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IG share dealing platform fundamentally flawed? Market Makers and order types


Ricky66

Question

I am an experienced user of share dealing platforms having used TD direct,  Iweb and Xo in the past. I have traded many " market makers" stocks in the past on other platforms and bought through standard limit orders and sold via limit orders as well as on quote. Furthermore I have easily been able to put stop losses in place through the platform to successfully mitigate risk. ON IG I could not see the ability to place a standard limit order on a market makers stock such as cssg or even a stop loss type order. I phoned through and was told that on market makers stocks you:

A. have to phone through to place a stop order ie the platform does not offer that facility and 

B. If you want to place a standard  limit order on ie. not DMA then you can by phoning through and paying £40 for the privilege.

I was able to place stop losses and limit orders through other platforms simply on the platform at no extra cost other than the dealing commission if it executed.

I also tried on IG using DMA on a market makers stock and placed an order BEFORE the Auction at the highest possible buy price ie the OFFER quote price if buying immediately and yet it was on the books through the auction and after on the open and NEVER filled . Even though i could buy instantly at quote at that price. No viable explanation was given.

I really believe unless I am missing something major here that these are fundamental flaws that are basic requirements of a share dealing platform.

Just to make it absolutely clear I can place a stop loss or limit order in an instant on other platforms on ALL types of stock and if the price reaches that which I have chosen will always execute albeit with sometimes slippage.

It is a real pity as IG looks on the face of it to offer real promise.

Am I missing something here? as I am surprised by all this

 

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Hi @Ricky66 thanks for you message. You should be able to set up Limit Orders on Market Maker stocks, however if you ever can't please let us know and we will look into the stock specifically. If you have a couple you are looking to deal on please let me know? The process is relatively manual but we should be able to get this sorted. 

With this in mind there are a few other things worth remembering when it comes to MM's. First of, the on screen value they are quoting doesn't mean you're going to get filled at that price - there is no obligation for them to do so - and therefore a significant majority of volume goes through via the 'get quote' functionality. This goes for the wider market, not just IG. 

When you are discussing order types with market makers its also worth thinking about how they fundamentally function. They are buyers and sellers of stock, however they are looking to also turn a profit. Setting a stop market order (or a 'stop') on a MM equity is basically saying 'please sell my stock when it goes through this price directly in the market' - as the MM is setting what their bid/offers are, as well as deciding on if you're getting filled at all, there is obviously a conflict of interest here. there are fundamental differences to the 'plumbing' of these types of stocks which is why RSP and auction periods are far better and provide generally a better execution. 

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Thank you for replying to this email, can i just clarify a couple of things please. I noticed recently that the exchange tab on market makers stocks has recently appeared when before it was not showing ( maybe a platform fault on my account?). I enclose a previous screenshot showing no exchange tab and one recently with an exchange tab showing for the same stock. Could you please explain the anomaly. 

Having traded MM stocks successfully in the past they remain of interest to me. Therefore can I clarify the following:

Am I right in thinking that MM stocks:

a: May not be filled on exchange EVEN if they match the at quote OFFER price as there is no obligation to fill any DMA order on MM stock

b:As far as on quote prices are concerned. In these cases MM are obliged to provide liquidity to the stock and will almost certainly fill your order via an on quote (non DMA) OFFER or LIMIT order provided obviously the limit order is going through that price at market..

C   The only way to potentially buy or sell within the spread on a MM stock via DMA is if it executes during an auction period directly filling an opposite buy / sell order.  In reality this method is difficult to execute in actual terms as most MM stocks are bought and sold at quote.

Could you please help me to understand if the above statements are true.

I recently asked Robbie Burns his view on MM stocks and DMA and his answer was that 

"DMA can't operate on market maker only stocks as it
is only market makers allowed!"
therefore am I right in concluding that using DMA for MM equities is limited to auction times.
I think it would be really helpful for myself and many others to explain the nuances of MM stocks and DMA. Maybe you could even do a tutorial explaining how DMA differs on SETS, SEAQ and SETSsqx.
I believe this is an area that confuses many.
 
I think in general you offer a great platform with DMA at the heart of it as the gold standard but please help to clarify the above. Thanks

on quote cssg.PNG

on excchange cssg.PNG

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