IB faces the same risks as Knight Capital

R

Retired

Fallout from Knight’s technology missteps could also bring pressure to bear on similar public companies. One is Greenwich, Conn.-based Interactive Brokers Group Inc., which runs both a discount brokerage business and a market-making arm that is similar to Knight’s trading division.

“Interactive Brokers should split up their market-making and brokerage businesses,” said Justin Hughes, a portfolio manager with Philadelphia Financial, a hedge fund firm. “The market-maker is a huge potential risk, why have that associated with your brokerage?”

http://blogs.wsj.com/deals/2012/08/02/knight-capital-staring-at-bleak-deal-environment/
 
Never happen. The purpose of forming IB was to provide order flow to the trading operation. They only work together. They are worth less as stand alone companies.
 
Quote from 1245:

Never happen. The purpose of forming IB was to provide order flow to the trading operation. They only work together. They are worth less as stand alone companies.
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You just made Def's head explode.
 
IB currently has around 4 billion in cash in the bank, a 400 million loss would be only a 10% hit.

I cant remember exactly the figure, but Peterfly once mentioned what the daily loss limit for the market making operation was, and it was tiny compared to how much cash they have.
They would have to blow the daily loss limit x100 to wipe out all the equity they have.

Now if Peterfly ever took most of the cash out as a dividend then it might be time to worry.
 
Jeez, those guys are quick to dump Knight.

http://www.cnbc.com/id/48473737
"Scottrade, one of the nation’s biggest retail brokers, said in a statement Thursday afternoon that it was “not utilizing Knight for equity execution services.” Knight handled more than 30 percent of Scottrade’s trading for NYSE and Nasdaq securities in the second quarter, according to regulatory filings."

Poor guys.
 
Quote from Traveler:

IBKR actually looks cheap now. Does the Street think they're going to blowup in some dramatic derivatives flameout?
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I agree, and I did look into this. An explanation I could come up with is that volume is drying up. Check out XBD, the AMEX securities broker/dealer index.
 
Quote from southall:

IB currently has around 4 billion in cash in the bank, a 400 million loss would be only a 10% hit.
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Incorrect. They report less cash than 4 billion.
 
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