IB Quits options game!

[Robert Morse]

WHY can't they just have ONE or a few central exchanges like the stocks or futures? It's very confusing and highly inefficient with all those exchanges each having their own rules and order-taking mechanisms that really does not benefit anyone.

Good question for the SEC that approves all these exchanges.

 

[Robert Morse]

I love these 'options' traders claiming they kicked TH's ass. When they have ZERO way to know what the outcome for the MM was when they trade against them .

Well, I expect they were kidding, but you are right. While on the AMEX, I would say I made money on close to 100% of the trades I did with Timber Hill, but they made money too. I made my money by offsetting with other option or hedging with the equity in that symbol and they made their money in their portfolio because of other trades.

 

[zdreg]

If you are asking to me guess, they can't do enough volume at their values to get a good ROI. Just a guess.

it is a reasonable guess. does it say the market is too competitive or has too many participants?

 

[Cdntrader]

IB is about retail, not market making anymore. This will be net positive for their retail brand.

 

[ajacobson]

One exchange for each product. A central limit order book. The futures model - monopoly trading and a monopoly clearing system. Remember when Eurex wanted to open here and they weren't allow to join the clearing house. The unanswered question is what would happen to exchange fees and commissions ? How expensive is it to trade in a monopoly environment ?
When we started the ISE option costs went from about a $1 (including fixed costs) to minus about 80 cents on multiply listed equities. Volumes went from a couple million a day to what they are today. You paid floor brokers and you paid to use the exchanges electronic routing system.
I fully agree that is gotten too complicated and requires a ton of expensive technology.
Tough to put that genie back in the bottle, but I doubt customers would pay for it.

 

[Robert Morse]

it is a reasonable guess. does it say the market is too competitive or has too many participants?

Equity/index option volume is no longer growing as fast, I would guess because of how popular ETFs are vs stocks. And, the market is too fragmented. And, the cost from exchanges, market data, regulation, PFOF and infrastructure has gotten too expensive for the share of the market's "dumb" volume, that is what MM call market orders, that is accessible. This all affects ROI. For MM that are not self-clearing, risk and capital requirements from the few clearing firms that guarantee this business has only gone up. All that is left are GSEC, ML Pro and ABN Amro. I'm surprised they stay in the business.

 

[zdreg]

Equity/index option volume is no longer growing as fast, I would guess because of how popular ETFs are vs stocks. And, the market is too fragmented. And, the cost from exchanges, market data, regulation, PFOF and infrastructure has gotten too expensive for the share of the market's "dumb" volume, that is what MM call market orders, that is accessible. This all affects ROI. For MM that are not self-clearing, risk and capital requirements from the few clearing firms that guarantee this business has only gone up. All that is left are GSEC, ML Pro and ABN Amro. I'm surprised they stay in the business.

your answer was very precise.

 

[ajacobson]

ABN has been rumored to be leaving for a while.
To your point this could be grooming the company to sell it.

 

[MoreLeverage]

WHY can't they just have ONE or a few central exchanges like the stocks or futures? It's very confusing and highly inefficient with all those exchanges each having their own rules and order-taking mechanisms that really does not benefit anyone.

The alternative is having a single exchange, which is simple. However, there's no check on that exchange overcharging everyone with high data fees and exchange charges given they have a monopoly. A highly competitive marketplace with many providers, ie exchanges, is usually the lesser evil.

 

[FSU]

A single exchange example is the CBOE trading SPX and VIX options. The cost to trade these products is about double for me vs all other products because of their high exchange fees. So competition is good in this sense.