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Non-Tech : Interactive Brokers / Timberhill

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To: Dan Duchardt who wrote (739)	12/3/2000 4:07:41 PM
From: Dan Duchardt	Read Replies (2) of 9012

An update regarding payment for order flow. I received the following email last week. I thought the issue had pretty much died so I did not post it immediately, but it seems to be resurfacing. Dear Mr. Duchardt, David Friedland pointed out your Silicon Investor posting on Best Ex/OrderFlow after last Thursday's San Francisco Chronicle article. The Chronicle article merits clarification and I would very much appreciate your sharing the facts with everyone on Silicon Investor. In my conversation with the paper I emphasized that best execution superceded everything else that we do, including the acceptance of payment for order flow. Unfortunately that point didn't come through as strongly as I had intended. Over the past year we have lobbied at the SEC for a pure market structure in which the best posted price alone would determine order routing. We lost that debate and we have now begun to accept payment for order flow, but only in options. At no time have we altered our commitment to Best Execution. The payments we receive generally are from exchange-mandated payment for order flow arrangements. Regardless of any payment we receive, all of our options orders are routed to the best posted market. We now offer this best execution routing service at the wholesale level to a growing number of brokerage firms. You are quite right in observing that "things change." We will be posting a statement on our payment for order flow policy to reflect that change shortly. I will also be briefing our representatives. In the meantime, please rest assured that Best Execution at IB means Best Execution. When you select Best Execution, we route to the best price accessible on our system, whether payment is offered or not. Best regards, Thomas A. Ascher Executive Vice President Interactive Brokers LLC Dan

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