By Jeremy Grant in Washington
Published: October 26 2005 18:51 | Last updated: October 26 2005 18:51
When Thomas Peterffy first stepped into the options trading pits at the American Stock Exchange in 1977 the young trader immediately drew attention to himself â and not just because of his Hungarian-accented English.
The former computer programmer was carrying a contraption he had designed to trade options contracts electronically â bypassing the face-to-face trading that floor traders had used for years.
âPeople were rather suspicious,â says Mr Peterffy, now 61 and chairman of Interactive Brokers, which on Wednesday signed a confidentiality agreement with the collapsed broker Refco over its plan to bid for the groupâs futures unit.
âBut then people realised how much money could be made trading this way â once I got the kinks out of it,â he recalls.
When the history of electronic futures and options trading is written, Mr Peterffy and his trading device are likely to feature prominently.
The Hungarian emigrant dogged faith in the efficiency of electronic trading over human interaction has helped him build Interactive Brokers into a pioneer in electronic trading.
Bill Brodsky, a former head of options trading at the Amex and now chairman of the Chicago Board of Options Exchange, says: â[Peterffy] was making markets electronically when people didnât know you could do it, let alone how you could do it.â
Interactive Brokers is the largest privately held US securities firm with capital of $2bn and $18bn in assets. It handles about 20 per cent of US options volume and about 16 per cent of the worldâs options volume.
As observers size up a list of bidders for Refcoâs futures unit, Interactive Brokers may seem an unlikely candidate because the firm â unlike Refco â grew without making acquisitions. At $858m, Interactive Brokersâ bid is the highest of three, including one from a consortium led by Merrill Lynch with private equity group Warburg Pincus and Susquehanna, one of the worldâs largest Nasdaq and options market makers. The other is an $828m offer from Dubai Investment Group.
US-based Marathon Asset Management, Apollo Management, the UKâs Man Financial, and Chicago-based TradeLink are all mulling bids.
Yet Mr Peterffy believes his firm has an edge because of its history of technological innovation.
Interactive Brokers was the first derivatives broker to offer trading not only of options electronically, but of futures, equities and other cash securities â all on one computer screen.
This has proved attractive as traders increasingly carry out âmulti-assetâ trading, ignoring traditional distinctions between futures, options and equities as they express their opinions on the future direction of asset prices electronically.
Mr Peterffy says that Interactive Brokersâ technology makes a good match with Refcoâs âtremendous marketing capacityâ, Mr Peterffy says from his headquarters in Greenwich, Connecticut, where he keeps a stable of horses.
Much of Refcoâs futures business consists of a retail operation, often seen as a less attractive business involving high net worth clients â occasionally referred to in the futures industry as âthe dentist in Des Moinesâ.
It is the institutional business on which bidders such as Mr Peterffy are likely to be more focused, especially since Refcoâs acquisition of Cargill Investor Services, one of the biggest brokers at the Chicago Board of Trade.
Mr Peterffy reckons that linking his company with Refco would double the number of customer transactions at Interactive Brokers to 1m. He says he may be interested in Refcoâs separate securities business, but that âit may be beyond repairâ.
Concern remains about customer defection. âWe very much hope that there will be a business left to auction off,â says Mr Peterffy, who gambled on his future by leaving Hungary âfor a new life, for capitalismâ in 1965.
âAs a wild guess I would say they have 150,000 accounts now. So long as we have â say â 50,000 accounts left, itâs interesting for us.â
Published: October 26 2005 18:51 | Last updated: October 26 2005 18:51
When Thomas Peterffy first stepped into the options trading pits at the American Stock Exchange in 1977 the young trader immediately drew attention to himself â and not just because of his Hungarian-accented English.
The former computer programmer was carrying a contraption he had designed to trade options contracts electronically â bypassing the face-to-face trading that floor traders had used for years.
âPeople were rather suspicious,â says Mr Peterffy, now 61 and chairman of Interactive Brokers, which on Wednesday signed a confidentiality agreement with the collapsed broker Refco over its plan to bid for the groupâs futures unit.
âBut then people realised how much money could be made trading this way â once I got the kinks out of it,â he recalls.
When the history of electronic futures and options trading is written, Mr Peterffy and his trading device are likely to feature prominently.
The Hungarian emigrant dogged faith in the efficiency of electronic trading over human interaction has helped him build Interactive Brokers into a pioneer in electronic trading.
Bill Brodsky, a former head of options trading at the Amex and now chairman of the Chicago Board of Options Exchange, says: â[Peterffy] was making markets electronically when people didnât know you could do it, let alone how you could do it.â
Interactive Brokers is the largest privately held US securities firm with capital of $2bn and $18bn in assets. It handles about 20 per cent of US options volume and about 16 per cent of the worldâs options volume.
As observers size up a list of bidders for Refcoâs futures unit, Interactive Brokers may seem an unlikely candidate because the firm â unlike Refco â grew without making acquisitions. At $858m, Interactive Brokersâ bid is the highest of three, including one from a consortium led by Merrill Lynch with private equity group Warburg Pincus and Susquehanna, one of the worldâs largest Nasdaq and options market makers. The other is an $828m offer from Dubai Investment Group.
US-based Marathon Asset Management, Apollo Management, the UKâs Man Financial, and Chicago-based TradeLink are all mulling bids.
Yet Mr Peterffy believes his firm has an edge because of its history of technological innovation.
Interactive Brokers was the first derivatives broker to offer trading not only of options electronically, but of futures, equities and other cash securities â all on one computer screen.
This has proved attractive as traders increasingly carry out âmulti-assetâ trading, ignoring traditional distinctions between futures, options and equities as they express their opinions on the future direction of asset prices electronically.
Mr Peterffy says that Interactive Brokersâ technology makes a good match with Refcoâs âtremendous marketing capacityâ, Mr Peterffy says from his headquarters in Greenwich, Connecticut, where he keeps a stable of horses.
Much of Refcoâs futures business consists of a retail operation, often seen as a less attractive business involving high net worth clients â occasionally referred to in the futures industry as âthe dentist in Des Moinesâ.
It is the institutional business on which bidders such as Mr Peterffy are likely to be more focused, especially since Refcoâs acquisition of Cargill Investor Services, one of the biggest brokers at the Chicago Board of Trade.
Mr Peterffy reckons that linking his company with Refco would double the number of customer transactions at Interactive Brokers to 1m. He says he may be interested in Refcoâs separate securities business, but that âit may be beyond repairâ.
Concern remains about customer defection. âWe very much hope that there will be a business left to auction off,â says Mr Peterffy, who gambled on his future by leaving Hungary âfor a new life, for capitalismâ in 1965.
âAs a wild guess I would say they have 150,000 accounts now. So long as we have â say â 50,000 accounts left, itâs interesting for us.â
