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I have been using Interactive Brokers for an year and a half now, trading stocks and cfds and I have been largely successful, almost 70% return on my investment. The spread between the bid and ask price for the stocks I have traded has always been in the range of a few cents.

However I noticed recently that this spread has increased to 40c, 50c, even more for certain stocks.

IB are denying that anything has changed in my account but somehow I do not trust them.

So my question is, can they legally manipulate the spread, so that they take a larger chunk from my trades? They claim that the bid and ask price are determined solely by the market. But is this really the case? Other online brokers have their own spreads.

  • Is there a change in the type of stocks you are trading - for example as you have got more experience you are now trading "riskier" smaller and/or less liquid companies with larger spreads? Also in the UK the answer might depend what exchange you are trading on - for some exchanges, your "broker" may actually be a "market maker" and different rules may apply. (Note, I have no idea about the details of the US system so that may be irrelevant). – alephzero Nov 9 '18 at 14:53
  • If a broker has their "own spread", you run away from them as fast as possible. IB is reputable and what you're seeing are market prices. Maybe you're not subscribed to all of the data and you're just seeing some of the ECNs? – misantroop Nov 10 '18 at 22:30
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NBBO (National Best Bid and Offer) is an SEC regulation in the US that requires brokers to trade at the best available bid and ask price. The broker cannot arbitrarily manipulate the B/A spread and " take a larger chunk" from your trades.

If you have multiple quote quote sources, you may see that one broker updates quotes slightly faster/slower than another but that's a function of their server speed.

  • Then how does RobinHood make money off the bid/ask spread? – horse hair Nov 9 '18 at 18:43
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    @horsehair - Do they? I don't think so. They profit off of 1) interest on the cash sitting in accounts, and 2) commissions from firms that pay them to route stock orders to their clients and thus provide liquidity. – Brian R Nov 9 '18 at 19:31

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