooby_mcnoob likes this.
  10. traider

    traider

    In general, options in high volume securities such as SPY, QQQ, and IWM, are quoted in penny increments regardless of the price. For others that trade below $3, the increment is $0.01 or $0.05 and for contracts above $3, the increment is $0.05 or $0.10

    A market maker is not rigidly limited to five to 10 cent increments. The legs of a combo order such as a spread can be filled at any price even though the legs are quoted in 5 cent increments.

    Can you give the name of the underlying so that I can test this out. Your case sounds like fraud. We cannot let something as trivial as this stop the fair put advancement!!!
     
    #10     Nov 26, 2021
    Jones75 likes this.