Any of you have experience in using the IB Arrival Price Algo ( https://www.interactivebrokers.com/en/?f=%2Fen%2Ftrading%2Forders%2Farrivalprice.php ) to trade your small cap P123 systems? If so, I’d love to get some feedback on what your experiences have been.
Thanks…
Tom C
I’ve tested most of the IB algos, including arrival price. You’ll need to ask a more specific question to get a detailed answer, but I had several complaints about arrival price.
The simplest answer is that it is basically a volume participation algo when the price is moving favorably (down if you’re buying or up when selling), but if the price moves against you it slows way down and often doesn’t complete orders. This is especially true for lower volume stocks. I’ve had orders fill <50% when the price was only down .25% from my arrival price even though there was ample and steady volume given my max vol % throttle and “aggressive” setting. It just sucks at filling orders if the price doesn’t move favorably. and the logic it uses isn’t customizable enough to fix it.
It also doesn’t have an option to try and not take liquidity, and in my experience it executed most transactions by submitting marketable orders even when set on “neutral”. Passive did tend to not take liquidity, but it simply did not fill unless the price moved favorably. Maybe not a huge deal for some, but it’s worse that alternatives at keeping commissions low in this regard.
Generally it just makes “odd” choices. I go back and look at the hours in which it was active and it will have elected to not make any trades for a whole 2 hour period when the price was better than arrival (and volume was present), and then suddenly tried to fill 20% of the order in 10 minutes when the price started moving the other way.
I never use the AP algo any more. There are just better alternatives in every situation.
If you’re looking for minimum hassle and a virtually guaranteed reasonable price I recommend VWAP. If you’re not in a hurry and your order is less than 5% of normal volume you can often try to never take liquidity which keeps commissions down around $.001/share, so you’re almost trading for free and still always around or better than the avg price.
If you want to fill as quickly as possible I’d go with Volume participation.
If you’re worried about liquidity I like to use a combination of one of those order types and CSFB Crossfinder, which is often able to fill large chunks of an order very quickly out of dark pools. There is a surprising amount of “large block” liquidity in the dark pools for many small stocks. But do note that the CSFB algos will always charge a >.5 cent per share commission since they don’t use IB smart routing. It sucks they don’t let you do basket trading with multiple algos, but splitting an order over multiple methods doesn’t take too much time if you’re monitoring execution.
If the best possible execution is super important to you I personally still like using the accumulate/distribute interface with a relative limit tied to some short term moving averages and other conditionals - but this method requires a lot of experience, time, and attention to do better than VWAP consistently.
Hi,
Has anyone tried the different VWAP algos at IB, their own, CSFB and JEFF? Have you noticed any difference that would make it worth the difference in price?
I’ve done at least a few trades with all the different CSFB algos. For VWAP I don’t notice any difference in execution. So I much prefer the IB version to control commissions. They’re obviously all very secretive about the code and logic their algos use, but VWAP is VWAP, and I think the IB version is probably as good as any. If there is sufficient volume it will always get within a small window around vwap.
SuPirate, thank you for your response – this was very helpful as I am relatively new to algo trading. Makes more sense to stick with VWAP going forward. Your point on not taking liquidity was a good one also. I currently use IB flat fee schedule, so it’s not an issue with me but I probably should reconsider that issue as my volume continues to increase.
One other question. During those times where IB VWAP does take liquidity does the algo take the time to look for hidden liquidity? (If not, will it if you enable that option in the order ticket?)
Thanks again.
Tom C
Yeah if you’re inexperienced and not doing very short term trading I recommend staying with VWAP for a while
I also advise switching to cost+. Even with low volume you will pay less unless you take liquidity more than about 60% of the time in my experience. Not a huge difference, but a few bucks here and there.
Probably my biggest complaint about IB routing is they don’t have good dark pool options. “Smart Routing” does include some dark pools (they won’t even tell you which ones or how it works), so you will sometimes get portions of an order filled there, but it’s a very small portion using any of the IB algos. It’s also often difficult to tell exactly which exchanges some orders are being filled on because IB just returns the exchange as “smart”, which can mean numerous things.
The thing to note about dark pool liquidity is that it usually exists in big block lots. Normal routing may sometimes find a few hundred shares here and there, but much of the hidden liquidity is wasted with vwap/arrival price/volume participation algos. And IB doesn’t even have a good dark-only algo, so I frequently use CSFB crossfinder (for large orders relative to the stocks volume). It’s unpredictable how much liquidity there will be, but if I’m having trouble making a trade crossfinder often gets the whole order filled for me quickly at midpoint or better with minimal impact.