How are the closing prices for U.S. listed securities options determined?

The prices which IB uses to mark U.S. listed securities options as of the close of business each day (both TWS and statements) originate from the Options Clearing Corporation (OCC).  As the sole clearinghouse for these option products, OCC generates a closing price for each option contract in order to calculate the margin required of its members on whose behalf it clears transactions (e.g., IB) and also to supply the risk arrays used by brokers carrying portfolio margin accounts.

Its important to note that the prices generated by OCC are edited and therefore may not reflect the closing price as disseminated by any of its participant exchanges.  They are edited primarily due to the fact that there is no consolidated quote provided for options, most of which are multiply listed and fungible across all seven exchanges (i.e., there may be seven different prices to choose from each day).  As a result, OCC creates a single price as of the close which is theoretically consistent across all exchanges and reviewed to ensure that there are no arbitrage conditions across strikes or time. 

In creating prices, OCC will start by taking the mid-point of the highest bid and lowest ask price across all listing exchanges, determining the implied volatility and then smoothing that implied volatility curve (for a given option class, type and expiration) through an iterative process which, in turn, adjusts the option mark prices.  There are also rules enforced to cap volatility for certain deep in and deep out-of-the-money options. The resultant edited price is extended out to six decimal places.  Due to the operational overhead of computing edited prices for the complete universe of option series, this process is performed only once per day as of the market close.

Options Regulatory Fee (ORF)


The ORF is a pass-through exchange fee collected by OCC clearing members such as IB on behalf of the U.S. option exchanges.  Its stated purpose is to assist in offsetting exchange costs relating to the supervision and regulation of the options market (e.g., routine surveillance, investigations, and policy, rule-making, interpretive and enforcement activities). The fee was initiated by the CBOE in mid-2009, by each of the BOX, ISE and PHLX in January 2010, by AMEX and ARCA in May 2011, by Nasdaq in January 2012, by C2 in August 2012, by Miami in January 2013, by ISE GEMINI in August 2013, by BATS in February 2015, by Nasdaq BX in February 2016, by BATS EDGX in February 2017 and by PEARL in February 2017. It is currently assessed to customer orders at a rate of $0.0431 per U.S. exchange listed option contract with the rate per exchange as follows: 

AMEX $0.0055
ARCA $0.0055
BATS $0.0009
BOX $0.0038
CBOE $0.0081
C2 $0.0015
EDGX $0.0004



GEMINI $0.0010
MIAX $0.0045


NASDAQBX $0.0004
PEARL $0.0010


Total $0.0431

It’s important to note that each of the above exchanges is assessing a fee regardless of the exchange on which the transaction occurs. Accordingly, the $0.0431 fee represents an aggregate of each of the ten individual exchange’s fee and is applied regardless of the market of execution (in other words each exchange would impose the ORF on all option transactions executed by a member firm even if the transactions take place on another exchange). 

Note that the ORF  is assessed on all trades, both buys and sells, in addition the IB commission charge as well as any existing exchange fees (e.g., liquidity removal) and will be reflected on the Activity Statement as a Regulatory Fee.

Overview of Accumulate / Distribute Algorithm


Accumulate/Distribute is a sophisticated trading algorithm which allows one to buy or sell large orders by splitting the trade into multiple orders with the goal of reducing visibility and market impact.

When to Use
This order type is geared towards traders of large position blocks as well as high frequency traders and is intended to run unattended while logged into the TWS.
How to Locate
The Accumulate/Distribute algorithm can be accessed from the TraderWorkstation by selecting the Trading and then Accumulate/Distribute menu options at the top of the page or it can be added to the trading tool bar menu by clicking on the Add More Buttons icon.
Order Set Up
Once the trader has defined the instrument and action (buy or sell), the following parameters are to be specified:
  1. Total Quantity – defines the aggregate order size (e.g., shares, contracts);
  2. Trade Increment – defines the unit (e.g., shares, contracts) size for each component order;
  3. Time Increment – defines the period of time (seconds, minutes or hours) between the submission of a component order and the submission of the following order;
  4. Order Type – may select from market, limit or relative. A market order will be executed at the ask price and should only be used where, for example, a stock is highly liquid with significant bid-ask sizes. Limit and Relative order types require that the trader specify additional order relationships and the choices are numerous. The execution price, for example, may be specified as being relative to a fixed value, bid, ask or last price, VWAP, moving average or last trade. These choices may be increased or decreased by an offset factor and multiple conditions may be established. For example, one may wish to create a relative order type to match the bid price plus an offset factor of $0.01 and to ensure that they don’t lift the ask if the spread is $0.01, add a condition that the bid be no less that $0.02 beneath the ask price.
  5. How to Operate – if the trader does not check the box titled “Wait for current order to fill before submitting next order” then orders which do not meet the price conditions will continue to accumulate in accordance with the established time increment, the unexecuted orders will be aggregated into one or more potentially sizable orders at the exchange. If this box is checked, then the more restrictive the buying conditions, the greater the likelihood that the algorithm will fall behind its schedule of buying or selling at every ‘X’ interval.  If this box is checked the trader may then check the box titled “Catch up in time”. When that box has been checked and should the algorithm fall behind, the next orders will be placed immediately after their predecessor fills until such time the algorithm has caught up.
  6. Randomization – check boxes are provided to allow for a +/- 20% randomization in the time increment and a +/- 55% randomization in the trade increment. Accordingly, in the case of a 30 second time increment, this would allow for randomization of between 24 and 36 seconds between orders and in the case of a 500 share trade increment, this would allow for randomization of between 200 and 800 shares (rounded to the nearest round lot) per order. Randomization serves to minimize the likelihood of others detecting your order.
  7. RTH – a check box is provided which will allow the order to be filled outside of regular trading hours.
  8. Take up Offer Size – if a limit or relative order type is selected, the trader may input an order size which if bid (in the case of a sell order) or offered (in the case of a buy order) the trader would be willing to take in its entirety, up to the remaining portion of the total order quantity (satisfies the price conditions).
Managing the Trade
The Accumulate/Distribute algorithm also allows for conditions to be established which, if not met, will cause the algorithm to either stop permanently or resume when the conditions are again satisfied. These include the following:
  1. Price Range - traders may specify a price range outside of which they do not want to buy the stock;
  2. News – the trader may stop the algorithm for some period of time if there is news on the stock, for example;
  3. Position - traders may stop the algorithm based upon their position in the stock; For example, a trader running multiple algorithms one to buy the stock and another to sell in an attempt to trade the stock back and forth for a profit may decide to suspend one side if the position becomes substantially imbalanced;
  4. Stock Path – a trader, for example, may wish to suspend the algorithm if a given moving average, say the 10-minute VWAP is not at least as high as another average, say the 50-day moving average. This feature enables you to set up algorithms to trade chart points even when you are not looking at the chart at that moment;
  5. Stock Path for Multiple Symbols – this condition is similar to the last except that it calls for two symbols. Here you can put in any symbol and compare some data point regarding that symbol (e.g., 10-minute VWAP, etc.) to the same or a different data point regarding the second symbol. These comparative conditions can apply to different symbols or to the same symbol.   For example, you could specify that you want to buy a certain stock only if it has been in a continuous uptrend. So in addition to the 10-minute VWAP being higher than the 50-day moving average, you would also like the 10-day moving average to be higher than the 30-day moving average on this stock.
Other Considerations
Acceptable inputs for this algorithm include:
  1. Products – any product offered by IB (stocks, options, ETFs, bonds, futures, Forex) other than mutual funds;
  2. Order Type – market, limit or relative.


This algo will only operate when the trader is logged into the TWS.  If the trader has been logged out prior to the algo completing (either by user action or by the automated nightly restart), a message will appear upon the next log in which will allow for re-activation of the algo.

Overview of the Scale Trader Algorithm


The ScaleTrader is a sophisticated trading algorithm which allows one to enter a large quantity order that is executed in a series of increments or components, with each component being executed at a progressively better price.

When to Use
The use of this algorithm is well suited to situations where a stock is trading at or near the bottom of a trading range and the trader is looking to average down, buying into a declining market. Alternatively, it may be used on the opposite side when the trader is looking to sell into the top of the trading range, perhaps scaling out of a long position. In either situation, the Scale Trader algorithm also allows the trader to scalp the market, submitting opposite profit taking orders against the original order.
How to Locate
The Scale Trader can be accessed from the TraderWorkstation by selecting the Trading and then Scale Trader menu options at the top of the page or it can be added to the trading toolbar menu by clicking on the Add More Buttons icon.
Order Set Up
Once the trader has defined the instrument and action (buy or sell), five parameters will need to be specified. Traders will also need to define the order type and time in force. These five parameters for a stock purchase (sale) would be as follows:
  1. Total Order Size (TOS) – the total number of shares the trader is willing to purchase (sell) as the price falls (increases);
  2. Initial Component Size (ICS) – the number of shares to be purchased (sold) at the Starting Price;
  3. Subsequent Component Size (SCS) – the additional number of shares to be purchased (sold) at each Price Increment (at successively lower prices in the case of a purchase and higher in the case of a sale). If a SCS is not entered, the ICS will be used for all component orders.
  4. Starting Price (SP) – the price at which you are willing to purchase (sell) the Initial Component Size
  5. Price Increment (PI) – in the case of a purchase (sale), this is the decrease (increase) in price at which each successive component order is to be executed.
Based upon the inputs provided to those parameters, the Scale Trader application will calculate a Top Price (TP) and a Bottom Price (BP) which, depending upon the buy or sell action selected, will either determine the price at which the last order will be executed (BP for purchases and TP for sales) or be relevant only if the same scale is used to close or restore the size of the position (TP for purchases and BP for sales). Adjustments made to either of these two factors will be reflected in the PI and their calculations are as follows:
  1. TP = (((ICS/SCS) -1) * PI) + SP
  2. BP = SP – (((TOS - ICS)/SCS) * PI
Note that once a product symbol has been entered a price chart will be displayed to assist in specifying the parameters. The algorithm will not be activated until the Transmit button has been clicked and once transmitted will run indefinitely until stopped or changed or it encounters conditions where it stops. It's important to note that this particular algo will continue to run even if the trader is not logged in to the TWS.
Assume a GTC limit order is entered into the Scale Trader to buy 1,000 shares of hypothetical stock ABC having a NBBO of $19.95 - $20.00 at a starting price of $20.00 with 500 more shares purchased at every $0.05 down, resulting in a maximum position of 4,000 shares. The five parameters for this order would be as follows:
  1. TOS = 4,000;
  2. ICS = 1,000;
  3. SCS = 500;
  4. SP = $20.00
  5. PI = $0.05
This order would be then be scaled into 7 components consisting of one at 1,000 and 6 at 500 each. The first component is submitted at $20.00 and after it fills the next component (500) would be submitted at $0.05 lower. That order would wait until marketable and once it has been filled the next component will be submitted. This pattern continues until all components have been filled or the order has been cancelled.
Managing the Trade
  1. Profit taking orders – the Scale Trader may be set to send an offsetting order to take advantage of periodic price surges or if the trader has reached a specified profit objective. This feature may be enabled by checking the box titled “Create profit taking order” and specifying the Profit Offset. Using the example above and a Profit Offset of $1.00, once the ICS was filled at $20.00 and an SCS submitted at $19.95, two profit orders would also be submitted, one for 500 shares at $21.00 and another for 500 shares at $21.05. It should be noted that profit orders are scaled to the SCS regardless of the size of the ICS and that if the ICS > SCS then the profit order price is determined using the PI along with the Profit Offset. 
  2. Restore size after taking profit – if using the profit taking orders feature, the trader can enable the repurchase of shares sold at a profit at the price they were originally bought at by checking the box titled “Restore size after taking profit”. This feature remains active whenever the price is within the range of TP + Profit Offset and BP. Using the example above, if order to sell 500 shares at $21.00 was executed this fill quantity would be put back into the original order at $20.00 and the order submitted at $19.95 would be cancelled.
  3. Restart Scale Trader & Restart Scale Trader with Filled Component Size – these features allow traders using the profit taking order and restore size features to restart the algorithm if stopped, helping to resume the order starting from the point at which the scaled sequence left off.
  4. Auto Price Adjustment – selecting this check box allows for an increase or decrease in the starting price automatically at stated time intervals (e.g., increase $0.01 every hour)
  5. Scale Trader Page – provides a view of the real-time status of scale orders, including filled and total quantity, filled, remaining, and total value, and the percent filled for each scale. Accessible via the Page and then Create Scale Trader Page menu options.
  6. View Scale Progress - right-click on the scale order line and select View Scale Progress. This will open a window displaying the complete scale price ladder, the Open/Filled component list for the parent scale order, and the Open/Filled component list for the child profit orders.
Other Considerations
Acceptable inputs for this algorithm include:
  1. Products – any product offered by IB other than mutual funds (e.g., stocks, options, ETFs, bonds, futures, Forex);
  2. Order Type - limit or relative (relative not offered for combination orders)
  3. Time in Force – Day, Good-til-Cancel or Day-til-Cancel. May also specify if order is allowed to be filled outside of regular trading hours, if executions may be routed and executed during pre-open session and whether to ignore opening auction.


Assets eligible to be transferred through ACATS

Instruments handled by the ACATS system include the following asset classes: equities, options, corporate bonds, municipal bonds, mutual funds and cash. It should be noted; however, that ACATS eligibility does not guarantee that any given security will transfer as each receiving broker maintains its own requirements as to which asset classes as well as securities within a particular asset class it will accept.

Account holders are encouraged to use the Contract Search link on IB’s homepage to assess transfer eligibility prior to initiating a full account transfer request.  In the case of mutual funds, please click here for a list of fund families and funds offered by IB.

ACATS Rejections - Most Common Causes

The rejection of an ACATS transfer request is typically initiated by action of the delivering broker once that broker has had an opportunity to review the request and confirm the details of the account to be transferred.  In the case of certain rejection notices (i.e., categories 1-5 and 10 below), the ACATS process affords the receiving broker (IB) a 24-hour window within which revised information may be transmitted and after which time the transfer request will require resubmission by the client.  During this 24-hour window, IB will attempt to contact the transferring client in an effort to reconcile any discrepancies causing the initial rejection notice. Rejections generally fall into the following categories:

Rejections by the Delivering Broker:
  1. Social Security Number/Tax ID Mismatch - the client taxpayer identification number as provided by the receiving broker does not agree with that of the delivering broker’s records. 
  1. Account Title Mismatch - the client account title as provided by the receiving broker does not agree with that of the delivering broker’s records. 
  1. Documentation Needed – the delivering broker requires additional account documentation in order to process a transfer request (e.g., death or marriage legal documents). 
  1. Account Flat – account holds no transferable assets. 
  1. Invalid Account Number – the client account number as provided by the receiving broker is not on delivering member’s books. 
  1. Duplicate – delivering broker is already in receipt of a transfer request involving the same receiving broker and client account..
  1. Account in Distribution or Transfer – another ACATS transfer or other distribution of account assets directly to client is already underway. 
  1. Client Rescinded – client has submitted written request to cancel transfer request. 
  1. Missing Authorization Signature – transfer request requires an additional client and/or custodian signature.


Rejections by the Receiving Broker: 

10. Credit Violation - the result of the transfer if effected would be to place the account in margin deficit and subject to forced liquidation.

Glossary terms: 



Beginning in 2006, working groups comprised of brokers, exchanges, clearing houses and vendors were formed in order to represent each of the U.S. and Canadian securities industries in a multi-year effort to develop a revised data format for representing listed option symbols. These efforts, referred to as the Option Symbology Initiatives (OSIs), are intended to provide the following benefits:
-         Decrease the number of errors in the front, middle and back office processes.
-         Represent the vast majority of listed option contracts using the same symbol as the
           underlying security to reduce investor confusion.
-         Reduce corporate action symbol conversions.
-         Eliminate wrap symbols.
-         Eliminate the need for LEAP rollover process.
-         Reduce the frequency of coordination among exchanges for symbol elections.
-         Support the growth in product listings through additional expiration events and more
           flexible strike price designations.
The following article provides background information regarding the products impacted by the OSI, the revised data format, project timeline and client impact as well as external links where additional information may be found.
The table below lists the product classifications of the US and Canadian exchange listed options which are impacted by the OSIs.  Note that while the mandated conversion date for Canadian options is identical to that of the US (i.e., February 12, 2010), the conversion of Canadian options was accelerated and completed by IB in September 2009.
Equity (short cycle, regular full cycle and long term)
Yield Based
Foreign Currency
Short Dated
Each OSI will replace the 5-character code with a 21-character OSI identifier to be used in the transmission of listed option contracts between exchanges, the clearinghouses and their constituents. The 21-character OSI identifier comprises six data elements arranged in logical order, each with a minimum field size. An example is provided in the table below.  


5-character Code
21-character OSI Identifier*
OSI Data Elements (minimum field size)
Option Root
SPX    111216P01900000
MSFT  100116C00047500
*If the Option Root Symbol is less than 6 characters, spaces are added to equal the six character minimum.
The industry effort has been organized into two phases:
1. The Conversion Phase in which the OPRA code format will be dropped and the 21-character record layout employed to include the expiration day and decimal strike price. This phase was completed on February 12, 2010; and
2. The Consolidation Phase during which LEAPS, wrap, FLEX, short-dated and non-standard delivery contracts will have their symbols consolidated to that of the underlying (e.g. MSQ to MSFT).  This phase will take place over the 5 weekends starting March 12, 2010 and ending May 14, 2010. Note that there are certain contracts, referred to by OCC Class Consolidation Exceptions, which will not be consolidated.  These contracts include binary and CDO options, options having a 5 character underlying as well as  options having unique settlement terms (e.g., settle on open).  In addition, adjusted symbols which are the result of a prior corporate action will be consolidated to the new OSI corporate action format at the time the underlying class consolidates.
Outlined in the table below are the key milestone and effective dates for this consolidation phase and the products impacted.
Milestone Date Action Issues/Series Impacted Effective Date
Friday, March 12, 2010 Initial group of options representing array of product scenarios to be consolidated (approx 12 classes) Options associated with a strategic group of underlyings including adjusted and non-standard symbols Monday, March 15, 2010
Saturday, March 20, 2010 Standard Expiration    
Wednesday, March 31, 2010 Quarterly Expiration    
Friday, April 9, 2010 Consolidation of options whose primary underlying starts with the letters A-C (approx 503 classes) All options associated with 'A-C' underlyings including adjusted and non-standard symbols Monday, April 12, 2010
Saturday, April 17, 2010 Standard Expiration    
Friday, April 23, 2010 Consolidation of options whose primary underlying starts with the letters D-I (approx 486 classes) All options associated with 'D-I' underlyings including adjusted and non-standard symbols Monday, April 26, 2010
Friday, May 7, 2010 Consolidation of options whose primary underlying starts with the letters J-IR(approx 575 classes) All options associated with 'J-R' underlyings including adjusted and non-standard symbols Monday, May 10, 2010
Friday, May 14, 2010 Consolidation of options whose primary underlying starts with the letters S-Z (approx 503 classes) All options associated with 'S-Z' underlyings including adjusted and non-standard symbols Monday, May 17, 2010
During this consolidation phase Good-till-Canceled (GTC) and Good-till-Date (GTD) orders will need to be canceled for all the option classes which are scheduled to consolidate. To accommodate this exchange mandate, IB will cancel all customer GTC and GTD orders on the Sunday of each milestone cycle.  Confirmation of these cancellations (outs) will be provided prior to effective date open (Monday) at which point customers may re-enter these orders utilizing the post consolidation symbol.
For additional information, please visit the symbology initiative sections of the OCC and Montreal Exchange websites.  


Trading Access to the Indian Financial Markets for non-residents

Per Indian regulations, trading access to the Indian financial markets for individuals residing outside India is currently restricted to "Non-Resident Indians" ("NRIs") and "Financial Institution Intermediaries" ("FIIs") only.


NRIs are defined in the Indian Foreign Exchange Management Act of 1999 and the Indian Foreign Exchange Management Deposit Regulations of 2000.

In short, to qualify for NRI status you must:

a. Reside outside of India for more than 182 days per year, and;

b. Hold Indian citizenship, or;

c. Be a Person of Indian Origin as defined in the Indian Foreign Exchange Management Deposit Regulations of 2000.


Please note that applicants must satisfy criteria (a) and criteria (b) or (c) and will be prompted to review the aforementioned legislation and confirm their status at the point of application.  To trade Indian products as a NRI, new or existing customers may apply for an account through the IB website.

Currently not supported.

TWS Order Checks

The TWS contains two checks to limit the possibility of customers entering trades at prices which are substantially inconsistent with that of the current market. 

Under the first check, stock buy orders which are 10% above the prevailing NBBO ask price will be automatically rejected by IB as will stock sell orders which are 10% below the prevailing NBBO bid price.  In the case of options, IB's automatic rejection threshold percentage for both buy and sell orders is 20%.  When an order violating these parameters is transmitted, it will be rejected and a TWS pop-up window will be displayed with the following warning message: "Limit price too far outside NBBO".

The second check relates to orders which are transmitted at prices which do not violate the parameters set by IB as outlined above, but which do violate parameters established by the account holder.  Here the account holder is able to establish Precautionary Settings by selecting the Order and then Configure Order Presets menu options from the TWS. This will open up a window providing for the creation of price thresholds set in terms of percentage or the number of ticks outside of the NBBO (settings may also be defined in terms of share/contract quantity or total dollar value of trade).  When an order violating the account holder's parameters is transmitted, it will be rejected and a TWS pop-up window will be displayed with the following warning message: "The price specified would violate the percentage constraint specified in the default order settings.  Do you really want to submit this order".  Unlike in the case of the check set by IB, the account holder has the option of overriding their own settings and transmitting the order by clicking on the "Yes" button.


Glossary terms: 

Where can I receive additional information on options?

The Options Clearing Corporation (OCC), the central clearinghouse for all US exchange traded securities option, operates a call center to serve the educational needs of individual investors and retail securities brokers. The resource will address the following questions and issues related to OCC cleared options products:

- Options Industry Council information regarding seminars, video and educational materials;

- Basic options-related questions such as definition of terms and product information;

- Responses to strategic and operational questions including specific trade positions and strategies.

The call center can be reached by dialing 1-800-OPTIONS. The hours of operation are Monday through Thursday from 8 a.m. to 5 p.m. (CST) and Friday from 8 a.m. to 4 p.m. (CST). Hours for the monthly expiration Friday will be extended to 5 p.m. (CST).

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