Best Execution and Order Flow

[muscleman]

https://www.tdameritrade.com/tools-and-platforms/order-execution.page

https://www.interactivebrokers.com/en/index.php?f=1340&gclid=Cj0KCQjwsZHPBRClARIsAC-VMPArbWzUQA_kueRnn3HWInzap2ViYVFypHi1n9Cw35gtt2agcA9-124aAvuuEALw_wcB

 

It is hard to know who is telling the truth.

IB says price improvement over NBBO for 100 shares is 0.31, while TD says it is 1.36. Hard to believe it could be so much.

 

 

[rukawa]

Your statement is pretty misleading.

 

First, nothing I said is misleading. It is simply a fact. If you are doing large enough trades, the quoted $7 commission at the retail brokerages is meaningless. This just means that the industry has done a great job getting price down so that the commissions are not material, except for small trades.

 

Second, I was using YOUR numbers. You said that the difference was $100 on a $100,000 trade. Assuming this was a typo... then yes, $100 on a $1M is not meaningful. But then I wonder why you picked $1M as your trade size. I don't think any investor on here is going to do too many $1M trades entered as a single order. And if you are doing $1M trade on a $5 stock, I suspect you would have some market impact.

 

Sorry that was my mistake. It should have read 1,000,000. The calc is 0.05 cents per 100 shares according to this site:

https://www.interactivebrokers.com/en/index.php?f=1340 (see Execution Price Improvement Comparison)

 

So if your stock is at $5 then you are buying 200,000 shares for a total value is $1,000,000. So the price improvement is (200,000) / (5 cents /100 shares) = 100. On $100,000 trade it would be $10 and on $10,000 it would be $1. Basically a basis point.

 

 

If you use market orders you shouldn't call yourself a value investor  ;) .

 

I bought Microsoft with market orders. Bought SP500 ETFs that way too. And with IB I will end up using market orders for sure to do currency exchange. But you are right...I'm don't consider myself an investor, value or otherwise.