IB CME cancel/modify fees

[jmreeve]

Just in case anyone missed it, IB are introducing new cancel and modify fees
for CME Globex futures and options on futures.

Anyone modifying or cancelling an order will be charged $1 with a $5 execution credit
offset against this.

http://www.interactivebrokers.com/en/accounts/fees/otherFees.php?ib_entity=uk#cancel

Anyone running automated trading software that uses a lot of cancel and modifies may find
that trading suddenly gets a lot more expensive.

 

[osho67]

Hi,

I'm still unclear about these cancellation/modify fees. Does it mean if I put in a Buy/Sell order for ES, but before it is executed I modify the price, I then get charged for that?
If I use stops and I modify the stop to lock in profitsI get charged for that as well?

Any help appreciated


Thanks

 

[jmreeve]

You can work out the your daily bill as follows:

$-1 * the number of times you modify or cancel an order + $5 * the number of orders that are filled.

If the result is less than zero on any day then that amount will be deducted from your account.

If you use globex native stops-limits then you will potentially be charged $1 every time you move it.
If you use simulated stops then there is no charge.

 

[osho67]

Thanks for the reply

I'm obviously still not getting it, but based on what you have replied am I right in thinking that if I place an order, modify it 6 times, then cancel the order, it does not get filled,e.g. not executed and clears from the IB screen, I still get charged $7, ($6 for modification and $1 when I cancelled)?

Thanks

 

[jmreeve]

Yes that is correct.

 

[osho67]

But that's just awful isn't it? You place an order, decide to cancel, IB hasn't had to do any work it is all electronic and you still get charged $1 just for the privilege of clicking a button? Is there an alternative to this, some other broker that doesn't do this?

I presume however, you do not get charged modification fees when you click Bid/Ask and adjust the price and then click transmit?


Thanks

 

[donaldduke]

If you trade small lots (read 1 lot) you should probably use IB simulated stops if this fee
is going to be an issue. In illiquid markets however you dont want to use simulated stops
as you will lose more in slippage than the fee.

If you trade bigger lots this fee probably doesnt make a huge difference to your P/L as it trade based not contract based, it will cost me about about 200 pounds a year. Which is
a fraction of what i will pay in commisions/slippage and bid ask spreads etc

 

[TWI]

This is really bad news...really bad news. Only reason I moved from LIFFE to CME was because they didn't have stupid rules for automated spreaders.....

 

[jmreeve]

But that's just awful isn't it? You place an order, decide to cancel, IB hasn't had to do any work it is all electronic and you still get charged $1 just for the privilege of clicking a button? Is there an alternative to this, some other broker that doesn't do this?

I presume however, you do not get charged modification fees when you click Bid/Ask and adjust the price and then click transmit?

Yes, it is pretty grim.
The new fees will impact small traders regardless of whether they are automated or not.
I do not know if other brokers are introducing similar fees so it may be worth checking.

The CME policy that underlies this change can be found here:
http://www.cme.com/trading/get/sup/messagingpolicy12089.html

 

[jmreeve]

This is really bad news...really bad news. Only reason I moved from LIFFE to CME was because they didn't have stupid rules for automated spreaders.....

The message ratio benchmarks for the Eurodollar are particularly restrictive.
The only place left to go is CBOT.

 

[josbarr]

From well known FCM official

"There has been talk that Globex is getting pounded by auto traders who send in hundreds of cancel replace orders for every one trade that they do. It really crushes the system. All of the exchanges are looking at these type of fees for these intense auto execute systems. It really crushed the firms also because we have to add servers and bandwidth to accomodate the trades going through the system."

 

[osho67]

What I think is annoying about these charges is that from the perspective of a newbie they are saying "you must get you entry trade right, correctly predict your target and if the trade really goes in your favour and you decide to adjust your target price, we'll charge you, and if you decide to protect profits by adjusting your stop we'll charge you again for that as well", basically disrupting the trade management.

These exchanges are rolling in money , why can't they just buy more computers/servers or whatever to cope with automated systems?

 

[josbarr]

http://www.cme.com/trading/get/sup/messagingpolicy12089.html

Effective April 18, 2005 CME will institute a new Messaging Policy which creates fair business guidelines by which customers will receive a surcharge for overly high message rates sent to the CME Globex platform. The policy has been tailored to the needs of each market. CME will define benchmarks based on a two-dimensional approach per product: Message Quality (Trade Ratio) and Liquidity (Volume Ratio). Each Class A firm (active or inactive clearing member firms which maintain relationships with the CME Clearing House) must not exceed product specific benchmarks based on the following ratios:

Message Quality or Trade Ratio: The Trade Ratio is based on the number of messages (orders, modifies and cancels) submitted for each matched trade. To calculate the Trade Ratio benchmark for a given product, CME will compare the total messages to matched transactions during RTH hours and factor in a percentage variation. The Trade Ratio cannot exceed a limit of 25:1.
Liquidity or Volume Ratio: The Volume Ratio is based on the number of messages submitted for each executed contract. To calculate the Volume Ratio benchmark for a given product, CME will compare the total messages to volume during RTH hours and factor in percentage variation. The Volume Ratio cannot exceed a limit of 25:1.

 

[bdholmes]

It's a shameless money making scam by CME. A message (order) is a line or two of text amounting to no more than a few kilobytes. Even if there are hundreds per trade, it doesn't take much bandwidth or server processing power to handle that much data. Have CME pandered to pressure from the big boys who are losing money to successful small automatic traders??? I think it's time to investigate the exchanges that don't charge for cancelling or modifying orders.

 

[donaldduke]

Looks like IB might delay this for atleast another month, because CME have delayed it.

 

[frugi]

I bet CBOT will follow suit too. Until then take refuge in YM

 

[triplepack]

I dont think it as bad as it may appear.
To me the additional info on IB indicates that you can alter your trade upto 5 times, then, you must have a
an executed trade otherwise the fine will then kick in .
But if you are in a trade , as i understand it , changes in stop loss etc,can be done because you have done 1 trade to buy then you will have another trade to sell giving u the option to modify cancel 10 times before getting charged.

Triplepack

 

[osho67]

Hi donaldduke

I trade throught TSimPlus and I've set it up to put in a stop loss and a limit order when I place a trade, but what is a simulated stop? How would you set this up in IB?

Thanks

 

[pogle]

Hi donaldduke

I trade throught TSimPlus and I've set it up to put in a stop loss and a limit order when I place a trade, but what is a simulated stop? How would you set this up in IB?

Thanks

osho67,

Stops and trailing stops are simulated by IB. I don't think changes or cancellations of these orders incur the charge. Limit orders are native to Globex and these incur a charge.

This page http://www.interactivebrokers.com/cgi-pub/exchange_display_web.pl?einfo=usCME2&file=GLOBEX.html
gives the full list of which are simulated and which are native.

The email I had from IB refers to 'CME cancellations' which makes me think its changes to orders placed on the exchange.

pogle

 

[peterpr]

osho67,
The email I had from IB refers to 'CME cancellations' which makes me think its changes to orders placed on the exchange.
pogle

Quite right. Too easy to just blame IB. It is the exchange that has changed their fee structure. IB is simply passing it on - that's my reading anyway. Also as you say most stop orders are simulated by IB and only arrive at the exchange as market or limit orders which are immediately executed. That's if you actually use IB for stops. Personally I simulate the lot through Bracket Trader so my orders only ever hit the exchange as market orders anyway, so can't see that it will make any difference to me. The downside is that I'm relying on an ever more comlex system of software handshakes between me and the exchange, but I've found IB stops to be far too slippery and am therefore prepared to live with it.