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That's a crock, Alex! I trade options occasionally and I don't chase the b/a
around.
1) I place a GTC order and cancel it a week later and get charged a fee.
2) I place a day limit order based on current implied volatilizes. If I
adjust price later in the day due to change in IV, I am will be charged if I
am not filled. The later is a real-world situation which goes on all the
time near support and resistance levels, especially with deep in the money
options. I can't count the number of times I've seen the MM's dance around
my limit order and not fill it. If I've changed the price and I don't get
filled, I'm charged a cancellation fee. Bottom line ... I'm supposed to use
market orders so I can get raped.
You brag about not charging an exchange fee, but so what if the customer
gets nailed for more than a commission on cancellations.
Earl
----- Original Message -----
From: "Jacobson, Alex" <AJacobson@xxxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Thursday, April 24, 2003 8:19 PM
Subject: RE: [RT] Option order cancellation fees
> I just collared the head of IB ... we're in Florida at the 30 anniversary
> options conference. He said there is a fair misunderstanding as to the
> nature of the fee. He claims that the fee is rebated if the order is
filled
> after a limited ( ask them) number of cancel and replace orders. Only one
> exchange has actually levied the fee and for a while only a couple of the
> exchanges had the rule in place. You might want to reclassify under what
> circumstances the fee get rebated.
>
> It sounds something like this
>
>
> Order 1 cost is a $1/ contract
>
>
> Order two cancel and replace order #1 fee goes to $1.20/ contract
>
> Order three cancel and replace order #2 fee goes to $1.40
>
> Order 3 fills .40 cent rebate.
>
> You will need to read their fine print to be sure.
>
> If this is a "classic" example this is not an example of anyone adding
> liquidity .. this is just someone chasing a market. If I ran a b/d I'm
not
> certain I wouldn't want to surcharge this user for using my network as
well.
> The economics of servicing this account at "rock bottom rates" are non
> existent. This is IMHO .. a money losing account for the b/d. I'd
> surcharge it or close it, I certainly wouldn't give it my best rate.
>
> -----Original Message-----
> From: Muskoka Joe [mailto:muskokaryan@xxxxxxxx]
> Sent: Thursday, April 24, 2003 8:51 AM
> To: realtraders@xxxxxxxxxxxxxxx
> Subject: Re: [RT] Option order cancellation fees
>
>
> The cost of doing business has been reduced to almost
> nothing over the past few years. When the concern is
> over $1 on a $16K order nobody is listening, least of
> all the SEC.
>
>
> --- EarlA <earl.a@xxxxxxxxxx> wrote:
> > So you penalize the small traders because they don't
> > deal in 50 contracts at
> > a time. The small traders pull back and now there is
> > less liquidity ... but
> > then the only good liquidity is liquidity provided
> > by market makers ... what
> > a crock. So too is the assumption that brokerage
> > firms will not pass along
> > the fee because they won't get hit with it 98% of
> > the time. When you have a
> > brokerage firm which runs razor thin commissions,
> > they are going to assume
> > that they will get hit with it because they can't
> > afford to assume that they
> > won't. Yes, maybe the fat cat brokerage firms like
> > Schwab and Fidelity,
> > which charge high commissions can eat the fee, but
> > so what. And you can kiss
> > GTC orders via the deep discount firms goodbye
> > because their customers will
> > get hit with a cancellation fee for canceling or
> > modifying the order.
> >
> > I pay $1.00 to IB to execute one $16,000 contract
> > for a deep in the money
> > SPX Put and you guys charge me $1.20 to cancel an
> > order ... what a deal!
> >
> > I can't wait to return the call I received from the
> > SEC today!
> >
> > Earl
> >
> >
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