How is IB so successful at market making?

Option Trader · Mar 26, 2008

The majority of IB's profits comes from market making, and they are VERY profitable. Is that because IB has lots of clients? Lots of dumb clients? Because they trade only at the ideal moments? Or for some other reason?

stock777 · Mar 26, 2008

Same reason you're so obsessed with everything IB.

They can't help it.

jeb9999 · Mar 26, 2008

Options market makers (such as Timber Hill) make money by buying at the bid, selling at the ask and controlling risk.

Div_Arb · Mar 26, 2008

Lord knows I've sent them a fair share of business

lescor · Mar 26, 2008

Regulations that prevent independent traders from competing with them doesn't hurt their business either.

freehouse · Mar 26, 2008

Quote from Option Trader:

The majority of IB's profits comes from market making, and they are VERY profitable. Is that because IB has lots of clients? Lots of dumb clients? Because they trade only at the ideal moments? Or for some other reason?

(1) Technology
(2) Diversification
(3) Order flow from IB to Timber Hill

just21 · Mar 26, 2008

Last august when the volatility started IB made wide markets when other market makers completely withdrew from the market. When the other market makers are competing then they make less money. Listen to the conference calls on their website for further information.

stock777 · Mar 26, 2008

Quote from lescor:

Regulations that prevent independent traders from competing with them doesn't hurt their business either.

I hear ya. I know you lusted after selling those BSC 30 puts for 50 cents. What a score, huh.