Interactive Brokers Group

Interactive Brokers Group, Inc.
Interactive Brokers Group LLC
Formerly called
 Timber Hill Group LLC
T.P. & Co.
Public
Traded as NASDAQ: IBKR
Industry Financial services
Founded New York City 1978 (1978)[1]
Headquarters Greenwich, Connecticut,
United States
Area served
 Worldwide
Key people
 Thomas Peterffy
(Founder, Chairman & CEO)
Products Direct market access to stocks, options, futures, forex, bonds, ETFs and CFDs
Services Online brokerage, direct-access trading
Revenue Decrease US$ 1.0 billion (2013)[2]
Decrease US$ 417.6 million (2013)[2]
Total assets Increase US$ 39.0 billion (2014)[3]
Total equity Increase US$ 5.2 billion (2014)[3]
Number of employees
 901 (March 2014)
Website www.interactivebrokers.com

Interactive Brokers Group, Inc. (IBG Inc.) and Interactive Brokers Group LLC (IBG LLC) are a corporate group, whose subsidiaries are an automated global electronic market maker and broker. It is headquartered in Greenwich, Connecticut and has offices in Budapest, Chicago, Hong Kong, London, Montreal, Mumbai, Shanghai, Saint Petersburg, Sydney, Tallinn, Tokyo, and Zug. The IB Group was founded in 1994 by its Chairman and CEO Thomas Peterffy,[4][5] and consists of subsidiaries operating on most major stock, option, futures, forex, bond, ETF and CFD exchanges worldwide. On May 3, 2007 the company issued 40,000,000 shares (approximately 10 percent of the capital of IBG LLC) in a public offering, at a price of US$30.01 per share under the NASDAQ ticker symbol IBKR.[6] IBG's largest subsidiary is Interactive Brokers LLC (IB), a US broker-dealer formed in 1993, and the largest US electronic broker, based on number of daily average revenue trades.[7] IBG's other major subsidiary is Timber Hill LLC, a US market maker formed in 1982.

About 11.5 percent of IBG Inc. is public, while the remainder is held by employees; Thomas Peterffy is the largest shareholder.[8] IB is regulated by the U.S. Securities and Exchange Commission, the U.S. Financial Industry Regulatory Authority (FINRA, the New York Stock Exchange (NYSE), the U.S. Financial Services Authority (SFA) and foreign regulatory agencies.[9] The company owns 40 percent of the futures exchange OneChicago, and is an equity partner and founder of the Boston Options Exchange.

History

1977-92: Founding and company beginnings

Company trading floor

In 1977, Thomas Peterffy left his job designing commodity trading software for Mocatta Metals, and bought a seat on the American Stock Exchange (AMEX) as an individual market maker. The following year, he formed his first company, named T.P. & Co., to expand trading activities to several members under badge number 549. The firm became the first to use daily printed fair value pricing sheets. In 1979, the company expanded to employ four people, three of whom were AMEX members. In 1982, Peterffy renamed T.P. & Co. to Timber Hill Inc.; he named it after a road to a favorite retreat,[10][11](p30–1) one of his properties on Hutchin Hill Road in Bearsville, New York.

In 1983, Peterffy sought to computerize the option market, and he first targeted the Chicago Board Options Exchange.[10] At the time, brokers still used fair value pricing sheets, which were by then updated once or twice a day. In 1983 Timber Hill created the first handheld computers used for trading, which tracked positions and continually re-priced options on stocks.[5] However, he immediately encountered opposition from the heads of the exchange. When he first brought a 12 inch long by 9 inch wide device to the exchange floor, a committee in the exchange told him it was too big. When he shrank the device further, the committee stated that no analytic devices were allowed to be used on the exchange floor. Effectively blocked from using the CBOE, he sought to use his devices in other exchanges.[10]

Also in 1983, Timber Hill expanded to 12 employees and began trading on the Philadelphia Stock Exchange.[5] In 1984 Timber Hill began coding a computerized stock index futures and options trading system and, in February 1985, Timber Hill's system and network was brought online. The system was designed to centrally price and manage risk on a portfolio of equity derivatives that are traded in multiple locations around the country.[5]

Timber Hill joined the Options Clearing Corporation in 1984, the New York Futures Exchange in 1985, the Pacific Stock Exchange, and the options division of the NYSE the following year. The firm began trading on the Chicago Mercantile Exchange, the Chicago Board of Trade and the Chicago Board of Exchange in 1985. In 1987, Timber Hill joined the National Securities Clearing Corporation and the Depository Trust Company (now merged as the Depository Trust & Clearing Corporation). By 1987, Timber Hill had 67 employees and had become self-clearing in equity securities.[5] In 1987 the CBOE was about to close down its S&P 500 options market due to the options not attracting trader interest. Because of this, Peterffy pledged that Timber Hill would make tight markets in the product for a year if the exchange would allow the traders to use handheld computers in the trading pit. The exchange agreed, and more traders were attracted by the change in pricing; today S&P 500 options are the most actively traded index options in the US.[10] In 1990, Timber Hill Deutschland GmbH was incorporated in Germany, and shortly thereafter began trading equity derivatives at the Deutsche Terminborse (DTB), marking the first time that Timber Hill used one of its trading system on a fully automated exchange. In 1992, Timber Hill began trading at the Swiss Options and Financial Futures Exchange, which merged with DTB in 1998 to become Eurex; at this time, Timber Hill had 142 employees.[5]

1993-2000: Interactive Brokers

IB Technical Operations

Interactive Brokers Inc. was incorporated in 1993 as a US broker-dealer, making Timber Hill's electronic network and trade execution services available to customers. In 1994, Timber Hill Europe began trading at the European Options Exchange, the OM Exchange and the London International Financial Futures and Options Exchange. Also in 1994, Timber Hill Deutschland became a member of the Belgium Futures and Options Exchange, IB became a member of the New York Stock Exchange, and the Timber Hill Group LLC was formed as a holding company of Timber Hill operations. In 1995, Timber Hill France S.A. was incorporated and began making markets at the Paris Traded Equity Options Market and the Marché à Terme International de France futures exchange. Also in 1995, Timber Hill Hong Kong began market making at the Hong Kong Futures Exchange, IB created its Trader Workstation for professional customers to access foreign exchanges, and IB executed its first trades for public customers.[5]

In 1996, Timber Hill Securities Hong Kong Limited was incorporated and began trading at the Hong Kong Stock Exchange. In 1997, Timber Hill Australia Pty Limited was incorporated in Australia, and Timber Hill Europe began trading in Norway and became a member of the Austrian Derivatives Exchange. By 1997, Timber Hill had 284 employees. In 1998, Timber Hill Canada Company was formed, and IB began to clear online trades for retail customers connected directly to Globex to trade S&P futures. In 1999, IB introduced a smart order routing linkage for multiple-listed equity options and IB began to clear online trades for customers trading stocks and equity derivatives through the IB system.[5] Also in 1999, Goldman Sachs attempted to purchase the company and was turned away.[10]

By 2000, IB began to clear online trades for customers trading stocks and equity derivatives through the IB system. Also in 2000, Interactive Brokers (U.K.) Limited was formed and Timber Hill became a Primary Market Maker on the International Securities Exchange.[5]

2001-present: Interactive Brokers Group

In 2001, the corporate name of the Timber Hill Group LLC was changed to Interactive Brokers Group LLC, which at the time handled 200,000 trades per day.[5] In 2002, Interactive Brokers, along with the Bourse de Montréal and the Boston Stock Exchange, created the Boston Options Exchange. Also in 2002, IB introduced Mobile Trader and an application programming interface (API) for customers and developers to integrate their systems with the IB trading system. In 2002, Timber Hill became the major market maker for the newly introduced US single-stock futures. In 2003, Interactive Brokers expanded execution and clearing services to include Canadian stocks, equity/index options and futures, Italian index options and futures, German equity options, Japanese index options and futures, Dutch index options and futures, UK equity options and Belgian index options and futures. In 2004, IB introduced direct market access to its customers on the Frankfurt and Stuttgart exchanges. IB upgraded its account management platform, including a new release of Trader Workstation, real time charts, scanners, fundamental analytics, BookTrader, OptionTrader, and Advisor account trade allocations. In 2005, IB released IdealPro (now Ideal FX). In 2006, the IB Options Intelligent Report was launched to report on unusual concentrations of trading interests and changing levels of uncertainty in the option markets. Also during that year, IBG took stakes in OneChicago, the ISE Stock Exchange, and the CBOE Stock Exchange. In 2006, Interactive Brokers became the first to offer penny-priced options.[5]

On May 3, 2007 IBG had its initial public offering and sold 40 million shares at $30.01 per share.[5] The shares sold represented approximately 10 percent of the interest in IBG LLC. Currently about 13.6 percent of the company is publicly held, while the remainder is held by employees. Thomas Peterffy is the largest shareholder of IBG Holdings. Also in 2007, a real-time Portfolio Margin platform was introduced for customers trading multiple asset classes; this provided increased leverage with real-time risk management. As well, exchanges for physicals were launched for customers to have a market-determined AAA rated financing alternative to randomly set broker rates. In 2008, IB released the IB Risk NavigatorSM. Also in 2008, several trading algorithms were introduced to the Trader Workstation including the Accumulate-Distribute Algo, which allows traders to slice larger orders into smaller, non-uniform increments and release them at random intervals over time, to help achieve best price execution for large volume orders.[5]

In 2009, IB launched the iTWS trading app and the Portfolio Analyst tool. In 2011, IB released IBIS, Capital Introduction for hedge funds, Stock Yield Enhancement and mobileTWS for iPad. As well, Interactive Brokers became the largest online US broker as measured by daily average revenue trades.[5] During the Occupy Wall Street protests of 2011-2012, IB ran a series of controversial television advertisements with the catchphrase "Join the 1%".[12] In 2012, IB began offering Wealth Manager and Money Manager accounts and opened the fully electronic Money Manager Marketplace. IB also released the TWS Mosaic trading interface and the Tax Optimizer for managing capital gains/losses in that year.[5] In 2013, IB released the Probability Lab and Traders' Insight tools. Also in 2013, IB integrated IB FYI automated portfolio-relevant notifications into the TWS, providing information such as shares becoming available for borrowing and options that may be exercised to obtain declared dividends.[5] On April 3, 2014, Interactive Brokers became the first online broker to offer direct access to IEX.[7]

Subsidiaries

Interactive Brokers Group subsidiaries include:[5]

Brokerage
  • Interactive Brokers LLC
  • Interactive Brokers Canada Inc.
  • Interactive Brokers Corp.
  • Interactive Brokers (India) Pvt. Ltd.
  • Interactive Brokers (U.K.) Limited
  • Interactive Brokers Hong Kong Ltd.
  • Interactive Brokers Securities Japan Inc.
Market making
  • Timber Hill LLC
  • Timber Hill Australia Pty. Ltd.
  • Timber Hill Canada Company
  • Timber Hill (Europe) AG
Issuance business
  • Interactive Brokers Financial Products SA

See also

References

  1. ↑ "IB Group History". Interactive Brokers. Interactive Brokers. Retrieved September 8, 2015.
  2. 1 2 "2013 Annual Review" (PDF). Interactive Brokers Group, Inc. Retrieved June 25, 2014.
  3. 1 2 "Interactive Brokers Group Announces 1Q2014 Results" (PDF). Interactive Brokers Group, Inc. Retrieved July 7, 2014.
  4. ↑ "Interactive Brokers". Retrieved 21 July 2015.
  5. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 "About the Interactive Brokers Group". Interactive Brokers. Interactive Brokers Group. Retrieved June 25, 2014.
  6. ↑ Gelsi, Steve (April 5, 2007). "Interactive Brokers Group IPO nearing its $500 mln debut". The Wall Street Journal. Retrieved June 25, 2014.
  7. 1 2 "Interactive Brokers Adds IEX as an Electronic Trading Venue". The New York Times. Business Wire. April 3, 2014. Retrieved July 2, 2014.
  8. ↑ Bunge, Jacob (April 19, 2012). "Interactive Brokers Founder, CEO To 'Gradually' Retire". The Wall Street Journal. Retrieved July 2, 2014.
  9. ↑ "IB Fact Sheet". Interactive Brokers. Interactive Brokers Group. Retrieved June 25, 2014.
  10. 1 2 3 4 5 McGee, Susan (November 10, 2005). "A Breed Apart". Institutional Investor Magazine (November 2005). Institutional Investor LLC. Retrieved June 27, 2014.
  11. ↑ Steiner, Christopher (2012). Automate This: How Algorithms Came to Rule Our World. New York, New York: The Penguin Group. ISBN 978-1-59184-492-1. OCLC 757470260. Retrieved July 11, 2014.
  12. ↑ Dicker, Ron. "Interactive Brokers Ad Mocks Occupy Movement: 'Join The 1%'". The Huffington Post. TheHuffingtonPost.com, Inc. Retrieved June 25, 2014.
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