Hi,
I used to trade the bulk of my money with folioFN until they moved us to IB where basket trading is expensive and complicated. At folioFN I just cut and paste TSV data with {asset, weights} and everything was done in less than 20 seconds for each account.
I wonder what do you recommend for basket trading?
thank you,
Dan
My broker Fidelity has 0% commissions on stocks and etfs, and has basket trading; apparently auto rebalancing is not currently available.
I have not used this myself:
Below is from their website:
What is Basket Trading?
Basket Trading lets you create a list of up to 50 stocks, called a basket, that you can save, trade, manage and track as one entity. Use the baskets you create to invest in and track stocks grouped by investment style, market sector, life event, or any classification you choose.
Baskets require an initial investment of $2,000 and allow you to:
Select between 2 and 50 stocks to purchase in a basket
Select an initial method to allocate your investment by dollars, shares, or percentage
Place multiple orders at the same time
Assign specific share tax lots after your order has been entered
Save the basket you create, change the selection or number of stocks in your basket as often as you want, and buy it at a later date
Planned Future Enhancements
Planned future enhancements to Basket Trading will include the ability to:
Create a basket based on pre-defined lists of securities
Define a basket based on advanced filtering technology
Rebalance a basket
IB said they were going to implement a new feature when they took over Folio Investing’s business that replicated “folio” trading. However, I have not seen anything equivalent. I am using basket trader and have tried various features such as VWAP, TWAP and the 3rd party brokerage interfaces - CSFB mainly. As you said, it is complicated and can be very expensive. I have a Pro account with variable rate, and I have found the best option is to “add liquidity” using the MIDPRICE algo. It took me a long time to get my head around “add liquidity” and what that means. I typically submit around 2:30 PM and allow orders to fill before the market closes at 3 (CST). Orders that have not completed, I resubmit the following morning. This approach results in trading fees around 1/10 to 1/20 of using CSFB TWAP routines and has worked pretty well.
IBs Trader Workstation may have some powerful features, but it is has a horrific user interface. I trade daily using platforms like ThinkOrSwim, TastyWorks, and I still make (costly) mistakes with Trader Workstation. I think for many users, making the switch from folio Investing’s simple website to Trader Workstation is very hard.
I’ll be frank… I don’t think Folio Investing’s management cared about their client base when they sold it off to IB. IB is for sophisticated traders, who trade for a living and trade daily. This does not align with the Folio Investing customer base. The cynic in me says that when GS came calling, they took the money and ran. I was disappointed when they announced this late last year and nothing since has made me change my mind.
Thank you for your answers.
They sold the business to Goldman Sacks that got rid of us, retail investors. At folio was a joy to rebalance and for free.
I have to investigate VWAP, TWAP too but mostly I’m deeply unhappy with all this process. I have to convert the accounts to no fees too if I will stay with them, if not the last chance is Fidelity.
The problem with TWAP and VWAP is they submit market orders which “remove liquidity” and result in high trading fees unless you are working high priced stocks (greater than $50 to $100/share). When I evaluated various 3rd party apps, I was getting hit with trading fees around $150 to $300 per rebalance/basket as many of the stocks I am working with are small cap and are priced around $5-$25/share. I would keep away TWAP/VWAP unless you can absorb the fees. I intended to try the other third party algos like Jeffries, but I gave up. Its too much work as there are around 120 different algos.
I use the SMART MaxRebate algorithm and submit my basket using MIDPRICE. To get minimum fee as I said you need to add liquidity to the market (with a pro account) - which means selling below the Ask, and buying above the bid with a limit order. It often takes 20 to 30 minutes to get fills, and there is a risk of not being filled by the time the market closes. The whole process requires hands on management. There is no real “set and forget” option without paying significant trading fees. IB does have a Market on Close (MOC), but in my opinion, this is only for very, very liquid stocks or etfs. I have used MOC with SPY, QQQ, IWM, MDY, etc but I think could result in a terrible fill for thinly traded small or micro caps.
I think I will contact them and ask them about their “folio” tool they were going to set up in Q1 this year and see if I can find out what’s going on. I’ll post an update if I hear anything.
With the trade function and the ability to send orders directly to brokers when rebalancing live portfolios I find it easy to rebalance portfolios. Although it would be nice to be able to set an automatically calculated limit price. For instance a limit order 2-3% above for buys or 2-3% below for sells based on the last closing or market price. I dont like to send market orders and I find it tedious to manually calculate and enter each limit price via the portfolio rebalance feature. In addition it would be nice to be able to send a sell order and be able to select “ALL ACCOUNTS” instead of having to manually enter the appropriate trading account as many people have more than one account with the same broker. For instance registered and non-registered accounts.
???
Simon,
I guess you trade with IB maybe? I do not understand people’s infatuation with IB.
I will accept that IB may be good for what it was originally designed for: exploiting “dumb money.” A more extended quote about this from Dark Pools here:
"…Peterffy was saying that the traders he was going up against on Island were too good….that there was virtually no way to make a reliable buck, especially for an options firm such as Interactive that didn’t specialize in stocks. It was pros against pros. … Island would no longer simply court the savviest investors—the sharks, the cheetah-fast hedge funds. It would start going after what on Wall Street is known as dumb money. In other words, retail investors. That meant clients of E*Trade, Charles Schwab, Ameritrade—and even Interactive Brokers."
In other words, Peterffy designed a place where one algo could exploit another algo and his algos won. Making him the wealthiest Florida resident (and the 32 wealthiest American with $12.6 Billion). Good to be Thomas Peterffy!
Now he just has to let people pay him commissions.
Or get payment for order flow. As per this IB site : “IBKR receives rebate payments for routing and executing marketable client orders…”
The above is under the heading of “IBKR-Pro Orders”.
The disclosures on order routing are not meant to be clear, and perhaps, the meaning of what is disclosed here can be debated. But I consider that a moot point knowing there are no commissions (or brokerage fees) on VWAP or TWAP orders at Fidelity.
So Chaim has posted on this. Sometimes he uses VWAP orders up to 10%, I think. Maybe you will have slippage of about 23 basis points with no commissions at Fidelity, if some of the text, articles and formulas on trading are correct.
I am not sure which broker Chaim uses but I think he has a point about how this method could be useful when there are no commissios. I have used it. But for what I do most days, I usually use POV 5% orders (percent of volume) when not just using a market order.
FWIW.
Jim
Jim,
I have a fairly large (in my mind!) account at IB and I trade stock, futures and options. IB has third party algos (CFSB, Jeffries, Fox River) all of which offer dark pools and other forms of hidden liquidity. Many people take the Lite option as it is free - but there is a catch - your fills are not good. To really see it, you would have to place two orders at the same time using different SW/brokerages and see what price you get. if you’re transacting 100 shares, who cares. if you are trading 5000 to 20,000 shares, while the trade might be free, your fill may suck - and so you lose more for the “free” trade than you get when paying for the transaction. These types of algos are for people who trade serious volume and they are looking for the best fills they can get. Some of the 3rd party Guerilla algos are meant to be very good, but I have not experimented with them enough to notice much of a difference.
IMO, the dumb money at IB is using a “Lite” account offering free trades. I use that for my daughters UGTM account but that’s a buy and hold and I only do 1 or 2 transactions a quarter.
The real problem for many is IB’s Traders Workstation involves a huge learning curve. It also allows you to do stupid things - like when rolling options it allows you to roll from one account into another account if you don’t have the correct account selected (I have both taxable and retirement accounts there). I get mad at myself when I do something like that, but its really the stupid SW. My taxable account is 1/10 of my retirement account - so rolling accidentally from the large account to a small one can make for a few minutes of unease 
I also use thinkorSwim, which I like, and TastyWorks, which is good for options trading. I only had a small account at IB until Folio sold out (their retail customer base) and they transferred all my accounts to IB. I have my weekend, and Monday AM routines established now for my 123 ports, and it seems to be working OK now. That only took around 15 “basket trades” to get something that I am ok with.
BTW, all the “free” brokerages are not free - I’m sure many have become aware now of cost of order flow to companies like Citadel and Virtu, who then front run the orders with HFTs. Many of the free companies like RH are also selling their order flow, which I believe is illegal in most jurisdictions outside of the US. So I guess what I am trying to say, you are getting what you pay for - and if its free, then the cost of your trade is in the fill you get.
BTW, I cover most of my trading costs at IB by offering up my shares for short sellers. I think the standard IB rate is 50% of the loan cost. I am not aware of any other retail broker that offers that, but I have not looked that hard.
Simon
Simon,
Thank you for your comments. At the end of the day it is all simple arithmetic that everyone can agree upon.
You are obviously an advanced trader who has done the math and the due diligence.
Your point about the price of the stock affecting the amount of commissions you pay at IB is spot on.
Surely for me and possibly for you there is a cutoff on the stock price where the commissions weigh heavily. I entertained having 2 accounts (only one with IB) and trading the different stocks in my ports—depending on the volume I want to buy and the price of the stock—using different brokers based on the calculations.
For most of us considering VWAP trades at IB, I refer you to Simon’s posts above. This can be fine-tuned for a specific stock with a specific volume in mind, for a specific tier at IB, depending on whether you want to provide liquidity…., never forgetting the BID/ASK being quoted, and whether you are willing to loan your stocks to short sellers. But perhaps this sums it up adequately for most of us to make a decision:
Jim
Agreed. I’m on IB, but if not for the $$ earned from lending shares, and their very low rates for margin balances, I can’t justify it. If I could find an online broker with competitive rates for my margin balance I’d change in a heartbeat.
Schwab, Fidelity, TD Ameritrade, etc. will all negotiate margin rates. Call them and let them know the average debit that you carry and the amount of trading that you do. Then they’ll give you a competitive offer if it’s decent sized margin balance. You’ll have to send a statement or 2 over for validation.
Jim,
For tiered Pro accounts the payment received by IB is passed through the clients (i.e. me) and is not to IB’s bottom line. This is a major difference between the “free” brokerages and IB’s Pro account structure. That said, if you have an IB Lite account, it goes to IB…
BTW, I used to track window trade fills at Folio Investing. Some of the fills were terrible. Sometimes my fills were quick (just a few minutes) and other times, it took 90 minute or so. This was especially true when working with low volume micro caps. Folio Investing never exposed how “window trades” were executed, or how they made money (outside of the annual fees). GS also never disclosed how much they paid for Folio Investing either; I guess I could go hunting through their 10-Qs, but my curiosity is not that high!
“Paying” for trades is a touchy subject now especially with most brokers offering commission-free trades. However I think an analogy can be drawn with financial advisors: the rule is to never use “free” advisors; if you want investment advice, pay for it up front. I know a lot of advisors use this site, so please excuse my analogy if inappropriate 
Transparency with transaction costs should be a net positive, but it does makes it more difficult for the typical retail trader. That’s not a pitch for IB; but the lack of transparency especially when associated with something that is “free” should result in a lot more questions…
Simon
Simon,
It would not hurt to have a little more information about IB’s tiered model.
I would love to be proven wrong and therefore learn something new and potentially important to my trading.
But these disclosures are not meant to be clear and what is left out of the disclosure is the most important. They do include this (leaving out some details):
That makes clear that they may not be passing all of the rebates to you.
Not only do they not make clear what “some” means but NONE OF THIS CAN BE COPIED FROM THEIR WEB SITE. They do not want me to copy the full details here. I retyped the quotes (without errors I hope)
However, it goes on to say that: " IBKR may receive enhanced payments for exceeding volume thresholds on particular markets but will not directly pass these enhancements on to clients."
I take this to mean that they receive payment for order flow that they do not pass on to clients—if IB gives them enough business (“exceed volume thresholds”). This would land a physician in jail, and I think, is not allowed in many countries’ stock exchanges. Elizabeth Warren wants to change this. That much is clear.
Furthermore, it seems to be that IB and whomever they are contracting with have a large amount of leeway as to how they structure those payments and rebates. There is no way for us to know the magnitude of this.
So, we really do not have much information on this—as intended. I understand this is far from the final word on this.
Link or disclaimer that IB is required to make by law: https://gdcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=3074
I have just 3 questions (true questions that I do not know the full answers to}:
How does this compare to Fidelity with regard to order price improvement or rebates of IB’s payments for order flow?
If IB is better than Fidelity because they rebate some payments for order flow does this adequately compensate for the commissions at IB?
And which tier do you have to be in to break-even or do better at IB? And for which type of orders? And is it possible to get reliable numbers for comparison?
One final note. It is getting harder and harder to get hard numbers on order-price-improvement. But when I checked, IB did not compare well to Fidelity or to Schwab. THIS WAS FOR MARKETABLE ORDERS WHICH YOU MAY NOT EVEN USE. I would appreciate it if anyone could post any recent numbers on this. Maybe I was wrong at the time or maybe this has changed.
I do have the belief that the order-price-improvement for market orders at IB is not as good as Fidelity’s price-improvement and that is before you figure-in the cost of the commissions. Market orders may not be important to you. But your analysis of VWAP orders at IB suggests that IB may not be the best place for every market order (or for VWAP orders). Something I agree with.
Anyway, it is just arithmetic and I am alway happy to have better numbers with which to update my assessments. Simon, for now your excellent assessment on VWAP at IB tells me most of what I need to know for my trading. But everyone trades differently and I am willing to learn new ways.
Best,
Jim
Just one note: Fidelity does not accept payment for order flow. They pass on all the price improvements to their customers. See https://www.fidelity.com/trading/execution-quality/overview: Fidelity “Does not take payment for order flow from market makers for stock and ETF trades.”
IBKR-LITE does accept payment for order flow. IBKR-PRO accepts it very rarely. All the details are here: https://gdcdyn.interactivebrokers.com/Universal/servlet/Registration_v2.formSampleView?formdb=3074
For me the trade-offs between Fidelity and IBKR-PRO are a) commissions; b) margin interest rates; c) customer service; d) ease of placing trades; e) algorithmic execution; f) access to foreign stocks. Execution is not an issue for me. Both are excellent, and superior to other brokers.
Apologies for joining this thread late. I also was migrated from Folio to IBKR; for all the reasons mentioned here, I am still working on recreating the straightforward and low cost method for implementing my P123 driven portfolio rebalancing/refactoring.
This move to IBKR caused me to implement Live Strategies and now Books in the P123 system. I did so because the P123 Trade interface looked straightforward and integrated with the portfolio tools I already use and trust. Via P123 dashboard, I can now execute rebalancing/refactoring trades using my Live strategies. Note: only IBKR and Tradier support API integration with P123.
A few thoughts on the P123 dashboard implementation for brokerage trading:
When I asked IBKR about their implementation of Folio features (as promised for 1Q), they said they will be rolled out in 2Q.; time will tell how they interpret and implement the Folio features.
Here are links to related threads on Folio and recreating their simple trading approach w/ P123:
Thanks, Gregg
