Brokerages & Trading Tools

[chickensevil]

please read carefully and digest the logic for the stat in the SEC letter linki gave above and you will find your solution on how to easily compare all in cost, the first time I read it, it took me 20-30 minutes to really let the steps outlined in that letter sink in where the light bulb went off and then it made perfect sense.

Seems like that is a feature of trading on IEX vice trading on some other exchange. So perhaps you can help clear something up for me with how the market actually works. Because assuming that IB only has access to IEX and not the other exchanges then that seems limited in and of itself, doesn't it? Options house and many others trade across a bunch of exchanges. I think mine has like 10 of them that they can trade on. You can specify a certain exchange if you want or just let the platform decide for you. Sadly they don't trade on IEX though.

So for already thinnly traded options and now you are restricting yourself to just one (albiet very large) exchange and that seems like it could hurt you just as much in the pricing. Looking across the different exchanges in real time on options house and there can be up to a 5 cent or more spread from the cheapest exchange to the mist expensive at any given moment. Which just trading one contract is the difference of 5$ which for me is basically paying out the commission fee.

I haven't had the time to really research any of the other exchanges other than AMEX and IEX but that seems like a decent flaw. Does IEX cross fill against the other exchanges if there are no compatible orders on their exchange? If so, then what are you actually saving in that instance since at some point it would have to negotiate with the "rigged" AMEX exchange which means you are still going to get shafted on the "best" price, right? That or they don't play together at all which means you could potentially have an order for 6.00 that never gets filled going to IEX but see AMEX drop to that price (or lower). Feel free to steer me straight on this because I am actually interested in some of the deeper workings of the different exchanges and such but it seems difficult to find good information on it.

 

[TSLAopt]

Seems like that is a feature of trading on IEX vice trading on some other exchange. So perhaps you can help clear something up for me with how the market actually works. Because assuming that IB only has access to IEX and not the other exchanges then that seems limited in and of itself, doesn't it? Options house and many others trade across a bunch of exchanges. I think mine has like 10 of them that they can trade on. You can specify a certain exchange if you want or just let the platform decide for you. Sadly they don't trade on IEX though.

So for already thinnly traded options and now you are restricting yourself to just one (albiet very large) exchange and that seems like it could hurt you just as much in the pricing. Looking across the different exchanges in real time on options house and there can be up to a 5 cent or more spread from the cheapest exchange to the mist expensive at any given moment. Which just trading one contract is the difference of 5$ which for me is basically paying out the commission fee.

I haven't had the time to really research any of the other exchanges other than AMEX and IEX but that seems like a decent flaw. Does IEX cross fill against the other exchanges if there are no compatible orders on their exchange? If so, then what are you actually saving in that instance since at some point it would have to negotiate with the "rigged" AMEX exchange which means you are still going to get shafted on the "best" price, right? That or they don't play together at all which means you could potentially have an order for 6.00 that never gets filled going to IEX but see AMEX drop to that price (or lower). Feel free to steer me straight on this because I am actually interested in some of the deeper workings of the different exchanges and such but it seems difficult to find good information on it.

Glad you are curious to learn as the brokers do not want you to know how things work. Here are a couple of things to help clear things up for you:
#1)IEX is only for stocks, not options. It is not technically an exchange or an ECN but a dark pool, soon they may go through the process of becoming an official exchange.
#2)at IB not all orders go to IEX, probably most don't. As a customer of IB you have a choice of routing your order to a particular exchange, ECN, or dark pool (IEX being one) or you can use their "Smart routing" order router which does pretty much what IEX was designed to do only IB has been doing it for decades and is arguably much better at it. Nonetheless if you don't believe that then, as an IB customer, you are free to send any or even all of your stock orders to IEX directly if you want at the same cost as gong through the IB smart routing.
#3)what is described in "Flash Boys" and with IEX is only relating to US stock trading. However, rest assured that the payment-for-orderflow and internalization is much more rampant and profitable for HFTs and brokers with options instead of stocks. It's only not publicized with options as much because Main Street doesn't understand what options are and barely understands the basics of what stocks are, and stocks are much more prominently traded than options.

Ask yourself these questions:
1)When you submit your option limit order with Options House (or anyone but IB) do they show you what options exchange your order is resting on while you await for the market to come to your limit price? (IB does). Why doesn't anyone else do this?

2)are there ever times when you submit your limit order and you think it should be displayed as part of the NBBO (National Best Bid/Offer) on your quote monitor but it doesn't get shown? Why do you think this could be?

3)are you aware of the 'maker or taker' fees/rebates offered by options and stock exchanges? Many of the exchanges typically give a rebate of up to 85 cents per contract for adding liquidity (Ie. Posting a limit order waiting for someone to lift your bid or offer price)
you can see details of what these rebates can be here by scrolling down and then clicking on any of the 12 options exchanges
Commissions

4)For stocks, if you only pay a flat ticket charge of 8.95 per trade no matter how big the order size is then why don't large hedge funds use these same brokers (E*Trade, Schwab, Fidelity, TD, Scottrade, etc.) with the 8.95 ticket charge ever if they want to buy/sell a large amount of shares? (Instead they pay Goldman or Morgan Stanley or JP Morgan 1-2 pennies per share which comes out to be much more than 8.95 for their order sizes).

 

[blakegallagher]

I use to use Tradeking and switched over to IB awhile back. I love it.

I love setting the bid price for my favorite solar city option and that is just not possible with tradeking.

The very low transactions fees and my latest favorite is the very low cost of capital. I have been carrying way to margin lately (flirting with margin calls) and still my interst rates are crazy low ... since I dipped into margin I have only been charged 50 bucks which is incredible compared to what it would have been at my old broker or anywhere else for that matter (That I could have access to)

The other great thing about IB is the security card they send you for an extra layer of security .... does options house have anything like that? At IB it looks like a credit card and you have a 4 digit pin for it. When you enter it in it gives you a random 6 digit code to enter and you can enable that for anytime you log on.

The last benefit I had was Having TSLAopt available for any questions I had when I setup which was nice . It was an easy process but since I moved my whole account over there was a 2-3 day limbo that was a little scary when I could not see my stocks/options in either platform.

 

[chickensevil]

Glad you are curious to learn as the brokers do not want you to know how things work. Here are a couple of things to help clear things up for you:
#1)IEX is only for stocks, not options. It is not technically an exchange or an ECN but a dark pool, soon they may go through the process of becoming an official exchange.
#2)at IB not all orders go to IEX, probably most don't. As a customer of IB you have a choice of routing your order to a particular exchange, ECN, or dark pool (IEX being one) or you can use their "Smart routing" order router which does pretty much what IEX was designed to do only IB has been doing it for decades and is arguably much better at it. Nonetheless if you don't believe that then, as an IB customer, you are free to send any or even all of your stock orders to IEX directly if you want at the same cost as gong through the IB smart routing.
#3)what is described in "Flash Boys" and with IEX is only relating to US stock trading. However, rest assured that the payment-for-orderflow and internalization is much more rampant and profitable for HFTs and brokers with options instead of stocks. It's only not publicized with options as much because Main Street doesn't understand what options are and barely understands the basics of what stocks are, and stocks are much more prominently traded than options.

Ask yourself these questions:
1)When you submit your option limit order with Options House (or anyone but IB) do they show you what options exchange your order is resting on while you await for the market to come to your limit price? (IB does). Why doesn't anyone else do this?

2)are there ever times when you submit your limit order and you think it should be displayed as part of the NBBO (National Best Bid/Offer) on your quote monitor but it doesn't get shown? Why do you think this could be?

3)are you aware of the 'maker or taker' fees/rebates offered by options and stock exchanges? Many of the exchanges typically give a rebate of up to 85 cents per contract for adding liquidity (Ie. Posting a limit order waiting for someone to lift your bid or offer price)
you can see details of what these rebates can be here by scrolling down and then clicking on any of the 12 options exchanges
Commissions

4)For stocks, if you only pay a flat ticket charge of 8.95 per trade no matter how big the order size is then why don't large hedge funds use these same brokers (E*Trade, Schwab, Fidelity, TD, Scottrade, etc.) with the 8.95 ticket charge ever if they want to buy/sell a large amount of shares? (Instead they pay Goldman or Morgan Stanley or JP Morgan 1-2 pennies per share which comes out to be much more than 8.95 for their order sizes).

I like learning how things tick, it is a flaw of mine so I am naturally curious even if I don't ever change a thing after taking in the new information I just like to know.

I had forgotten that the option exchanges were different from the stocks. So thanks for reminding me I also didn't know that IB pretty much seems to trade on whatever they want to which is pretty cool.

I can't tell you how good or bad options house is but I can at least attempt to answer your questions based on my experience.

I honestly never peered too deeply. If nothing else I could go to a thinly traded strike price and place a bid to see which one they throw me on should be easy enough to tell. It might be somewhere else in an easier to find fashion, but I do know that you can choose which exchange you want instead of going with the "best" option. They tack on an extra very small charge for this and I can pick from any of the choices in the list. I don't know if that helps anything? I always go with the "best" choice to just let their software handle it because I don't know enough to know why it would even be in my benefit to pock a specific exchange and eat the couple pennies of a fee they charge for it.

I have always seen my trade affect the board except when they are filled instantly as I place the limit order. This is usually because I am hastily purchasing something and don't try to haggle for the best price. When I do haggle it has ALWAYS bumped up the bid price to whatever I just set. It was a really weird and cool feeling to see my little ole tiny order actually move the price. The only time I ever had an issue with that was also around the same afternoon I experienced some weird connectivity issues with their service and couldn't really do anything for like 15 minutes. But that is not tied to manipulation and more of a technical difficulty. It struck me as odd though upon first seeing it and not knowing I had basically lost coonection to the tickers because the order would go in and nothing moved.... Like nothing... And I sat there watching all of the strikes and quickly realized that the stock was still moving around but all the options were frozen in time... So whatever technical difficulty they had I wouldn't call that manipulation (because the order NEVER executed because it was way out of strike by the time I put it in) and I point it out to say that I do watch the price movements very closely since pennies equals dollars in real money and these suckers move by 5 dollar jumps every second.

I wasn't aware of this and that is interesting. Can you expand on the subject some? Since I would be classified as "public" I clearly don't get a thing for this... But how does that help the broker? Would this be why they might favor one exchange over another or something?

I assume that would be because of a deal they are cutting in some form or another with the exchange or whatever because they are trading such a large volume. I have only ever held in the hundreds of share count for any one stock because I am not such a wealthy person (yet) so I assumed that is more what you get when you decide to ask for 10,000 shares of TSLA in one go without breaking a sweat and having that much cash to purchase such a large number you would want some guarantees about how the order was executed. But that was as much thought as I put into it. So if you have a thought on that beyond that scope feel free. I mean obviously the big firms have their own direct ties into the exchange and can execute orders "very carefully" I don't have enough money to even think about becoming a customer of GS or JP Morgan or whatever. *shrugs*

 

[TSLAopt]

I assume that would be because of a deal they are cutting in some form or another with the exchange or whatever because they are trading such a large volume. I have only ever held in the hundreds of share count for any one stock because I am not such a wealthy person (yet) so I assumed that is more what you get when you decide to ask for 10,000 shares of TSLA in one go without breaking a sweat and having that much cash to purchase such a large number you would want some guarantees about how the order was executed. But that was as much thought as I put into it. So if you have a thought on that beyond that scope feel free. I mean obviously the big firms have their own direct ties into the exchange and can execute orders "very carefully" I don't have enough money to even think about becoming a customer of GS or JP Morgan or whatever. *shrugs*

Instead of me trying to explain it to you, I highly recommend you read Michael Lewis' explanation in a very entertaining book to read, "Flash Boys". It should enlighten you much more than I can articulate in a forum post on what really is happening with your orders and it is actually a very fun read that will be hard to put down.

 

[chickensevil]

I use to use Tradeking and switched over to IB awhile back. I love it.

When I looked I was a little put off by their fees which is why I have stayed away from them for now. I think if and when I get higher volume it will be worth it without question but for the few contracts I trade I think that makes the fees a bit better for me with what I use, plus I liked that I could open an account and be approved in very short order. I don't use margin (yet) and again would probably factor into my decision to jump ship if I ever did. As long as I am not going to get royally screwed over the whole broker manipulation thing, I would be more worried about external threats manipulating the stocks and options than I would caring that my one single contract could have been had for 6.00 instead of 6.05 if that contract jumps to 12.00 I'm sure I'm not going to care one bit on a miss of 5$ profit since most of the getting in and out of contracts I find myself getting larger hits on just the volatility alone with how fast prices move than something shady being done underneath. If I find myself trading larger volume it will be a different story for sure... But right now for me I think the key is making good worthy trades because it is quite a hit to dump out of a raw deal.

And the security, no they don't. That's cool that IB offers that. I wish more companies would push toward a more secure authentication like a one-pass token. This is just in general.

 

[blakegallagher]

When you say fees you mean for access to the real time data? As for as actual trading fees it was the lowest that I have found.

 

[chickensevil]

When you say fees you mean for access to the real time data? As for as actual trading fees it was the lowest that I have found.

Yeah, it seems like the counter on IB is that they have pretty low commissions but get you with the other fees. The other thing is that in order to even use them, they have a pretty high minimum amount (10k) and require you to have at least 10$ in commission charges a month or they charge you an "inactivity" fee of 10$. They also have fees for canceling orders and modifying orders. And that doesn't even get into if you want access to any of their research data which all has fees to it. IB seems a bit out of my league from those perspectives... Like I said, I am really small time on the money I play with for speculation. That was why I appreciated those who were suggesting a switch to TOS since it is a rather fantastic platform and doesn't cost you an arm and a leg. But I am going to hold off on the switch to TOS until I see how the merger between Options House and Trade Monster goes down, since everything I am seeing points to Trade Monster being a pretty fantastic platform. Since it isn't going to cost me anything to give them a go, I will see how that comes out.

Maybe someday I will get a big enough account that switching to IB would be worth it. That said, I do appreciate knowing how the brokers screw you over which makes me want to switch at some point, I just am too small time to be able to do it right now...

 

[Auzie]

True cost is not just commissions or ticket charges, but really is the execution quality. Reading "Flash Boys" should help anyone understand that. If you have read "Flash Boys" then it is important to know Interactive Brokers is the only broker out there that will let you route all of your orders to IEX if you wanted to at no extra cost. No other broker would let you route all of your orders to IEX as they would be losing money on their payment for orderflow business where as Interactive Brokers is the only broker out there that doesn't engage in this.

Anyone who understands the mechanics of trading should read this letter submitted to the SEC on Aug 1st
https://www.interactivebrokers.com/download/execution_stats_comment_letter.pdf

no other broker would want to publish this simple statistic because it would expose them to how much they are truly making off of their clients.

if you read and digest and understand the logic for that stats in the above letter then this press release is the latest stats as of the end of Oct showing that the all in cost for making a trade using IB is less than 1 basis point
Interactive Brokers Group Reports Brokerage Metrics for October 2014, Includes Reg.-NMS Execution Statistics - Yahoo Finance

i would love to see the SEC make other brokers publish this same stat

Very interesting, thanks for posting. It seems to me that IB is trying to push the metric, specifically execution, that shows them as the best broker in some respects. I could not fault their reasoning behind the metric. However, I doubt that the metric, as calculated in the paper, will be adopted by others to be published on a regular basis.

That is a pity. In reading that paper, I found some other interesting metrics that I would not mind watching on a regular basis.

All buy metrics are higher than sell metrics for every month this year. Money is obviously flowing into the market in higher volume than going out.

Perhaps these numbers can be used as an indicator of market bullishness. The difference between buy and sell metrics in any category and the trend of it may be an indicator of the degree of bullishness or the opposite.

Yeah, it seems like the counter on IB is that they have pretty low commissions but get you with the other fees. The other thing is that in order to even use them, they have a pretty high minimum amount (10k) and require you to have at least 10$ in commission charges a month or they charge you an "inactivity" fee of 10$. They also have fees for canceling orders and modifying orders. And that doesn't even get into if you want access to any of their research data which all has fees to it. IB seems a bit out of my league from those perspectives... Like I said, I am really small time on the money I play with for speculation. That was why I appreciated those who were suggesting a switch to TOS since it is a rather fantastic platform and doesn't cost you an arm and a leg. But I am going to hold off on the switch to TOS until I see how the merger between Options House and Trade Monster goes down, since everything I am seeing points to Trade Monster being a pretty fantastic platform. Since it isn't going to cost me anything to give them a go, I will see how that comes out.

Maybe someday I will get a big enough account that switching to IB would be worth it. That said, I do appreciate knowing how the brokers screw you over which makes me want to switch at some point, I just am too small time to be able to do it right now...

Please let us know how you go with other brokers, I am curious to learn various ways of doing the same thing.

 

[Robert.Boston]

Bumping this up.

 

[Jonathan Hewitt]

Tastyworks is only a year old but it's getting a lot better! A year ago they were missing a ton of features but they've been adding features every month. Optionshouse (now etrade) is my main trading account but it's hard to beat these commissions unless you successfully negotiate with your brokerage. I have a Roth and Traditional IRA with Tastyworks and if they could match all the features Optionshouse does I would move my trading account over, too.

Starting this year they capped commissions.
Options Commissions | Check Out tastyworks' Commission Structure

Oh, and Tastyworks is pretty awesome because look at their referral program top prize:

 

[Zloy]

I like IB overall, low fees, low interest rates, fast execution etc. But for the last two weeks, they had at least two cases of servers down (not accessible). In one case system was down for almost the whole day. Luckily, I didn't have anything urgent to do with an account, but that made me think about switching to some other brokerage. In the end, problems like these can cost much much more than what you save on commissions or margin interest rates.

I don't think I ever had such issues with IB in the past, though.

 

[mblakele]

I have Vanguard and their mobile app is OK but placing orders is a bit clunky (compared to TD Ameritrade at least). I was pretty unhappy with Vanguard back when TSLA was added to S&P, because they have limited ordering options. Specifically, they told me they didn't have a 'Market Close' sell order option, and I wanted to sell about 5% of my TSLA shares using that type of order.

I ended up just not selling at all, and of course those shares are now worth >$800 whereas I would have sold them at $695.

So maybe using Vanguard is a good way to passively reinforce a HODL strategy

[replying in a more appropriate thread]

By design on Vanguard's part, I'd guess. They tend to encourage long-term investment over trading.

 

[mblakele]

So who are the good brokers in the US now? Going to leave Interactive Brokers after these shenanigans, and would want someone who would let me borrow against my capital so I dont have to sell my TSLA and has moderately low option trade fees. Sorry mods if there is already a thread for this.

Let's try to revive this thread.

 

[mblakele]

 

[chiller]

I do not appreciate IBKR restricting stuff, and I also got hit with no cash margin loan. They previously borrowed out up to your margin limit at just over 1% interest. I was planning on using that, but apparently since my account was recently moved to belgium (because of brexit), that option is gone! My Norwegian broker has the same deal, but at 5.8%.

Does anyone know of any alternatives?

 

[Boomer19]

I do not appreciate IBKR restricting stuff, and I also got hit with no cash margin loan. They previously borrowed out up to your margin limit at just over 1% interest. I was planning on using that, but apparently since my account was recently moved to belgium (because of brexit), that option is gone! My Norwegian broker has the same deal, but at 5.8%.

Does anyone know of any alternatives?

your account got moved to belgium?

do you mean hungary?

 

[chiller]

your account got moved to belgium?

do you mean hungary?

Actually it was Luxemburg. Question still stands!

 

[Boomer19]

Actually it was Luxemburg. Question still stands!

i dont have EU alternative

the short answer for reason would be different regs between UK and EU...so maybe there isnt an EU alternative that gets you back to the terms you had when in UK entity...but maybe there is someone out there with far better terms. i dont know that answer. best of luck