Interactive Brokers’ VWAP algo to enable speeding up when market nears limit price

Interactive Brokers Group, Inc. (NASDAQ:IBKR), one of the major providers of online trading services in the US, keeps enhancing the capabilities of its Trader Workstation (TWS) platform.

We have been curious to see what’s in store for users of the solution and, so, we took a look at TWS Beta Build 955, which seems to be full of various novelties, including a new parameter for one of Interactive Brokers’ advanced trading algorithms – IBALGO VWAP.

The change concerns the best-efforts VWAP algo, which aims to achieve the Volume-Weighted Average price (VWAP), calculated from the time a trader submits the order to the close of the market.

interactivebrokersBest-efforts VWAP algo, which is available for all US equities, is considered a lower-cost alternative to the Guaranteed VWAP that enables the user to try never to take liquidity while also trading past the end time. Because the order may not be filled on the bid or at the ask prices, there is a trade-off with this algo. The order may not fully fill if the user is attempting to avoid liquidity-taking fees and/or maximize liquidity-adding rebates, and may miss the benchmark by asking to stay on the bid or ask.

The trader can set the maximum percentage of ADV (up to 50%) his order will comprise. The system will generate the VWAP from the time the order is entered through the close of trading, and the order can be limited to trading over a pre-determined period. The trader can request the order to continue beyond its stated end time if unfilled at the end of the stated period.

In TWS Beta 955, the best-efforts VWAP algo includes a checkbox to “Speed up when market approaches limit price.”

When checked, this feature will raise the rate of trading when the order is marketable and the market prices closes the gap toward the order’s limit price since the chance of a market move resulting in the order becoming non-marketable is high. One should check this feature to help ensure a better fill rate for relatively small order sizes.

Other enhancements in TWS Beta 955 include:

  • Invest with Portfolio Builder now with Fundamentals Data;
  • Mutual Fund/ETF Replicator Considers Liquidity;
  • Voice Notifications Available in Sound Manager;
  • New “52 Week Fraction” Column: A new market data column, “52 Week Fraction” has been added to the High/Low/Volume/History category.
  • Options Implied Volatility Term Structure;
  • Traders’ Insight Available in TWS News;
  • Risk Navigator Enhancements.

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