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IBKR Smart Routing
SMART Stock Routing Algorithms
- SMART Multipurpose (SMART) - This is the basic smart-routing algorithm. Routes your non-marketable order to the default exchange for the contract.
- SMART Dark Only - Will probe the dark pools for liquidity and use the immediate-or-cancel time in force.
- Highest Rebate (SMART Rebate) - Routes your non-marketable order to the exchange offering the highest rebate for added liquidity.
- Primary exchange (SMART Primary) - Routes your non-marketable order to the listing exchange for the contract.
- Highest volume exchange with rebate (SMART VRebate) - Routes your non-marketable order to the exchange with the most volume that also offers the highest rebate for added liquidity.
- Highest volume exchange with lowest fee (SMART VLowFee) - Routes your non-marketable order to the exchange with the most volume that also charges the lowest fee for taking liquidity.
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Note: On a best efforts basis, the IB SmartRouting system will attempt to capture a rebate on your order. However, not all trades will receive a rebate, as best execution at the best possible price remains the top priority.
SMART Option Routing Algorithms
- SMART Multipurpose (SMART) - this is the basic smart-routing algorithm. Routes your non-marketable order to the default exchange for the contract.
- SMART Maximize Rebate (SMART MaxRebate) - Routes the order to the exchange offering the highest rebate.
- SMART Prefer Rebate (SMART PreferRebate) - Routes the order with the bias toward getting a rebate vs. getting the order filled.
- SMART Prefer Fill (SMART PreferFill) - Routes the order with the bias toward getting a fill vs. getting a rebate.
- SMART Maximize Fill (SMART MaxFill) - Routes the order with the sole objective of getting a fill.
MaxRebate vs PreferRebate
To reduce fee, the only way is to collect more exchange rebates and you get that by adding liquidity. Orders which sit for a while before execution, especially scale orders, often have pretty Low or even negative fees
The problem with "max rebate" is it means the other side will pay a lot for taking your liquidity, which may mean your order is less likely to be filled at the same price that it would on an exchange that doesn't have these charges.
I've had limit orders sit on an exchange that provides high rebates, and when I change it to another, such as the CBOE, I am filled right away (speaking of options).
The broker who pings your order will never route the order to you unless they don't have a choice. That means that whenever your limit order fill, it is almost always that the price action will be against you immediately after.
The consensus I have seen is that PreferRebate is the best option for retail investors.