They can still sell order flow
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IB faces the same risks as Knight Capital
- Thread starter Retired
- Start date
I don't have any opinion on the OP's concerns, but certainly IB hasn't exactly fallen over itself to reassure customers that they're safe from the same risks as customers of/investors in PFG, now Knight, and to a lesser extent MFG.
It couldn't hurt to be a bit more communicative in these turbulent times.
It couldn't hurt to be a bit more communicative in these turbulent times.
Quote from southall:
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.
Daily loss limit might be useless if there is a software bug, although I believe IB has far more checks built into their market making operation than KCG.
One reason I could think of for KCG having this bug , and taking more than 30 minutes to halt it, is they might have been thinking the NYSE would cancel ALL the affected trades. It has happened before, and the trades were cancelled. It is a good thing NYSE did not bow to KCG. Now every broker and algo developer will do a better job of software QA, and not rush to release new software/version every couple of months. Even my individual trading algo, I am always thinking of what might go wrong, and programming exception handlers. Stuff like:
1) Maximum number of orders allowed to be placed per hour or per day (if system goes into a buggy loop)
2) What if the quotes coming in are unreliable?
3) What if the balance info fed from my brokers API is wrong (and my sizing is based on that?)
4) What if the spread on the price is too big, or price moves seem too fast?
You would think a big brokerage had covered all those and more with enough checks and manual intervention triggers.
Quote from Traveler:
IBKR actually looks cheap now. Does the Street think they're going to blowup in some dramatic derivatives flameout?
Weakness following late 10-Q's is normal.
Still, the accounting question that underpins the issue that lead to the late 10-Q should have zero impact on the security of brokerage customer segregated funds.