I'm using limit orders to exit some stocks. I noticed SMART sometimes fills me on NYSE and sometimes on BATS. BATS has the biggest rebate of all. Would be more prudent for me to specifically demand BATS routing and give up on SMART? As I understand Reg NMS prevents trading outside the best bid and ask so it would not hurt my liquidity but maybe there is a catch at BATS only routing Thoughts?
Another choice is to choose the SMART strategy that favors rebates over other factors. Last time I looked there were several choices for Routing, other than the default settings for SMART.
The biggest catch is that the commissions are quite a bit higher for customer-routed orders. My experience has been that Smart routing does a pretty good job of speed and price.
Are you sure?I usually pay 70c-80c per 100 shares. This morning I did a quick trade routing to BATS adding liquidity, paid 50c per 100 shares. Only 1 trade but I'm already pleased with the results
IIRC that's for API orders only. No difference in commissions on orders entered through the GUI. I don't know why IB penalizes API users.
Because point-and-click guys are so slow that anyone can make a killing off them. By the time the left button of the mouse clicks back to it's normal position 5-8 guys/firms have already gotten a look at your order and you are that guy looking around wondering who the sucker is. I used to really knock IB but recently I'm starting to appreciate the amount of risk retail firms take on both as a firm as well as with the overhead it takes to run a business like that. I still despise internalization of order flow but that won't change until Stock777 conquers the world and rings the NYSE open every day for a living. The only real "HFT" crooks out there are the internalization guys - in my opinion. It is interesting to see IB stick to the retail space vs. make an attempt at the low-latency guys. I guess the profit margins are that much better. Just assume that everything they do has been fully evaluated and helps them more than it helps you. If your trading style is impacted by pricing look for better pricing (or broker) before you look for a better strategy.
Great advice. Can you recommend brokers with better pricing than IB ? What is the broker that you use ?
I'm trying to understand better the order internalization vs. going directly to an exchange. If I send a market order and it gets internalized, does that mean I get a worse price than if I had sent it to an exchange ? What about an internalized limit order ? How will it be executed exactly ? Also, can the broker "delay" my order instead of sending it directly to the exchange ? If so, by how much time ? Sorry if those question seem stupid, but these details are not available from the brokers (for example Interactive Brokers).
Those details are not available because IB does not internalize. IB does publish price improvement audit results and you can read the 606 report that all firms must report to FINFA.
To softdown, IB's statement on this is debatable. For a quick review check out: http://bannronn.com/market-basics/us-brokers/trade-execution-order-routing-options.html Where the author writes: "Internalization Using SMART Routing Technology The third option is internalization in which the broker can send the order to a different division within the firm to fill the order. An excellent example of this is the relationship between Interactive Brokers (IB) and Timber Hill (TMBR). TMBR makes markets in a variety of trading instruments while IB is a deep discount brokerage in stocks, futures, options etc. Using IB's SMART routing technology, orders are routinely routed to TMBR to see if it can be executed there before proceeding elsewhere."