width=150There is a difference between smelling a rat, and catching one. A few weeks ago I noticed the hedgefund HiQ was in the kitchen of online broker DeGiro. Terrible situation, don’t set the fox to watch the geese.

Worried about extra risks, in case of a collapse of HiQ. Everything at an abstract level. Today I discovered some more urgent issues at DeGiro.

Clients can’t trade with clients

It turns out clients of DeGiro can’t trade against other DeGiro clients. When clients want to cross the spread, the other side is always taken by the “join orders” of hedgefund HiQ. Clients with a passive sitting order in the market will never get executions from other DeGiro clients.

Checking inhouse matching

I decided to test DeGiro’s story about functioning of inhouse matching of orders. In theory, this means if one customer is a buyer in an option, and another one is seller – these are matched inhouse instead of executed at the exchange. Saving costs. Suspected this whole “inhouse matching” story is a cover-up of a hedgefund preying on retail orders.

Evidence in Ten Cate options

A friend with an account at DeGiro gave a bid in the Ten Cate Dec 20 put. A 6 cent bid, for five contracts. He was the best bid in the market. In front of everyone else. See the Bloomberg screenshot. And his own screenshot. This is customer “A”.

With his bid, the market became 0.06 – 0.11.

Another DeGiro client (customer “B”) wants to sell the option. He gave a sell order for two contracts with a limit price of 6 cent. In other words, he was ready to sell on the bid.

The seller received confirmation, he sold two contracts. But customer A on the bid did not buy any options at all. While he was in front of everybody else, with the best price in the market. What happened? Instead of internalizing orders between clients A and B, the HiQ hedgefund came between them. Some more puts were sold, but the client with the 6 cent bid received nothing. Here’s the screenshot from DeGiro of the seller, customer B.

Wrong at many levels

This is wrong at many levels.

First of all, clients of DeGiro can’t trade against order clients of DeGiro. My friend is customer of DeGiro, he gave the best bid in the market.  He can’t receive a fill from other DeGiro customers. HiQ takes all. Other customers will have missed executions as well. Problem is, nobody knows it. No client sees the full picture. The customer with the bid receives no fill (but nothing traded in screen). The seller gets a fill (all fine, no reason to investigate). Only hedgefund HiQ sees everything.

DeGiro is effectively saying, ah the clients – we give all orders crossing the bid-ask spread to our own hedgefund.

Against own DeGiro policy

Second, these order executions are against their own policy. They have a policy, and referred often to it. Read this. That’s an excerpt from the full order and execution policy from DeGiro. Can be found on page 9.

Priority of orders:

  1. Limit orders (like the buy order from client A)
  2. Limit Hit orders (don’t exist)
  3. Join orders (only exist for HiQ)

Contrast with public statements

Third, this is against all public comments from Gijs Nagel. He actually didn’t tell the truth when he said DeGiro is matching clients against clients. In FD last week, on investors website IEX last month (link – nl).

Lot of explanation to do

DeGiro has a lot of explanation to do. They could say the terms and conditions are wrong and will be rewritten. Or the priority of orders should be read upside down. Maybe they could say clients should use the non-existing limit hit orders. Or this inhouse matching stuff only works for orders not being sent to the exchange (right..). Or it’s only happening in TCT options (too bad,  checked other option classes as well). Perhaps it’s just a bug in their system. Uhuh.. A bug generating profits for the DeGiro/HiQ group.

There’s a hedgefund in the kitchen. Shouldn’t have been there.

Striking similarity with ITG

This inhouse matching has been going on for at least a full year. Clients have been denied executions, and all of them together may have lost a large sum of money due this practices. In the US a class action would follow, here we rely on the AFM.

The similarity with US broker ITG is getting scary. The US broker received a fine of $20 million for trading against it’s own customers in their dark pool. I can imagine the AFM won’t follow every single negative story. But this is something they can’t ignore.


I’m not on a crusade against DeGiro. The integrity of the market is what matters. I have no alliance with any broker, nor have I received any information or suggestions from third parties. As a market maker, I’m one of the very few people outside DeGiro to see what’s actually happening.

DeGiro’s ceo Gijs Nagel wasn’t able to respond on a short notice.


Turns out DeGiro has created a system where clients can trade with other clients, as long as there are no partial executions. Otherwise everything will be default routed to HiQ.

  • You’re bidding 1 contract, and a seller comes in from another client for 1 contract : inhouse matched.
  • You’re bidding for 5 contracts, a seller comes in from another client for 2 contracts : the bid gets no execution, seller matches against hedge fund HiQ.

This is an awful design. No doubt it violates the “order and execution policy” from DeGiro. It gives no best execution for the best bid, as it gets no execution. The best execution would be a regular trade on the screen. Both clients happy. DeGiro carefully avoided addressing the problems.

They don’t deny the facts mentioned above. Sharing some pages of source code looks interesting, but it means nothing. Their response about the messenger (me) only serves as a distraction from the key issues. The technical details of their story make no sense, but decided to ignore. Let’s stay focused on the ball.

Two important questions remain:

Did DeGiro follow their own order and execution policy with the TCT option trade? Yes/No

And of course..

Customer A received no execution on his buy order in the TCT option, was this because DeGiro’s own hedgefund jumped in front of him? Yes/No

It may sounds silly. Not important. But realize you will never know how much you’ve lost because the shark HiQ stole your execution. In the options market, but also in simple stock orders.

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