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sure, the most obvious is they steal a trade which you the customer were entitled to. if you're bidding for 1000 shares in something that trades 15000 shares a

sure, the most obvious is they steal a trade which you the customer were entitled to. if you're bidding for 1000 shares in something that trades 15000 shares a day, they lean on your bid, buy on a different exchange than you're posted on, take your trade, and try to flip it for the spread. there are many many other ways they rip you off, but stealing doesn't necessarily mean a trade through -- even though you'll never (i mean this quite literally) NEVER - get a fill on a limit order with ib unless it trades through you.

yummyfajitas 10y ago
Can you explicitly write out the sequence of events? Something like this, but obviously not so snarky: 1. Send a limit order for 1000@$20 to my brokerage. <- This part I understand. 2. "Lean on your bid?" <- Not a valid message in FIX. 3. Do flips. <- Acrobats do this, not brokerages. 4. Make a profit
- lintiness 10y ago
  i'm clearly talking to a real expert here. sure, i'll pretend it's 1996 again, and I haven't spend the last 19 years making a living trading equities. 1. send limit order 2. broker sells said order to timberhill (ib) 3. timberhill places limit order on exchange -- let's call it the nonsense exchange since that's exactly what it is. 4. timberhill bids the same price or say 1/100th ahead of my order (leans on me) on real exchanges. 5. timerbhill takes the next trade at my price while leaving me unfilled (my order still hasn't executed even though it should have). 6. timberhill offers the shares i should have bought at price inside the current best offer. it's funny; i checked your blog posts about hft, and your solutions are the opposite of what's required to end the bullshit. the market would be much better served as a real marketplace if it enforced the penny increment rule (brokers currently sub penny the fuck out of every order on the market in the name of phony "price improvement"), and it consolidated venues (most trading venues today are holding places for customer order flow to be ripped off in the manner i've already explained).
  - yummyfajitas 10y ago
    That's not how internalizers work. The right sequence is the following: 1. Send limit order to broker. 2a. If timberhill's resting order is at or better than the NBBO, your brokerage informs him that he just got a fill. 2b. If timberhill is worse than the NBBO, the order is routed to the public market and timberhill doesn't hear about it until INET/ARCA/whoever puts it (anonymized) in the quote stream.
    - lintiness 10y ago
      you're confused. timberhill PAID ib for the order. they're not quoting anything unless it's relative to their receipt of said order.
      - yummyfajitas 10y ago
        Timberhill paid IB for the right to place orders on their internalization dark pool. Once in the darkpool they placed a resting order in that darkpool. I posted a link to IB documents elsewhere - I suggest you read them.
mrchicity 10y ago
I don't see an issue with quote matching or pennying someone's order on a public exchange. That's arguably either providing liquidity in a place where it's missing or providing price improvement, and they are at risk on the quote. Even if you are the fastest trader on earth, someone can simultaneously sweep your order and the quote matcher/penny guy's order, and he's SOL. It's not free money. You can always bid higher or in multiple places if you really want the shares, or just cross the spread. Nobody has a G-d given right to non-toxic fills on their limit orders. Doing it off-exchange for a minimal improvement is less clear to me. In some markets regulators have limited off-exchange trading to block trades or substantial price improvement as a way to incentivize displayed liquidity and price discovery. That seems more fair but also subsidizes informed traders at the expense of uninformed ones. Spreads tighten as market makers compete to trade with some retail flow, but informed spread-crossers also get cheaper trading with these tighter spreads since market makers lose their option to price differently.
- lintiness 10y ago
  they're not pennying the order; they're SUB-pennying an order for $.001 improvement while leaning on an order they've paid for. they are stealing fills at the expense of the guy who took the risk / quoted the market.

yummyfajitas 10y ago

Can you explicitly write out the sequence of events? Something like this, but obviously not so snarky: 1. Send a limit order for 1000@$20 to my brokerage. <- This part I understand. 2. "Lean on your bid?" <- Not a valid message in FIX. 3. Do flips. <- Acrobats do this, not brokerages. 4. Make a profit

lintiness 10y ago
i'm clearly talking to a real expert here. sure, i'll pretend it's 1996 again, and I haven't spend the last 19 years making a living trading equities. 1. send limit order 2. broker sells said order to timberhill (ib) 3. timberhill places limit order on exchange -- let's call it the nonsense exchange since that's exactly what it is. 4. timberhill bids the same price or say 1/100th ahead of my order (leans on me) on real exchanges. 5. timerbhill takes the next trade at my price while leaving me unfilled (my order still hasn't executed even though it should have). 6. timberhill offers the shares i should have bought at price inside the current best offer. it's funny; i checked your blog posts about hft, and your solutions are the opposite of what's required to end the bullshit. the market would be much better served as a real marketplace if it enforced the penny increment rule (brokers currently sub penny the fuck out of every order on the market in the name of phony "price improvement"), and it consolidated venues (most trading venues today are holding places for customer order flow to be ripped off in the manner i've already explained).
- yummyfajitas 10y ago
  That's not how internalizers work. The right sequence is the following: 1. Send limit order to broker. 2a. If timberhill's resting order is at or better than the NBBO, your brokerage informs him that he just got a fill. 2b. If timberhill is worse than the NBBO, the order is routed to the public market and timberhill doesn't hear about it until INET/ARCA/whoever puts it (anonymized) in the quote stream.
  - lintiness 10y ago
    you're confused. timberhill PAID ib for the order. they're not quoting anything unless it's relative to their receipt of said order.
    - yummyfajitas 10y ago
      Timberhill paid IB for the right to place orders on their internalization dark pool. Once in the darkpool they placed a resting order in that darkpool. I posted a link to IB documents elsewhere - I suggest you read them.

mrchicity 10y ago

I don't see an issue with quote matching or pennying someone's order on a public exchange. That's arguably either providing liquidity in a place where it's missing or providing price improvement, and they are at risk on the quote. Even if you are the fastest trader on earth, someone can simultaneously sweep your order and the quote matcher/penny guy's order, and he's SOL. It's not free money. You can always bid higher or in multiple places if you really want the shares, or just cross the spread. Nobody has a G-d given right to non-toxic fills on their limit orders. Doing it off-exchange for a minimal improvement is less clear to me. In some markets regulators have limited off-exchange trading to block trades or substantial price improvement as a way to incentivize displayed liquidity and price discovery. That seems more fair but also subsidizes informed traders at the expense of uninformed ones. Spreads tighten as market makers compete to trade with some retail flow, but informed spread-crossers also get cheaper trading with these tighter spreads since market makers lose their option to price differently.

lintiness 10y ago
they're not pennying the order; they're SUB-pennying an order for $.001 improvement while leaning on an order they've paid for. they are stealing fills at the expense of the guy who took the risk / quoted the market.