Trying to understand slippage: 1.6% with Interactive Brokers.

[mickael28]

It's not the 1st time that it's happened so wondering if I'm not understanding something or sending my orders in the wrong way as I'm suffering quite large slippages so I'd like to see if you guys can think why this could be.

Last time was with QNST, where on Thursday 7th I had a Stop Loss order for 715 shares at 18.47. I've talked to IB and they've mentioned that my order was triggered at 09:31:25.192 and was sent to the exchanges less than 10 milliseconds later.

I was checking a Times and Sales report and I could see quite a lot of traders bidding at that time for larger blocks of x800, x1200, x1300, x500, x400 shares etc for prices between 18.45-18.30, however my order was executed as follows:
* 100 @ 18.24 (14:31:25)
* 300 @ 18.15 (14:31:26)
* 15 @ 18.15 (14:31:26)
* 300 @ 18.15 (14:31:26)

for a slippage of ~1.67%!

I thought that when my Stop was triggered, that would have been sent to the market as a market order, and that would mean that if I put my Stop at 18.47 and there were bidders at 18.30, 18.40, 18.45 etc... they should have been filled with my order, shouldn't they? I can see that some of those large blocks where just assigned 100 or 200 shares even though my order had been triggered already and was ready to be taken...

Do you know why this could be happening? ie, the large spreads (which happen quite frequently) and why in this particular case I got an average price of just 18.16 when there were a lot of bidders above that?

Thank you!!

 

[Trader333]

What type of stop order did you use, was it stop limit or just a straight stop order that would trade at the market ?

 

[mickael28]

What type of stop order did you use, was it stop limit or just a straight stop order that would trade at the market ?

It was a normal Stop order with stop price at 18.47, after triggered I was understanding that it would be transmitted at the market and sold at the best bid price available at the time, and for what I could see in the Times and Sales data there were so many traders bidding at higher prices (18.30-18.45) than what was my execution (mainly at 18.15) that I was expecting not suffering such a large splippage (1.6%).

Trying to understand why this is happening as it's not the first time, although IB says that it's normal, without further explanation...

 

[Trader333]

IB SMART routing should fill you at the best price so are you able to see who filled your order ?

 

[mickael28]

IB said that they routed my orders to ISLAND and IEX, but these are the exchanges that I can see with prices of 18.30-18.45, so having my fills at 18.15 seems to not match the data *IF* IB sent my order as a market order to the market.

Not sure if their 'smart' routing works in a different way so that my order was not really sent to the market and IB was instead trying to fill me with whatever was available at the time, which caused delays and slippages?

 

[Trader333]

My understanding of SMART is that IB automatically routes to the best price available for the ECN / MMs that they use.

 

[mickael28]

Not sure about how their routing works but every now and then I'm getting pretty bad slippages. I was reading about this, not sure if it's related to the slippage but I was assuming that when my Stop order was triggered IB would send it as a market order and that's it. But now I read about this:

https://www.interactivebrokers.co.uk/en/?f=/en/trading/simulated-market-orders.php

Market Order Handling using Simulated Market Orders


To protect our clients as well as IB from losses associated with significant and rapidly changing prices, IB generally simulates market orders by submitting a series of marketable limit orders. Alternatively, where available, IB may simulate market orders by using Market With Protection orders.

Although these limit prices are set at a level intended to balance the objectives of execution certainty and minimized price risk, there exists a remote possibility that an execution will be delayed or may not take place. In addition, please note that certain exchanges may impose their own price caps or bands upon market orders at levels that can be more or less restrictive than those imposed by IB, and which may similarly affect the speed and certainty of order execution.

 

[Trader333]

Having read that it says that an order may experience a delay in fast moving markets, however you said your order was sent in 10mS so was there any obvious delay from being sent to being filled ?

 

[mickael28]

I cannot see the millisecond when they were filled, but it was 1 second later. As there's just one fill of 100 shares at 09:31:25 and the rest 615 shares are at 09:31:26

In Times & Sales, I can see that there were a lot of bidders at higher prices, so I'm not sure why there was this large slippage. But it happens every now and then, so wondering if I could reduce this occurrences somehow

 

[Solas0077]

HTF algos front run your order. These slippage levels can happen near the RTH open. I would try to avoid orders near the open.