(FinanceMagnate)–Electronic trading firm Interactive Brokers Group, Inc. (NASDAQ:IBKR) aka “IB”has announced its plans to put an end to its options market making activities globally.
The operations, which are conducted through the Timber Hill companies, are expected to be phased out over the coming months. The broker will continue carrying out certain trading activities in stocks and related instruments.
In a press release, Thomas Peterffy, Chairman and CEO, explained that “Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity”.
Added Peterffy, an immigrant from Hungary who was recently featured in Forbes for having a net worth north of as much as $15bil, “Having initiated the first automated option market making operation in the mid ’80s, which grew into the largest such business on a global scale over the next 25 years, it’s been painful for me to see it deteriorating in the last few years. But we do not have a choice in this matter. Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity.
“We must focus on continuing to build our brokerage platform to empower our customers with first rate execution and account management capabilities at very low cost. This remains our mission, to which we must devote our full attention. In retrospect, 40 years of market making gave us the financial resources and the unique expertise to develop our superior brokerage platform for cost and execution sensitive, professional investors and traders, and to give them the edge to successfully compete in the marketplace.”
In addition, Interactive Brokers’ management is conducting a review of the facilities and staffing, with the review set to be completed in the near future. The goal, as the broker put it, is “optimizing the deployment of the Company’s resources”.
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Along with this shift toward electronic brokerage, Interactive Brokers said it planned to rebalance the composition of currencies in the GLOBAL, a basket of 15 major currencies in which it holds its equity, by increasing the relative weight of the US dollar vs. the other currencies to approximately 70% from the current weight of about 47%. The new composition is set to become effective at the close of business on March 31, 2017, whereas the conversion to the new targeted currency holdings will happen soon after that.
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