Does IBKR do proprietary trading with own money?

H

helpme_please

Recently, I read about the story of MF Global and it sends shivers up my spine. Jon Corzine caused MF Global to go bankrupt through proprietary trading and even took client money down with it. If it can happen to a big broker like MF Global, why can't it happen to other brokers? Even one as big as IBKR?

I am a satisfied customer of IBKR. I would like to stay on with IBKR. If there are IBKR staff here, may I ask you if IBKR do proprietary trading like MF Global? I'm scared that a black swan event hits and I may suffer the same fate as MF Global clients. I don't think I'm the only IBKR client who is worried about this.
 
I was a broker, our firm and several clients cleared through MF GLOBAL. We saw what was going on and got out of Dodge. They had no safeguards in place like firms do today, and there were rogue traders taking advantage of the situation. Evan Dooley was one of them and as he had a massive position in the Wheat market and when the sharks found out what was going on they squeezed this guy by running up Wheat to al time highs and they say it caused a 141 million dollar loss that they never could possibly recover. So Corzine wasn't the only one. Regulations have changed since then but it took another debacle with Wasendorf before the changes were implemented. I could say much more but this is not how I want to spend my time.
 
Thanks for sharing, though most of it is public knowledge. The last sentence was funny though. You are already wasting time on ET. Why not share some not so public, funny or not so funny stories. Not pertaining to you, but over the years I noticed how many former small fry who worked at financial firms, especially Americans in the US, are scared to death to share any funny or salacious incidents of the past. One hears tons of stuff from former traders and sales people at other money centres around the globe and by those of other ethnicities. But Americans are tight lipped. Why is that? Threat of law suits?

interdim said:
I was a broker, our firm and several clients cleared through MF GLOBAL. We saw what was going on and got out of Dodge. They had no safeguards in place like firms do today, and there were rogue traders taking advantage of the situation. Evan Dooley was one of them and as he had a massive position in the Wheat market and when the sharks found out what was going on they squeezed this guy by running up Wheat to al time highs and they say it caused a 141 million dollar loss that they never could possibly recover. So Corzine wasn't the only one. Regulations have changed since then but it took another debacle with Wasendorf before the changes were implemented. I could say much more but this is not how I want to spend my time.
More...
 
DiceAreCast said:
.... One hears tons of stuff from former traders and sales people at other money centres around the globe and by those of other ethnicities...
More...
I mustn't get around much because I've never come across any of that, in 20+ years of trading, other than what makes the news headlines. Care to share some links?
 
interdim said:
I was a broker, our firm and several clients cleared through MF GLOBAL. We saw what was going on and got out of Dodge. They had no safeguards in place like firms do today, and there were rogue traders taking advantage of the situation. Evan Dooley was one of them and as he had a massive position in the Wheat market and when the sharks found out what was going on they squeezed this guy by running up Wheat to al time highs and they say it caused a 141 million dollar loss that they never could possibly recover. So Corzine wasn't the only one. Regulations have changed since then but it took another debacle with Wasendorf before the changes were implemented. I could say much more but this is not how I want to spend my time.
More...
https://www.justice.gov/usao-ndil/p...ars-prison-causing-mf-global-lose-141-million
https://www.reuters.com/article/us-...ncealed-in-a-postal-box-idUSBRE88N0EJ20120924

"I could say much more but this is not how I want to spend my time."
You could probably write a book.
 
Last edited:
helpme_please said:
Recently, I read about the story of MF Global and it sends shivers up my spine. Jon Corzine caused MF Global to go bankrupt through proprietary trading and even took client money down with it. If it can happen to a big broker like MF Global, why can't it happen to other brokers? Even one as big as IBKR?

I am a satisfied customer of IBKR. I would like to stay on with IBKR. If there are IBKR staff here, may I ask you if IBKR do proprietary trading like MF Global? I'm scared that a black swan event hits and I may suffer the same fate as MF Global clients. I don't think I'm the only IBKR client who is worried about this.
More...

Yes they do but it's only affiliates of IBKR that do proprietary trading using their own funds and not their client-facing businesses. And they never use client assets for proprietary trading if they do. I remember several years back, IB used to own an exchange that made market in options and they got out of that business citing conflict of interest but in reality I suspect it's because they were actually losing money making market. Options used to have lot better fills and lot more volume when they were in the market, and ever since IB got out, option trading had become lot less profitable for me. :(

This is what IB has to say about their proprietary trading on their website:

  • We manage our brokerage and market making businesses in separate companies, which are registered with local securities and/or commodities regulators. We maintain strict systematic and procedural separation between the two business lines and we do not commingle or utilize client-segregated assets for proprietary operations. Although certain affiliates of IBKR trade for their own account, our client-facing businesses do not conduct proprietary trading. We have completed the winding down of the bulk of our market making operations.
https://interactivebrokers.com/en/index.php?f=2334
 
helpme_please said:
Recently, I read about the story of MF Global and it sends shivers up my spine. Jon Corzine caused MF Global to go bankrupt through proprietary trading and even took client money down with it. If it can happen to a big broker like MF Global, why can't it happen to other brokers? Even one as big as IBKR?

I am a satisfied customer of IBKR. I would like to stay on with IBKR. If there are IBKR staff here, may I ask you if IBKR do proprietary trading like MF Global? I'm scared that a black swan event hits and I may suffer the same fate as MF Global clients. I don't think I'm the only IBKR client who is worried about this.
More...
%%
WHY cant it happen to other brokers/big brokers??.
Mainly because of the old school bankers plan;
character,
collateral,
capacity to pay. Mr J C goofed up all 3/long story short. And its like my banker dad taught me ''accidents dont just happen son/they are caused'' :caution::caution::caution::caution::caution::caution::caution:[Edit; so character, collateral+ capacity to pay still matters ]
 
Last edited:
JSOP is correct posting and stating:
https://www.interactivebrokers.com.hk/en/index.php?f=564


  • We manage our brokerage and market making businesses in separate companies, which are registered with local securities and/or commodities regulators. We maintain strict systematic and procedural separation between the two business lines and we do not commingle or utilize client-segregated assets for proprietary operations. Although certain affiliates of IBKR trade for their own account, our client-facing businesses do not conduct proprietary trading. We have completed the winding down of the bulk of our market making operations.
IB was initially founded as Timber Hill and were pioneers in electronic trading and market making. As the options game shifted in the states toward payment for order flow and HFT which weren't areas the firm (our chairman) wanted to pursue, the firm shifted its focus towards its burgeoning brokerage business. As someone who was with Timber Hill from the early days and can tell you first hand that controlling risk was and still is the primary focus of our firm.

For client safety IBG has a history of retaining earnings and building our capital which is now well over $8.5 billion USD. Please read the info under the link below for pointers on our strength and security. One item I find most compelling to offer confidence to clients is that management and staff have significant skin in the game ultimately owning over 80% of the company. As stated under the link below: Unlike at most other firms, where management owns a relatively small share, we participate substantially in the downside just as much as in the upside. Because of this vested interest, we run our business conservatively.

https://www.interactivebrokers.com.hk/en/index.php?f=2334

Hope this info provides you some comfort.

Note: correction to initial post. Sleeping today. as/of last quarter, equity was at $8.5B USD.
 
Last edited:
You must log in or register to reply here.
Back
Top