A direct competitor to IB targeting active traders

G

gmst

Myself been a loyal IB customer for 5 years. But,
i sometimes wonder why there is no other brokerage trying to compete head-on with IB targeting active traders - across all products, all geographies, similar commissions, similar or better software!!!

I mean what will it really take in terms of
1) financial backing
2) minimum capital requirements
3) team of programmers rolling out execution platform + API
4) data team interfacing with different exchanges
5) sales and customer support teams

So, what kind of investments (in terms of financial capital, manpower & time to rollout) it will take in above 5 fields to launch a direct competitor to IB targeting active clients?!? I wonder!
 
Quote from gmst:

Myself been a loyal IB customer for 5 years. But,
i sometimes wonder why there is no other brokerage trying to compete head-on with IB targeting active traders - across all products, all geographies, similar commissions, similar or better software!!!

I mean what will it really take in terms of
1) financial backing
2) minimum capital requirements
3) team of programmers rolling out execution platform + API
4) data team interfacing with different exchanges
5) sales and customer support teams

So, what kind of investments (in terms of financial capital, manpower & time to rollout) it will take in above 5 fields to launch a direct competitor to IB targeting active clients?!? I wonder!
More...


IB has decades of experience with electronic markets. You'd need to some pretty experienced market people with the ability to code to replicate their system.

Pretty tall order. But it would be nice to see some competition.
 
Nobody in the retail space has ever been able to match IB's use of technology. Now with all the flaky brokerages around, size/stability has become very important, especially for futures traders.
 
In the article that someone posted yesterday about the ability of non-programmers to build their own HFT software, a representative from TD Ameritrade was quoted along the lines of "we're not going to focus on HFT for retail traders; our expansion areas are options (presumably equities) and futures."

I surfed over to TDA/ThinkorSwim and noticed their futures rates are $2.25 per contract, per side plus exchange and NFA fees. That's not bargain basement but I believe it's an improvement compared to the last time I looked at their site. Maybe they're winning over some moderately active futures traders who are willing to pay something for the TOS quotes, charts, analysis as well as the financial stability of the parent.

TDA's prices remain steep for moderately active stock and stock option traders, but at least they're making progress on the futures front.
 
Quote from Brighton:

In the article that someone posted yesterday about the ability of non-programmers to build their own HFT software, a representative from TD Ameritrade was quoted along the lines of "we're not going to focus on HFT for retail traders; our expansion areas are options (presumably equities) and futures."

I surfed over to TDA/ThinkorSwim and noticed their futures rates are $2.25 per contract, per side plus exchange and NFA fees. That's not bargain basement but I believe it's an improvement compared to the last time I looked at their site. Maybe they're winning over some moderately active futures traders who are willing to pay something for the TOS quotes, charts, analysis as well as the financial stability of the parent.

TDA's prices remain steep for moderately active stock and stock option traders, but at least they're making progress on the futures front.
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TDA is a marketing firm like the rest of the old guard financial monoliths. Not for professional traders.
 
Quote from rwk:

Nobody in the retail space has ever been able to match IB's use of technology. Now with all the flaky brokerages around, size/stability has become very important, especially for futures traders.
More...

+1

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The requirements are pretty extensive...

However, the payoff would be much greater than your typical start-up. At the very least, the chances of success would be higher than your typical B-to-C business...

A brokerage has one of the best business models one could wish for.

You are a gatekeeper controlling access to somebody else's sandbox, and you get to hit your customers coming and going for each and every transaction.

The capital and technology requirements are pretty extensive if you want to challenge IB. Probably looking at a 2-3 year development window before you flip the open sign, and 5-10 years to gain enough market share to become stable and profitable.

Building an IB challenger would be no different than starting Amazon back in the late 90s. It took Amazon 8 years to become profitable (opened in 1995, first profitable year was 2003), and 11-12 years to have more cash than long-term debt...

With the right banking connections, one could presumably issue junk bonds to fund most of the growth. Without, you'd need serious investor cash.

I imagine VCs haven't pursued this idea because their investment banking partners would blackball them if they did...
 
perhaps you've missed the market consolidation that has taken place within the retail space over the past decade... but simply put, there are reasons why that consolidation has taken place... lower profit margins and high cost to entry into the market will deter any new participants... you can absolutely find competition to IBKR in terms of services and access, but only within the investment bank's... and if people think that IBKR is tough with min amount required, they require much more... lastly, you do have a choice in the retail space btw... you could always go lightspeed(they clear futures with RJO)... close enough to IBKR...

I dont know what platform you use, or which side you are on... but you can pretty much get any platform that does FIX with their CTCI platform (well, not all... but close enough) and you can use 3rd party platforms... so there are choices...

anyhow... just my 2 cents... IBKR isnt perfect, but there is very little competition to them for a reason... it is really expensive to beat them if you dont have the volumes and the number of accounts they do... after all, brokerage is volume dependent.....

Quote from gmst:

Myself been a loyal IB customer for 5 years. But,
i sometimes wonder why there is no other brokerage trying to compete head-on with IB targeting active traders - across all products, all geographies, similar commissions, similar or better software!!!

I mean what will it really take in terms of
1) financial backing
2) minimum capital requirements
3) team of programmers rolling out execution platform + API
4) data team interfacing with different exchanges
5) sales and customer support teams

So, what kind of investments (in terms of financial capital, manpower & time to rollout) it will take in above 5 fields to launch a direct competitor to IB targeting active clients?!? I wonder!
More...
 
Quote from blah12345678:


I imagine VCs haven't pursued this idea because their investment banking partners would blackball them if they did...
More...

VC's are after making bank... they are not after investing in low profit margin businesses that require very large amounts of capital investments...
 
How many capable people want to launch a start up that requires a huge capital investment against entrenched competition without some sort of disruptive technology or other clear edge? What would you do offer their customers a 5% lower commision rate? Give them better day trade margins and attract the weakest clients?

There is no reason to cough up big money to take on a hard, seasoned competitor. The weak make better prey than the strong.
 
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