The purpose of this notice is to advise you of the practical consequences of executing transactions with Interactive Brokers on the VWAP pricing basis offered by IB. By agreeing to execute a large transaction pursuant to IB's VWAP average price arrangement, your transaction will be executed after the close of trading at the average price for the security during the reference period, as calculated by Bloomberg. At the end of the trading day, a single, average price for the entire block will be reported to you. In many circumstances, by executing the transaction in this manner the overall transaction price will be more favorable to you. Please bear in mind, however, that the average price reported to you on the relevant confirmation may not be reflective of the actual trading level of the security at any point during the trading day, but rather reflects an average price based upon transactions effected during the reference period, as calculated by Bloomberg.
In average price transactions IB, as agent, will generally forward the transactions for execution to its affiliate, Timber Hill LLC, which will act as principal in the transaction. Customers entering VWAP orders agree to accept the VWAP price for the reference period as calculated by Bloomberg. IB has no control over the methodology used by Bloomberg to calculate VWAP prices and does not warrant the accuracy of the Bloomberg prices.
IB reserves the right NOT to execute a VWAP transaction at the close of trading in the following limited circumstances: 1) the customer's VWAP order violates exchange or S.E.C. rules or is intended to defraud or manipulate the market; 2) a significant disruption in or premature close of trading on the New York Stock Exchange or Nasdaq market; 3) acts of God, war (declared or undeclared); terrorism, fire or action by an exchange or governmental authority that disrupts trading in the relevant security or Bloomberg's calculation of the VWAP; 4) if Bloomberg's calculation of VWAP prices is clearly erroneous. In such cases, IB shall have no obligation to execute customer's VWAP order; 5) The VWAP stock does not open by 15:00.