Interactive Brokers LLC (IB) is an American multinational
brokerage firm
A broker is a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confu ...
. It operates the largest
electronic trading platform
In finance, an electronic trading platform also known as an online trading platform, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products c ...
in the U.S. by number of
daily average revenue trades. The company brokers
stock
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
s,
options,
future
The future is the time after the past and present. Its arrival is considered inevitable due to the existence of time and the laws of physics. Due to the apparent nature of reality and the unavoidability of the future, everything that currently ...
s,
EFPs,
futures options,
forex
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
,
bond
Bond or bonds may refer to:
Common meanings
* Bond (finance), a type of debt security
* Bail bond, a commercial third-party guarantor of surety bonds in the United States
* Chemical bond, the attraction of atoms, ions or molecules to form chemica ...
s,
funds
Funding is the act of providing resources to finance a need, program, or project. While this is usually in the form of money, it can also take the form of effort or time from an organization or company. Generally, this word is used when a firm uses ...
, and some
cryptocurrencies
A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank
A bank is a financial i ...
.
The company is headquartered in
Greenwich, Connecticut
Greenwich (, ) is a New England town, town in southwestern Fairfield County, Connecticut, United States. At the 2020 United States Census, 2020 census, the town had a total population of 63,518. The largest town on Connecticut's Gold Coast (Conne ...
and has offices in four cities. It is the largest subsidiary of the brokerage group Interactive Brokers Group, Inc., which was founded by Chairman
Thomas Peterffy
Thomas Peterffy (born September 30, 1944) is a Hungarian-born American billionaire businessman. He is the founder, chairman, and the largest shareholder of Interactive Brokers. Peterffy worked as an architectural draftsman after emigrating to t ...
, an early innovator in computer-assisted trading. IB is regulated by the
U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
, the
Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Associati ...
, the
New York Stock Exchange
The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its listed c ...
, the
Commodity Futures Trading Commission
The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974 that regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options.
The Commodity Exchange Ac ...
,
National Futures Association
The National Futures Association (NFA) is the self-regulatory organization (SRO) for the U.S. derivatives industry, including on-exchange traded futures, retail off-exchange foreign currency (forex) and OTC derivatives ( swaps). NFA is headquar ...
,
Chicago Mercantile Exchange
The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an a ...
and other
self-regulatory organization
A self-regulatory organization (SRO) is an organization that exercises some degree of regulatory authority over an industry or profession. The regulatory authority could exist in place of government regulation, or applied in addition to governmen ...
s. The company is a provider of fully disclosed,
omnibus, and non-disclosed broker accounts and provides correspondent
clearing services to 200
introducing brokers worldwide, as of 2014. , the company serves 1.76 million customers, with
US$
The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...
348.5
billion
Billion is a word for a large number, and it has two distinct definitions:
*1,000,000,000, i.e. one thousand million, or (ten to the ninth power), as defined on the short scale. This is its only current meaning in English.
* 1,000,000,000,000, i.e ...
in
customer equity
Customer equity is the total combined customer lifetime values of all of the company's customers.Fripp. G (2014Guide to Customer Lifetime Value/ref> It is calculated by multiplying the number of customers by the average value of each customer. Cust ...
. Interactive Brokers Group owned 40 percent of the now-closed futures exchange
OneChicago
OneChicago was a US-based all-electronic futures exchange with headquarters in Chicago, Illinois. The exchange offered approximately 12,509 single-stock futures (SSF) productshttp://www.onechicago.com/?page_id=1129 with names such as IBM, Appl ...
, and it is an equity partner and founder of the
Boston Options Exchange
BOX Options Exchange, LLC (BOX) is an automated exchange operated by the TMX Group and owned by TMX and a consortium of broker-dealers. As an equity options market, it provides electronic order matching services to stockbrokers and traders.
O ...
.
The original organization was first created as a
market maker
A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the ''bid–ask spread'', or ''turn.'' The benefit to the firm is that it ...
in 1977 under the name T.P. & Co., and was renamed Timber Hill Inc. in 1982. It became the first to use
fair value
In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated wi ...
pricing sheets on an
exchange trading floor in 1979, and the first to use handheld computers for trading, in 1983. In 1987, Peterffy also created the first fully automated
algorithmic trading
Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of ...
system, to automatically create and submit orders to a market. Between 1993 and 1994, the corporate group Interactive Brokers Group was created, and the subsidiary Interactive Brokers LLC was created to control its electronic brokerage, and to keep it separate from Timber Hill, which conducts market making. In 2014, Interactive Brokers became the first online broker to offer direct access to
IEX
Investors Exchange (IEX) is a stock exchange in the United States. It was founded in 2012 in order to mitigate the effects of high-frequency trading. IEX was launched as a national securities exchange in September 2016. On October 24, 2017, it ...
, a private forum for trading securities. , about 23.5 percent of the company is publicly held, while the remainder is held by employees and their affiliates; Thomas Peterffy is the largest shareholder.
History
In 1977,
Thomas Peterffy
Thomas Peterffy (born September 30, 1944) is a Hungarian-born American billionaire businessman. He is the founder, chairman, and the largest shareholder of Interactive Brokers. Peterffy worked as an architectural draftsman after emigrating to t ...
left his job designing commodity trading software for Mocatta Metals, and bought a seat on the
American Stock Exchange
NYSE American, formerly known as the American Stock Exchange (AMEX), and more recently as NYSE MKT, is an American stock exchange situated in New York City. AMEX was previously a mutual organization, owned by its members. Until 1953, it was known ...
(AMEX) as an individual
market maker
A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the ''bid–ask spread'', or ''turn.'' The benefit to the firm is that it ...
. The following year, he formed his first company, named T.P. & Co., to expand trading activities to several members under badge number 549. At the time, trading used an
open outcry
Open outcry is a method of communication between professionals on a stock exchange or futures exchange, typically on a trading floor. It involves shouting and the use of hand signals to transfer information primarily about buy and sell order ...
system; Peterffy developed algorithms to determine the best prices for
options and used those on the trading floor,
and thus the firm became the first to use daily printed
fair value
In accounting and in most schools of economic thought, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. The derivation takes into account such objective factors as the costs associated wi ...
pricing sheets. In 1979, the company expanded to employ four traders, 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,
one of his properties on Hutchin Hill Road in
Woodstock, New York
Woodstock is a town in Ulster County, New York, United States, in the northern part of the county, northwest of Kingston, NY. It lies within the borders of the Catskill Park. The population was 5,884 at the 2010 census, down from 6,241 in 2000 ...
. By 1983, Peterffy was sending orders to the floor from his upstairs office; he devised a system to read the data from a
Quotron
Quotron was a Los Angeles-based company that in 1960 became the first financial data technology company to deliver stock market quotes to an electronic screen rather than on a printed ticker tape. The Quotron offered brokers and money managers up ...
machine by measuring the electric pulses in the wire and decoding them. The data would be then sent through Peterffy's trading algorithms, and then Peterffy would call down the trades.
After pressure to become a true market maker and keep constant bids and offers, Peterffy knew that he would need his employees to closely pay attention to market movements, and that handheld computers would help. At the time, the AMEX didn't permit computers on the trading floor. Because of this, Peterffy had an assistant deliver market information from his office in the
World Trade Center
World Trade Centers are sites recognized by the World Trade Centers Association.
World Trade Center may refer to:
Buildings
* List of World Trade Centers
* World Trade Center (2001–present), a building complex that includes five skyscrapers, a ...
.
In November 1983 he convinced the exchange to allow computer use on the floor.
In 1983, Peterffy sought to computerize the options market, and he first targeted the
Chicago Board Options Exchange
The Chicago Board Options Exchange (CBOE), located at 433 West Van Buren Street in Chicago, is the largest U.S. options exchange with an annual trading volume of around 1.27 billion at the end of 2014. CBOE offers options on over 2,200 companies ...
(CBOE).
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. As Peterffy explained in a 2016 interview, the battery-powered units had touch screens for the user to input a stock price and it would produce the recommended option prices,
and it also tracked positions and continually repriced options on stocks.
However, he immediately encountered opposition from the heads of the exchange. When he first brought a by device to the exchange floor, a committee in the exchange told him it was too big. When he made the device smaller, 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.
![IBcommunication](https://upload.wikimedia.org/wikipedia/commons/b/b0/IBcommunication.jpg)
Also in 1983, Timber Hill expanded to 12 employees and began trading on the
Philadelphia Stock Exchange
Philadelphia Stock Exchange (PHLX), now known as Nasdaq PHLX, is the first stock exchange established in the United States and the oldest stock exchange in the nation. The exchange is owned by Nasdaq, which acquired it in 2007 for $652 million, a ...
. 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
Portfolio may refer to:
Objects
* Portfolio (briefcase), a type of briefcase
Collections
* Portfolio (finance), a collection of assets held by an institution or a private individual
* Artist's portfolio, a sample of an artist's work or a ...
of
equity derivative In finance, an equity derivative is a class of derivatives whose value is at least partly ''derived'' from one or more underlying equity securities. Options and futures are by far the most common equity derivatives, however there are many other ty ...
s traded in multiple locations around the country.
In 1985, Peterffy introduced his computer system to the New York Stock Exchange (NYSE), which allowed it. However, the stock exchange only allowed it to be used at trading booths several yards away from where transactions were executed. Peterffy responded by designing a code system for his traders to read colored bars emitted in patterns from the video displays of computers in the booths. This caused the exchange and other members to be suspicious of
insider trading
Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider information ...
, which convinced Timber Hill to distribute instructions throughout the exchange, describing how to read the displays.
In response, the exchange required the company to turn the screens away from the trading floor, which prompted Peterffy to hire a clerk to communicate with the traders via hand signals. Eventually computers were allowed on the trading floor.
![Twin Towers circa fall 1993](https://upload.wikimedia.org/wikipedia/commons/d/d8/Twin_Towers_circa_fall_1993.jpg)
Timber Hill joined the
Options Clearing Corporation
Options Clearing Corporation (OCC) is a United States clearing house based in Chicago. It specializes in equity derivatives clearing, providing central counterparty (CCP) clearing and settlement services to 16 exchanges. Started by Wayne Luth ...
in 1984, the
New York Futures Exchange in 1985, and the
Pacific Stock Exchange
The Pacific Exchange was a regional stock exchange in California, from 1956 to 2006. Its main exchange floor and building were in San Francisco, California, with a branch building in Los Angeles, California.
In 1882, the San Francisco Stock and ...
and the options division of the NYSE the following year. Also in 1985, the firm joined and began trading on the
Chicago Mercantile Exchange
The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an a ...
, the
Chicago Board of Trade
The Chicago Board of Trade (CBOT), established on April 3, 1848, is one of the world's oldest futures and options exchanges. On July 12, 2007, the CBOT merged with the Chicago Mercantile Exchange (CME) to form CME Group. CBOT and three other excha ...
and the Chicago Board Options Exchange. In 1986, the company moved its headquarters to the World Trade Center to control activity at multiple exchanges. Peterffy again hired workers to sprint from his offices to the exchanges with updated handheld devices, which he later superseded with phone lines carrying data to computers at the exchanges. Peterffy later built miniature radio transmitters into the handhelds and the exchange computers to allow data to automatically flow to them.
In 1987, Timber Hill joined the National Securities Clearing Corporation and the Depository Trust Company (now merged as the
Depository Trust & Clearing Corporation
The Depository Trust & Clearing Corporation (DTCC) is an American Trade (financial instrument), post-trade financial services company providing clearing (financial), clearing and settlement (finance), settlement services to the financial markets ...
). By 1987, Timber Hill had 67 employees and had become self-
clearing in
equities
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
.
In 1987, the CBOE was about to close down its
S&P 500
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of D ...
options market due to the options not attracting sufficient 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 on the trading floor. 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 U.S.
In 1990, Timber Hill Deutschland
GmbH was incorporated in
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
, and shortly thereafter began trading equity derivatives at the Deutsche Terminbörse (DTB), marking the first time that Timber Hill used one of its trading systems 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
Eurex Exchange is an international exchange which primarily offers trading in European based derivatives. It is the largest European futures and options market. The products traded on this exchange vary from German and Swiss debt instruments to E ...
. At that time, Timber Hill had 142 employees.
While Peterffy was trading on the
Nasdaq
The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
in 1987,
he created the first fully automated
algorithmic trading
Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of ...
system. It consisted of an
IBM computer that would pull data from a Nasdaq terminal connected to it and carry out trades on a fully automated basis. The machine, for which Peterffy wrote the software, worked faster than a trader could.
Upon inspection, the Nasdaq banned direct interface with the terminal, and required trades to be typed in manually. Peterffy and his team designed a system with a camera to read the terminal, a computer to decode the visual data, and mechanical fingers to type in the trade orders, which was then accepted by the Nasdaq.
1993 to 2000
Interactive Brokers Inc. was incorporated in 1993 as a U.S.
broker-dealer
In financial services, a broker-dealer is a natural person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers. Broker-dealers are at the heart of the securities and d ...
, to provide technology developed by Timber Hill for electronic network and trade execution services 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
The London International Financial Futures and Options Exchange (LIFFE, pronounced 'life') was a futures exchange based in London. In 2014, following a series of takeovers, LIFFE became part of Intercontinental Exchange, and was renamed ICE ...
. 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 and IB's operations.
In 1995, Timber Hill France S.A. was incorporated and began making markets at the Marché des Options Négociables de Paris (a subsidiary of
Euronext Paris
Euronext Paris is France's securities market, formerly known as the Paris Bourse, which merged with the Amsterdam, Lisbon, and Brussels exchanges in September 2000 to form Euronext NV. As of 2022, the 795 companies listed had a combined marke ...
) 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
Hong Kong Futures Exchange (HKFE) is a futures exchange in Hong Kong. Established in 1976, it offered a variety of options and futures contracts, linked to stock market indices, stocks, short-term interest rates, and foreign exchange. HKFE is a su ...
and IB created its primary
trading platform
In finance, an electronic trading platform also known as an online trading platform, is a computer software program that can be used to place orders for financial products over a network with a financial intermediary. Various financial products c ...
Trader Workstation and executed its first trades for public customers.
In 1996, Timber Hill Securities Hong Kong Limited was incorporated and began trading at the
Hong Kong Stock Exchange
The Stock Exchange of Hong Kong (SEHK, also known as Hong Kong Stock Exchange) is a stock exchange based in Hong Kong. As of the end of 2020, it has 2,538 listed companies with a combined market capitalization of HK$47 trillion. It is repor ...
.
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
The Chicago Mercantile Exchange (CME) (often called "the Chicago Merc", or "the Merc") is a global derivatives marketplace based in Chicago and located at 20 S. Wacker Drive. The CME was founded in 1898 as the Chicago Butter and Egg Board, an ...
to trade
S&P futures.
In 1999, IB introduced a
smart order routing
Smart order routing (SOR) is an automated process of handling orders, aimed at taking the best available opportunity throughout a range of different trading venues.
The increasing number of various trading venues and MTFs leads to a surge in liq ...
linkage for multiple-listed
equity options
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date ...
and began to clear trades for its customer stocks and equity derivatives trades.
Also in 1999,
Goldman Sachs
Goldman Sachs () is an American multinational investment bank and financial services company. Founded in 1869, Goldman Sachs is headquartered at 200 West Street in Lower Manhattan, with regional headquarters in London, Warsaw, Bangalore, H ...
attempted to purchase the company and was turned away.
In 2000, Interactive Brokers (U.K.) Limited was formed and Timber Hill became a
Primary Market Maker on the
International Securities Exchange
International Securities Exchange Holdings, Inc. (ISE) is a wholly owned subsidiary of American multinational financial services corporation Nasdaq, Inc. It is a member of the Options Clearing Corporation (OCC) and the Options Industry Council ( ...
(ISE).
2001 to present
![IBfloor](https://upload.wikimedia.org/wikipedia/commons/0/03/IBfloor.JPG)
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.
In 2002, Interactive Brokers, along with the
Bourse de Montréal
The Montreal Exchange (MX; french: Bourse de Montréal), formerly the Montreal Stock Exchange (MSE), is a derivatives exchange, located in Montreal, Quebec, Canada that trades futures contracts and options on equities, indices, currencies, ETFs, ...
and the
Boston Stock Exchange
The Boston Stock Exchange (now NASDAQ BX, formerly ''BSE'') is a regional stock exchange located in Boston, Massachusetts. It was founded in 1834, making it the third-oldest stock exchange in the United States. On October 2, 2007, NASDAQ agreed t ...
, created the
Boston Options Exchange
BOX Options Exchange, LLC (BOX) is an automated exchange operated by the TMX Group and owned by TMX and a consortium of broker-dealers. As an equity options market, it provides electronic order matching services to stockbrokers and traders.
O ...
.
Also in 2002, IB introduced Mobile Trader and an
application programming interface
An application programming interface (API) is a way for two or more computer programs to communicate with each other. It is a type of software interface, offering a service to other pieces of software. A document or standard that describes how t ...
for customers and developers to integrate their mobile phone systems with the IB trading system.
Also in 2002, Timber Hill became the major market maker for the newly introduced U.S.
single-stock futures In finance, a single-stock future (SSF) is a type of futures contract between two parties to exchange a specified number of stocks in a company for a price agreed today (the futures price or the strike price) with delivery occurring at a specified ...
.
In 2003, Interactive Brokers expanded its trade execution and clearing services to include Belgian index options and futures, Canadian stocks, equity/index options and futures, Dutch index options and futures, German equity options, Italian index options and futures, Japanese index options and futures, and U.K. equity options. In 2004, IB introduced
direct market access to its customers on the
Frankfurt
Frankfurt, officially Frankfurt am Main (; Hessian: , "Frank ford on the Main"), is the most populous city in the German state of Hesse. Its 791,000 inhabitants as of 2022 make it the fifth-most populous city in Germany. Located on its na ...
and
Stuttgart
Stuttgart (; Swabian: ; ) is the capital and largest city of the German state of Baden-Württemberg. It is located on the Neckar river in a fertile valley known as the ''Stuttgarter Kessel'' (Stuttgart Cauldron) and lies an hour from the ...
exchanges. In the same year, IB upgraded its account management system and Trader Workstation, adding
real-time
Real-time or real time describes various operations in computing or other processes that must guarantee response times within a specified time (deadline), usually a relatively short time. A real-time process is generally one that happens in defined ...
charts, scanners, fundamental analytics, and tools BookTrader and OptionTrader to the platform.
In 2005, IB released its forex trading platform IdealPro (now Ideal FX).
In 2006, the IB Options Intelligence Report was launched to report on unusual concentrations of trading interests and changing levels of uncertainty in the option markets. Also in that year, IBG took stakes in
OneChicago
OneChicago was a US-based all-electronic futures exchange with headquarters in Chicago, Illinois. The exchange offered approximately 12,509 single-stock futures (SSF) productshttp://www.onechicago.com/?page_id=1129 with names such as IBM, Appl ...
, the
ISE Ise may refer to:
Places
* Ise, Mie, a city in Japan
**Ise Grand Shrine, a Shinto shrine located in Ise, Mie
* Ise Ekiti, a city in Nigeria
*Ise, Norway, a village in Norway
*Ise Province, an ancient province of Japan
* River Ise, a tributary of th ...
Stock Exchange, and the CBOE Stock Exchange. In 2006, Interactive Brokers started offering penny-priced options.
On May 3, 2007, IBG held its
initial public offering
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...
(IPO) through the Nasdaq and sold 40 million shares at $30.01 ($ in ) per share.
It was run as a
Dutch auction
A Dutch auction is one of several similar types of auctions for buying or selling goods. Most commonly, it means an auction in which the auctioneer begins with a high asking price in the case of selling, and lowers it until some participant accep ...
handled by
WR Hambrecht (which handled
Google
Google LLC () is an American multinational technology company focusing on search engine technology, online advertising, cloud computing, computer software, quantum computing, e-commerce, artificial intelligence, and consumer electronics. ...
's IPO similarly in 2004) and
HSBC
HSBC Holdings plc is a British multinational universal bank and financial services holding company. It is the largest bank in Europe by total assets ahead of BNP Paribas, with US$2.953 trillion as of December 2021. In 2021, HSBC had $10.8 tri ...
;
it was the second-largest U.S. IPO that year
and the largest brokerage IPO since 2005.
The shares sold represented approximately 10 percent of the interest in IBG LLC.
Also in 2007, a real-time Portfolio Margin platform was introduced for customers trading multiple
asset classes
In finance, an asset class is a group of financial instruments that have similar financial characteristics and behave similarly in the marketplace. We can often break these instruments into those having to do with real assets and those having ...
, providing increased
leverage
Leverage or leveraged may refer to:
*Leverage (mechanics), mechanical advantage achieved by using a lever
* ''Leverage'' (album), a 2012 album by Lyriel
*Leverage (dance), a type of dance connection
*Leverage (finance), using given resources to ...
with real-time risk management; as well, the company introduced
exchanges for physicals for customers to exchange stocks and futures with a market-determined rate.
In 2008, the company released Risk Navigator, a real-time
market risk
Market risk is the risk of losses in positions arising from movements in market variables like prices and volatility.
There is no unique classification as each classification may refer to different aspects of market risk. Nevertheless, the most ...
management platform. Also in 2008, several trading algorithms were introduced to the Trader Workstation. Among these is the Accumulate-Distribute Algo, which allows traders to divide large orders into small non-uniform increments and release them at random intervals over time to achieve better prices for large volume orders.
In 2009, IB launched iTWS, a mobile trading app based on IB's Trader Workstation; it also released the Portfolio Analyst tool.
In 2011, the company introduced several new services, including the Interactive Brokers Information System, Hedge Fund Capital Introduction Program, and the Stock Yield Enhancement Program. Interactive Brokers also became in 2011 the largest online U.S. broker as measured by
daily average revenue trades.
During the
Occupy Wall Street
Occupy Wall Street (OWS) was a protest Social movement, movement against economic inequality and the Campaign finance, influence of money in politics that began in Zuccotti Park, located in New York City's Financial District, Manhattan, Wall S ...
protests of 2011–2012, IB ran a series of television commercials with the catchphrase "Join
the 1%
We are the 99% is a political slogan widely used and coined during the 2011 Occupy movement. The phrase directly refers to the income and wealth inequality in the United States, with a concentration of wealth among the top-earning 1%. It ref ...
",
which were seen as a controversial criticism of the protests.
In 2012, IB began offering
money manager
Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institut ...
accounts and opened the fully electronic Money Manager Marketplace. IB also released the TWS Mosaic trading interface and the Tax Optimizer for managing
capital gain
Capital gain is an economic concept defined as the profit earned on the sale of an asset which has increased in value over the holding period. An asset may include tangible property, a car, a business, or intangible property such as shares.
...
s and
loss
Loss may refer to:
Arts, entertainment, and media Music
* ''Loss'' (Bass Communion album) (2006)
* ''Loss'' (Mull Historical Society album) (2001)
*"Loss", a song by God Is an Astronaut from their self-titled album (2008)
* Losses "(Lil Tjay son ...
es.
In 2013, IB released the Probability Lab tool and Traders' Insight, a service that provides daily commentary by Interactive Brokers traders and third party contributors. Also in 2013, IB integrated its trading notification tool (called IB FYI) into the TWS.
The tool keeps customers informed of upcoming announcements that could impact their account, and a customer can set it to automatically act to
exercise
Exercise is a body activity that enhances or maintains physical fitness and overall health and wellness.
It is performed for various reasons, to aid growth and improve strength, develop muscles and the cardiovascular system, hone athletic ...
options early if the action is projected to be beneficial for the customer. An IB FYI also can act to automatically suspend a customer's orders before the announcement of major economic events that influence the market.
On April 3, 2014, Interactive Brokers became the first online broker to offer direct access to
IEX
Investors Exchange (IEX) is a stock exchange in the United States. It was founded in 2012 in order to mitigate the effects of high-frequency trading. IEX was launched as a national securities exchange in September 2016. On October 24, 2017, it ...
, a private
electronic communication network
An electronic communication network (ECN) is a type of computerized forum or network that facilitates the trading of financial products outside traditional stock exchanges. An ECN is generally an electronic system that widely disseminates orders ...
for trading securities, which was subsequently registered as an exchange.
In 2015, IB created the service Investors' Marketplace, which allows customers to find investors and other service providers in the financial industry.
IB also gained clients through
Scottrade
Scottrade was a stockbrokerage firm that operated both online and at branches. In 2017, the company was acquired by TD Ameritrade and Toronto-Dominion Bank.
History
In 1980, Rodger O. Riney founded Scottsdale Securities as a retail stockbrok ...
that year; Scottrade had previously offered
complex option trading through its platform OptionsFirst, and began offering trading through IB's platform.
In March 2016, IB released a companion app to iTWS for the
Apple Watch
Apple Watch is a line of smartwatches produced by Apple Inc. It incorporates fitness tracking, health-oriented capabilities, and wireless telecommunication, and integrates with iOS and other Apple products and services. The Apple Watch was rel ...
.
In May 2017, IB announced the sale of the market making business conducted by its Timber Hill subsidiary, including its market making software, to New York-based
Two Sigma Securities.
Milan Galik was appointed chief executive officer of Interactive Brokers Group in 2019, succeeding founder Thomas Peterffy, who remained as chairman of the board.
In 2019, IB launched the low-cost account offering "IBKR Lite" and fractional share trading.
In 2020, the customer base grew to one million users. During the
GameStop short squeeze
In January 2021, a short squeeze of the stock of the American video game retailer GameStop () and other securities took place, causing major financial consequences for certain hedge funds and large losses for short sellers. Approximately 140 ...
, Interactive Brokers briefly restricted trading of several stocks, along with other brokerages.
In 2021, the company announced that users would be able to trade cryptocurrencies such as
Bitcoin
Bitcoin ( abbreviation: BTC; sign: ₿) is a decentralized digital currency that can be transferred on the peer-to-peer bitcoin network. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distr ...
and
Ethereum
Ethereum is a decentralized, open-source blockchain with smart contract functionality. Ether (Abbreviation: ETH; sign: Ξ) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capita ...
. The company charges commissions of 0.12 to 0.18% of the traded amount.
Operations
![Interactive Brokers War Room](https://upload.wikimedia.org/wikipedia/commons/2/2e/Interactive_Brokers_War_Room.jpg)
Interactive Brokers is the largest electronic brokerage firm in the US by number of daily average revenue trades,
and is the leading
forex
The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. It includes all as ...
broker.
Interactive Brokers also targets commodity trading advisors, making it the fifth-largest
prime broker
Prime brokerage is the generic name for a bundled package of services offered by investment banks, wealth management firms, and securities dealers to hedge funds which need the ability to borrow securities and cash in order to be able to invest ...
servicing them.
IB is regulated by the Securities and Exchange Commission, the
Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Associati ...
, the New York Stock Exchange, the
Financial Conduct Authority
The Financial Conduct Authority (FCA) is a financial regulation, financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The ...
and other regulators and self-regulatory organizations.
It provides correspondent clearing services to 200 introducing brokers worldwide, as of 2014.
, the company serves 1.68 million client brokerage accounts, with $373.8 billion in
customer equity
Customer equity is the total combined customer lifetime values of all of the company's customers.Fripp. G (2014Guide to Customer Lifetime Value/ref> It is calculated by multiplying the number of customers by the average value of each customer. Cust ...
.
, about 23.5 percent of the company is publicly held, while the remainder is held by employees; Thomas Peterffy is the largest shareholder.
Peterffy has described the company as similar to
Charles Schwab Corporation
The Charles Schwab Corporation is an American multinational financial services company. It offers banking, commercial banking, investing and related services including consulting, and wealth management advisory services to both retail and instit ...
or
TD Ameritrade
TD Ameritrade is a stockbroker that offers an electronic trading platform for the trade of financial assets including common stocks, preferred stocks, futures contracts, exchange-traded funds, forex, options, mutual funds, fixed income investmen ...
, however, specializing in providing brokerage services to larger customers and charging low transaction costs. He also described the company's focus on building technology over having high sales, with technology often used to automate systems in order to service customers at a low cost.
The company can afford to focus on automation and acquiring customers over focusing on financial results, as 76.5% of the company is held by employees.
It has offered
direct market access to Australian
contracts for difference since 2008.
, mobile transactions accounted for about 10% of the company's retail orders.
Investors can open accounts online without a minimum deposit requirement, and IBKR does not charge inactivity fees. New customers are directed towards IBKR Campus, the company's education resource repository.
Employees
Interactive Brokers Group has 11 directors, including Thomas Peterffy, chairman of the board of directors, who as the
controlling shareholder
A controlling interest is an ownership interest in a corporation with enough voting stock shares to prevail in any stockholders' motion. A majority of voting shares (over 50%) is always a controlling interest. When a party holds less than the majo ...
is able to elect board members.
As of 2016, the company has 1,649 employees, and 1,365 of them hold company stock.
Interactive Brokers employs computer programmers and
IT workers; programmers outnumber other employees five to one.
As of 2015, approximately nine percent of employees work in legal or
regulatory compliance
In general, compliance means conforming to a rule, such as a specification, policy, standard or law. Compliance has traditionally been explained by reference to the deterrence theory, according to which punishing a behavior will decrease the viol ...
departments.
Among the company's directors are Lawrence E. Harris, a professor at the
University of Southern California
The University of Southern California (USC, SC, or Southern Cal) is a Private university, private research university in Los Angeles, California, United States. Founded in 1880 by Robert M. Widney, it is the oldest private research university in C ...
's
Marshall School of Business
The USC Marshall School of Business is the business school of the University of Southern California. It is accredited by the Association to Advance Collegiate Schools of Business.
In 1997 the school was renamed following a $35 million donation fr ...
, and who was
chief economist Chief economist is a single-position job class having primary responsibility for the development, coordination, and production of economic and financial analysis. It is distinguished from the other economist positions by the broader scope of respons ...
of the Securities and Exchange Commission.
Among its former directors are
Hans Stoll, founder and director of the Financial Markets Research Center at
Vanderbilt University
Vanderbilt University (informally Vandy or VU) is a private research university in Nashville, Tennessee. Founded in 1873, it was named in honor of shipping and rail magnate Cornelius Vanderbilt, who provided the school its initial $1-million ...
, and an author and former president of the
American Finance Association
The American Finance Association (AFA) is an academic organization whose focus is the study and promotion of knowledge of financial economics. It was formed in 1939. Its main publication, the ''Journal of Finance'', was first published in 1946.
...
,
and
Ivers Riley, former chairman of the
International Securities Exchange
International Securities Exchange Holdings, Inc. (ISE) is a wholly owned subsidiary of American multinational financial services corporation Nasdaq, Inc. It is a member of the Options Clearing Corporation (OCC) and the Options Industry Council ( ...
, CEO of the
Hong Kong Futures Exchange
Hong Kong Futures Exchange (HKFE) is a futures exchange in Hong Kong. Established in 1976, it offered a variety of options and futures contracts, linked to stock market indices, stocks, short-term interest rates, and foreign exchange. HKFE is a su ...
, and chief developer of
SPDR
SPDR funds (pronounced "spider") are a family of exchange-traded funds (ETFs) traded in the United States, Europe, Mexico and Asia-Pacific and managed by State Street Global Advisors (SSGA). Informally, they are also known as Spyders or Spiders. S ...
funds.
Locations
Interactive Brokers maintains a headquarters in downtown Greenwich, Connecticut.
Traders and programmers work in units with several monitors and more overhead, while several network engineers staff an area round the clock, six days a week.
The company also has offices in
Budapest
Budapest (, ; ) is the capital and most populous city of Hungary. It is the ninth-largest city in the European Union by population within city limits and the second-largest city on the Danube river; the city has an estimated population ...
,
Chicago
(''City in a Garden''); I Will
, image_map =
, map_caption = Interactive Map of Chicago
, coordinates =
, coordinates_footnotes =
, subdivision_type = Country
, subdivision_name ...
,
Dublin
Dublin (; , or ) is the capital and largest city of Republic of Ireland, Ireland. On a bay at the mouth of the River Liffey, it is in the Provinces of Ireland, province of Leinster, bordered on the south by the Dublin Mountains, a part of th ...
,
Hong Kong
Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China ( abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delt ...
,
London
London is the capital and largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary down to the North Sea, and has been a majo ...
,
Luxembourg
Luxembourg ( ; lb, Lëtzebuerg ; french: link=no, Luxembourg; german: link=no, Luxemburg), officially the Grand Duchy of Luxembourg, ; french: link=no, Grand-Duché de Luxembourg ; german: link=no, Großherzogtum Luxemburg is a small lan ...
,
Montreal
Montreal ( ; officially Montréal, ) is the List of the largest municipalities in Canada by population, second-most populous city in Canada and List of towns in Quebec, most populous city in the Provinces and territories of Canada, Canadian ...
,
Mumbai
Mumbai (, ; also known as Bombay — the official name until 1995) is the capital city of the Indian state of Maharashtra and the ''de facto'' financial centre of India. According to the United Nations, as of 2018, Mumbai is the second- ...
,
San Francisco
San Francisco (; Spanish language, Spanish for "Francis of Assisi, Saint Francis"), officially the City and County of San Francisco, is the commercial, financial, and cultural center of Northern California. The city proper is the List of Ca ...
,
Singapore
Singapore (), officially the Republic of Singapore, is a sovereign island country and city-state in maritime Southeast Asia. It lies about one degree of latitude () north of the equator, off the southern tip of the Malay Peninsula, borde ...
,
Sydney
Sydney ( ) is the capital city of the state of New South Wales, and the most populous city in both Australia and Oceania. Located on Australia's east coast, the metropolis surrounds Sydney Harbour and extends about towards the Blue Mountain ...
,
Tokyo
Tokyo (; ja, 東京, , ), officially the Tokyo Metropolis ( ja, 東京都, label=none, ), is the capital and largest city of Japan. Formerly known as Edo, its metropolitan area () is the most populous in the world, with an estimated 37.468 ...
,
Toronto
Toronto ( ; or ) is the capital city of the Canadian province of Ontario. With a recorded population of 2,794,356 in 2021, it is the most populous city in Canada and the fourth most populous city in North America. The city is the ancho ...
,
West Palm Beach
West or Occident is one of the four cardinal directions or points of the compass. It is the opposite direction from east and is the direction in which the Sunset, Sun sets on the Earth.
Etymology
The word "west" is a Germanic languages, German ...
, and
Zug
, neighboring_municipalities = Cham, Baar, Walchwil, Steinhausen, Unterägeri
, twintowns = Fürstenfeld (Austria), Kalesija (Bosnia-Herzegowina)
Zug (Standard German: , Alemannic German: ; french: Zoug it, Zugo r ...
.
More than half of the company's customers reside outside the United States, in approximately 200 countries.
Media
The first chapter of Christopher Steiner's 2012 book ''
Automate This: How Algorithms Came to Rule Our World'' describes Thomas Peterffy's development of Interactive Brokers and the technologies that have led to the modern automated market.
Four chapters of
Scott Patterson
Scott Gordon Patterson (born September 11, 1958) is an American actor and musician. He is known for his role as Luke Danes in ''Gilmore Girls'' and as Special Agent Peter Strahm in the ''Saw'' films. He also starred as Michael Buchanan in the ...
's ''Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market'' also detail Peterffy and his company.
See also
*
Financial innovation
Financial innovation is the act of creating new financial instruments as well as new financial technologies, institutions, and markets. Recent financial innovations include hedge funds, private equity, weather derivatives, retail-structured pro ...
Notes
References
External links
*
{{authority control, state=expanded
1978 establishments in New York (state)
American companies established in 1978
Companies based in Greenwich, Connecticut
Financial services companies established in 1978
Financial derivative trading companies
Financial services companies of the United States
Investment management companies of the United States
Multinational companies headquartered in the United States
Online brokerages
Electronic trading platforms
Online financial services companies of the United States
2007 initial public offerings