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Multi-asset automated brokerage Interactive Brokers (NASDAQ:IBKR) said it has decided to cease offering options market making services on a global scale. The broker conducts such services through its Timber Hill companies. The reason for the move is the dying interest in such activities.
The phase out of options market making activities will be gradual and will take place over the coming months.
“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,” Thomas Peterffy, the broker’s chairman and CEO, said. “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,” he added.
Interactive Brokers intends to continue offering certain trading activities in stocks and related instruments. It will focus on products and services that generate higher profit and customer interest. In addition, the broker’s management will further optimize deployment of resources by completing a comprehensive review of facilities and staffing in the near future.
The broker plans to “rebalance the composition of currencies in the GLOBAL, a basket of 15 major currencies in which we hold our equity, by increasing the relative weight of the US dollar vs. the other currencies to approximately 70% from its current approximately 47% weight”. The new composition will come into effect at the close of business on 31 March, 2017 and the conversion to the new targeted currency holdings will take place shortly after that.
“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,” Peterffy said. “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.”
Connecticut-based Interactive Brokers is a broker and a market maker. Through its numerous subsidiaries, the company offers online automated trading in stocks, options, futures, forex, bonds, contracts for difference (CFDs) and funds. It serves retail and institutional clients in over 120 market across the globe. The brokerage has offices in the North America, Europe, Australia, and Asia. The group companies hold licenses by the relevant authorities in the US and the UK.