Tag Archives: Thomas Peterffy

interactive-brokers-options-market-making-retreat

Interactive Brokers to Retreat From Options Market-Making

(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. Continue reading

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What’s Next? Reuters Gets Redi; EMS Icon Acquired by Market Data Legend

Reuters execs say “Why build an expensive EMS platform to integrate with your buy-side focused analytics platform when you can buy one that already has captive customers?” If it’s the right price, then the answer  would seem to favor Buy v Build! That is apparently the calculus of market data provider  Thomson Reuters, which just announced they will acquire 100% of Redi Global Technologies.

Below coverage courtesy of our friends at MarketsMedia.com.

The market data provider plans to integrate Redi’s at-trade capabilities with into its Eikon pre-trade financial-analysis desktop

Market data provider Thomson Reuters has just moved into the trade-execution space with its agreement to purchase buy-side execution management system provider Redi Global Technologies.

Although both parties declined to disclose the terms of the deal, which is expected to close by the end of the year, Redi CEO Rishi Nangalia stated, “This is a 100% acquisition by Thomson Reuters and Redi’s existing owners will no longer have an equity stake in the company.”

“This deal was as much about technology, clients, reputation as it was domain expertise that sits with the Redi employees,” added Michael Chin, managing director, global head of equities at Thomson Reuters.

Most Industry watchers see the acquisition playing an important part in Thomson Reuters’ technology and trading strategy. One EMS sector market muse commented “InteractiveBrokers CEO Thomas Peterffy is probably peeing his pants from laughing too hard. Thomson Reuters has a history of bungling acquisitions.”

“Redi has a strong buy-side/hedge fund footprint, which will help Thomson Reuters increase its presence with that increasingly important demographic allowing Thomson Reuters to expand its data, distribution, and analytics business,” said Larry Tabb, founder and CEO of industry analyst firm Tabb Group. “Also given that Redi is not a broker and helping investors connect to their brokers, the acquisition will help reinforce the relationship that Thomson Reuters has on the sell side.”

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The two vendors already share many buy-side clients, according to Nangalia.

“However there is less overlap in the user base,” he added. “Eikon users typically are portfolio managers and analysts while RediPlus users are more often traders.”

Thomson Reuters plans on integrating the Redi EMS with its Eikon platform in a phased approach by moving each platform onto a common architecture through their respective upgrade cycles.

“We are not planning to re-write Redi into Eikon in the near term,” said Chin.

“There is no forced timeline to deliver an integrated product, said Nangalia. “It will be client feedback and prudent discussions along the way that will drive those technology decisions.”

Neither companies expect that the deal will result in any redundancies for Redi’s approximately 120 employees.

“The idea is to invest and grow the business,” said Nangalia. “The synergies are not planned from a people perspective. They are from other cost areas. This is an investment thesis and not a cost-cutting thesis.”

From a real-estate perspective, Redi will move from its corporate headquarters in Manhattan’s Wall Street neighborhood and other global offices into existing Thomson Reuters facilities.

“To achieve and integrated team, we want the teams in each city to be next to each other,” Nangalia added. “Obviously, Thomson Reuters’ offices are much large than ours, so we will be moving into their offices and integrating with their financial equities teams as quickly as is practical.”

Equities market-maker Spear, Leeds & Kellogg developed the RediPlus EMS in 1992, which Goldman Sachs later acquired in 2001. The investment bank then spun off the EMS vendor in 2013 with the collaboration of Bank of America Merrill Lynch, Barclays, BNP Paribas, Citadel and investment funds associated with Lightyear Capital.

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