An intermarket sweep order is generally a large quantity limit order that is sent to multiple exchanges simultaneously. The trader submitting this type of order is required to fulfill Regulation NMS order protection obligations and exchange rules by simultaneously sending orders to market centers with better prices than the defined order limit.
Traders may see, on occasion, execution prices reported to time and sales that are at price levels through an order that they may have had working at the time. Some time and sales service providers reflect these prints with a special designation (intermarket sweep). The TWS software does not display these designations, therefore, it may appear as if a order was due an execution when it may not have been.
This article is being written in attempt to assist traders in understanding intermarket sweep transactions.
When an intermarket sweep order is being executed, only the inside quote (NBBO) at each available exchange is "protected". This means that orders resting on an exchange at prices that are inferior to the best bid or ask prices at the time of the intermarket sweep print are not considered to be "protected" and may be traded through.
The trader that enters the intermarket sweep order would be required to fulfill their Regulation NMS requirement by executing the maximum available quantity on exchange A at 40.63 and then may execute the balance of the order on exchange B at 40.88 even though it is at a price that is inferior to the 40.80 order resting in the book on exchagne A. The 40.80 price is not the inside quote and is therefore not "protected" in terms of the balance of the sweep order executing at exchange B at a price of 40.88.
A wealth of information is available on the web regarding intermarket sweep orders and SEC regulation NMS. The following are some links that may be useful in terms of providing additional information on these topics;
Each exchange has rules that define how intermarket sweep orders are handled. The following are reference links to the rulebooks of the primary exchanges where traders can find more informaiton on intermarket sweep order handling;
IB offers market venues and trading platforms which are directed towards both forex-centric traders as well as traders whose occasional forex activity originates from multi-currency stock and/or derivative transactions. The following article outlines the basics of forex order entry on the TWS platform and considerations relating to quoting conventions and position (post-trade) reporting.
A forex (FX) trade involves a simultaneous purchase of one currency and the sale of another, the combination of which is commonly referred to as a cross pair. In the examples below the EUR.USD cross pair will be considered whereby the the first currency in the pair (EUR) is known as the transaction currency that one wishes to buy or sell and the second currency (USD) the settlement currency.
The IDEALFX venue provides direct access to interbank forex quotes for orders that exceed the IDEALFX minimum quantity requirement (generally 25,000 USD). Orders directed to IDEALFX that do not meet the minimum size requirement will be automatically rerouted to a small order venue principally for forex conversions. Click HERE for information regarding IDEALFX minimum and maximum quantities.
Currency dealers quote the FX pairs in a specific direction. As a result, traders may have to adjust the currency symbol being entered in order to find the desired currency pair. For example, if the currency symbol CAD is used, traders will see that the settlement currency USD cannot be found in the contract selection window. This is because this pair is quoted as USD.CAD and can only be accessed by entering the underlying symbol as USD and then choosing Forex.
Depending on the headers that are shown, the currency pair will be displayed as follows;
The Contract and Description columns will display the pair in the format Transaction Currency.Settlement Currency (example: EUR.USD). The Underlying column will display only the Transaction Currency.
Click HERE for information regarding how to change the shown column headers.
1. To enter an order, left click on the bid (to sell) or the ask (to buy).
2. Specify the quantity of the trading currency you wish to buy or sell.
For example, an order to buy 100,000 EUR.USD will serve to buy 100,000 EUR and sell the equivalent number of USD based on the displayed exchange rate.
3. Specify the desired order type, exchange rate (price) and transmit the order.
Note: Orders may be placed in terms of any whole currency unit and there are no minimum contract or lot sizes to consider aside from the market venue minimums as specified above.
Common Question: How is an order entered using the FX Trader?
FX position information is an important aspect of trading with IB that should be understood prior to executing transactions in a live account. IB's trading software reflects FX positions in two different places both of which can be seen in the account window.
The Market Value section of the Account Window reflects currency positions in real time stated in terms of each individual currency (not as a currency pair).
The Market Value section of the Account view is the only place that traders can see FX position information reflected in real time. Traders holding multiple currency positions are not required to close them using the same pair used to open the position. For example, a trader that bought EUR.USD (buying EUR and selling USD) and also bought USD.JPY (buying USD and selling JPY) may close the resulting position by trading EUR.JPY (selling EUR and buying JPY).
The Market Value section is expandable/collapsible. Traders should check the symbol that appears just above the Net Liquidation Value Column to ensure that a green minus sign is shown. If there is a green plus symbol, some active positions may be concealed.
Traders can initiate closing transactions from the Market Value section by right clicking on the currency that they wish to close and choosing "close currency balance" or "close all non-base currency balances".
The FX Portfolio section of the account window provides an indication of Virtual Positions and displays position information in terms of currency pairs instead of individual currencies as the Market Value section does. This particular display format is intended to accommodate a convention which is common to institutional forex traders and can generally be disregarded by the retail or occasional forex trader. FX Portfolio position quantities do not reflect all FX activity, however, traders have the ability to modify the position quantities and average costs that appear in this section. The ability to manipulate position and average cost information without executing a transaction may be useful for traders involved in currency trading in addition to trading non-base currency products. This will allow traders to manually segregate automated conversions (which occur automatically when trading non base currency products) from outright FX trading activity.
The FX portfolio section drives the FX position & profit and loss information displayed on all other trading windows. This has a tendency to cause some confusion with respect to determining actual, real time position information. In order to reduce or eliminate this confusion, traders may do one of the following;
By clicking the arrow to the left of the word FX Portfolio, traders can collapse the FX Portfolio section. Collapsing this section will eliminate the Virtual Position information from being displayed on all of the trading pages. (Note: this will not cause the Market Value information to be displayed it will only prevent FX Portfolio information from being shown.)
By right clicking in the FX portfolio section of the account window, traders have the option to Adjust Position or Average Price. Once traders have closed all non base currency positions and confirmed that the market value section reflects all non base currency positions as closed, traders can reset the Position and Average Price fields to 0. This will reset the position quantity reflected in the FX portfolio section and should allow traders to see a more accurate position and profit and loss information on the trading screens. (Note: this is a manual process and would have to be done each time currency positions are closed out. Traders should always confirm position information in the Market Value section to ensure that transmitted orders are achieving the desired result of opening or closing a position.
We encourage traders to become familiar with FX trading in a paper trade or DEMO account prior to executing transactions in their live account. Please feel free to Contact IB for additional clarification on the above information.
Equity option exchanges define position limits for designated equity options classes. These limits define position quantity limitations in terms of the equivalent number of underlying shares (described below) which cannot be exceeded at any time on either the bullish or bearish side of the market. Account positions in excess of defined position limits may be subject to trade restriction or liquidation at any time without prior notification.
Position limits are defined on regulatory websites and may change periodically. Some contracts also have near-term limit requirements (near-term position limits are applied to the side of the market for those contracts that are in the closest expiring month issued). Traders are responsible for monitoring their positions as well as the defined limit quantities to ensure compliance. The following information defines how position limits are calculated;
The following examples, using the 25,000 option contract limit, illustrate the operation of position limits:
IB will send notifications to customers regarding the option position limits at the following times:
Position limits are set on the long and short side of the market separately (and not netted out).
Traders can use an underlying stock position as a "hedge" if they are over the limit on the long or short side (index options are reviewed on a case by case basis for purposes of determining which securities constitute a hedge).
Position information is aggregated across related accounts and accounts under common control.
IB considers related accounts to be any account in which an individual may be viewed as having influence over trading decisions. This includes, but is not limited to, aggregating an advisor sub-account with the advisor's account (and accounts under common control), joint accounts with individual accounts for the joint parties and organization accounts (where an individual is listed as an officer or trader) with other accounts for that individual.
Regulations permit clients to exceed a position limit if the positions under common control are hedged positions as specified by the relevant exchange. In general the hedges permitted by the US regulators that are recognized in the IB system include outright stock position hedges, conversions, reverse conversions and box spreads. Currently collar and reverse collar strategies are not supported hedges in the IB system. For more detail about the permissible hedge exemptions refer to the rules of the self regulatory organization for the relevant product.
OCC posts position limits defined by the option exchanges. They can be found here.
Executions in equities will sometimes be listed as R6, which is short for Rule 611 of SEC Regulation NMS. This condition code indicates that the execution(s) in question is not subject to trade-through rules. R6 trades are given an SEC exemption.
Rule 611, which is the Trade Through Exemption of SEC Regulation NMS, is very lengthy to cover in detail. Parties interested in reading the rule in its entirely should type "SEC Rule 611" into an internet search engine. This is the portion of the document that is pertinent to IB traders, in a nutshell:
Typically the trades involved are a multi-component trade involving orders for a security and a related derivative, or, in the alternative, orders for related securities, that are executed at or near the same time. The SIA (Securities Industry Association) notes that the economics of a contingent trade are based on the relationship between the prices of the security and the related derivative or security, and that the execution of one order is contingent upon the execution of the other order.
The bottom line is that when a trade is ruled R6 the SEC has granted a trade-through exemption. This means that these execution reports do not affect the resting orders in-between the market at the time, and the R6 execution. For example, the real market is quoting 10.50 at 10.51, and an execution is reported at 10.90. This execution was given an R6 exemption. A sell limit order at 10.75, an an example, would not be executed because the 10.90 execution was given an R6 status.
Simply stated, an "Odd Lot" is a stock order comprised of less than 100 shares of stock. So any stock order from 1 share to 99 shares is considered to be an odd lot.
This is the pertinent information traders should know about odd lot orders:
Combo orders which involve a stock and an option leg are accepted natively only at ISE. So if you would like to create a covered call position, and wish to buy the stock and sell the option simultaneously, ISE is the exchange to which these orders will be sent if, in fact, the specific options trade at the ISE.
In the event that the option in question does not trade at ISE, the order can't be sent to that exchange. These orders will stay on IB's system until the point at which the possibility exists that both legs may be executed simultaneously.
For example, if you are long XYZ stock and short an XYZ call against it, you might choose to close this position using a combo order. This order will be sent to ISE since it has a stock and option component. However, if XYZ options don't trade at ISE, they can't accept the order. In this case the order will stay on IB's server until the system reads that the XYZ stock can be sold and the XYZ option bought, at which point the system will send the orders simultaneously to the respective exchanges. Please note that although it is possible that both orders will be executed simultaneously at the combo price, there is no guarantee of fill simply because the displayed quotes from each exchange indicate the combo price is available.
The pink status indicates that you have sent a request to cancel the order, but have not yet received cancel confirmation from the order destination. At this point your order is not confirmed canceled. You may still receive an execution while your cancellation request is pending.
The most frequent cause of this issue is sending a cancel request to an exchange that is not currently open. For example, you have an open limit order that is at the NYSE. You send a cancel on that order at 16:05 EST, when the NYSE is closed. Their computers do not electronically respond, therefore IB can't confirm the cancel or clear the order. This example holds true for nearly all exchanges.
Another cause is an order being "stuck" electronically on your TWS system. In these cases traders will have to wait for the system to go through its "daily reset" for the order to disappear from the trading application.
*If you have an order in this status on your screen, you should contact IB immediately. If we are able to see the order in our system (and for orders that have been requested canceled by the account holder, but not acknowledged by the exchange, IB can usually see the orders in our system) we can attempt to call the exchange and request a confirmation of cancellation. Unfortunately in many cases, most notably with the NYSE, the exchanges will not answer their phones after they are officially closed for trading. If the exchange can't be contacted, the order will remain in this status until their computers send the cancel confirmation. As stated above: At this point your order is not confirmed canceled. You may still receive an execution while your cancellation request is pending.
In the case of orders that have been placed, but do not appear to be acknowledged, you must contact IB via telephone immediately. We will need to contact the exchange in these cases. Communication through web tickets is not real time, and can not be used for issues of an urgent nature. Requests for trade cancellations/fills must be made within the time limits set by the relevant exchange. Many equity exchanges have a notification period of 30 minutes or less. Derivative exchanges have notification periods as short as 5 minutes. Requests for trade cancellations should be made by telephone or the Bust Request tool (no email or other non real-time method) to IB within 15 minutes of the erroneous transaction. IB requires sufficient time to prepare the necessary information required by the exchanges and this time is included in the exchange-specified reporting period. Requests for cancellation are always handled on a best-efforts basis and IB cannot guarantee the reporting time requirements. In addition, exchanges have bust request fees that account holders must agree to before IB can proceed with the request. The fees vary by exchange, and you will be informed of what that fee is for the exchange in question prior to the bust request filing.
The order is not temporarily suspended while you modify the price or any other parameters of the order. The order is still active at the exchange if it has already been sent there. You do run the risk of being filled on the original order until the modified order has been sent to, and accepted by, the exchange. Only at that point are the previous order dead and the modified order working.
In the Trader Workstation you have the option of deactivating the working order while you modify. Once an order has been transmitted and before being filled, you can right-click on the order line and select “Deactivate” in the drop-down menu. This will deactivate the order while you make modifications.
If you want to modify parameters other than Price or Quantity of an order in the TWS, you must cancel the working order and create and transmit a new order. This practice is commonly required by order destinations.
Once an order parameter is modified, you are required to resubmit the order. The modification will not take effect until the order is resubmitted.
The first point to understand is what a marketable order is. Marketable orders are either market orders, or buy and sell limit orders whose limit price is at or above/below the current market price. A marketable buy limit order would have a limit price set at or above the current ask in the market. Conversely, a marketable sell limit order would have a limit price set at or below the current bid in the market.
Marketable orders remove liquidity from the market.
Non-marketable orders are buy and sell limit orders in which the limit price is below/above the current market price. A non-marketable buy limit order would have a limit price that is below the current ask in the market. Conversely, a non-marketable sell limit order would have a limit price that is above the current bid in the market.
Non-marketable orders add liquidity to the market.