Is IB in deep poo too?

Quote from Occam:

True. Brokers should generate their income off of explicit fees rather than back-door income such as interest on cusomer assets, internalization, and the sale of "muppet" order flow to wholesalers such as Knight.

A lot of this could be straightened out simply by forcing brokers to pass on all income generated from a customer's assets back to that cusomter, a privlege already enjoyed by those whose accounts earn them exchange rebates, etc. It would actually be safer for brokers in the long run, I think, even if it reduced volume in the near-term (as people would finally see the "true cost" of what they're doing); I'm sure it would have prevented MF Global's collapse, the underlying cause of which was motivated directly by this dropoff in interest income.
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Really? So the brokerage industry should become socialistic? Or, would you prefer that the earnings that were generated from PFOF, interest, dark pools and other profit centers were taken away you and everyone else can pay higher transaction cost?

We are all in this to make money. If the client and the broker can't make money, there is no business model. You get the ultimate vote with your assets. Pick a firm that does business the way you would like them to. If you can't find that, which you won't, find another business to be in.
 
Quote from 1245:

Really? So the brokerage industry should become socialistic? Or, would you prefer that the earnings that were generated from PFOF, interest, dark pools and other profit centers were taken away you and everyone else can pay higher transaction cost?
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I would rather that explicit brokerage fees were higher in exchange for the elination of PFOF and other kickback schemes, because if it were so, then overall costs would be much lower. Retail customers are ripped off on every trade and the vast majority don't even know it -- in fact, you can't know by exactly how much.

I don't see good financial regulation as "socialistic". We have laws for a reason, and finance is one of the areas where enforcement is the most necessary. Just ask Madoff's clients. Yet I'll be the first to admit that there's a limit to this, and which policies are advantageous is debatable (e.g., transaction taxes would just be a nightmare, and a boon to the big banks).

Pick a firm that does business the way you would like them to. If you can't find that, which you won't, find another business to be in.
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Indeed I have found brokerages that do pass through all rebates and don't play the PFOF wholesaler/internalization games. However, none of them are retail (and I don't know much about prop).

It's tough for a B/D to be transparent about this, yet compete with B/D's who are taking their customers for maybe .008 cents/share on every order, hence the need for good regulation. And good regulation would start with a ban on wholesaler PFOF and B/D internalization, or at the least force B/D's to credit the customers with any proceeds derived thereof.
 
Quote from Occam:



Indeed I have found brokerages that do pass through all rebates and don't play the PFOF wholesaler/internalization games. However, I know of none left that are either retail or prop. It's tough for a B/D to be transparent about this, yet compete with B/D's who are taking their customers for maybe .008 cents/share on every order, hence the need for good regulation. And good regulation would start with an outright ban on wholesaler PFOF and B/D internalization.
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Your broker might not get PFOF for transactions but the routes they use do. If you use a smart route or a manged route your order will filter through a dark pool, then MAYBE to an exchange or ECN. If you get full DMA access for options, many exchanges pay for order flow. You can't escape it.
 
Quote from 1245:

Your broker might not get PFOF for transactions but the routes they use do. If you use a smart route or a manged route your order will filter through a dark pool, then MAYBE to an exchange or ECN. If you get full DMA access for options, many exchanges pay for order flow. You can't escape it.
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Escape what? I'm suggesting that any PFOF rebates be required to be passed on to the customers, as indeed many institutional brokers do.

I doubt there's anything smart about "smart routes", at least among the ones offered to retail. They generally act in the broker's best interest, not yours.

http://www.nanex.net/aqck2/3517.html
 
Ben Bernanke's policies may be helping some sectors but it is at the expense of other sectors which he is killing. The small to mid size financial firms and brokers are within what he is killing.
 
To equate a falling stock price with a high risk of insolvency is absurd. I'm not suggesting that the share price does not collapse in an insolvent company but share prices retreat for lots of reasons most of which do not involve a firm going under. This is a difficult environment for firms to make money in so they are all a bit weaker. But it is the firm that goes into this type of dead period weak that is more likely to fold than a strong one.
 
Quote from Swan Noir:

To equate a falling stock price with a high risk of insolvency is absurd. I'm not suggesting that the share price does not collapse in an insolvent company but share prices retreat for lots of reasons most of which do not involve a firm going under. This is a difficult environment for firms to make money in so they are all a bit weaker. But it is the firm that goes into this type of dead period weak that is more likely to fold than a strong one.
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when I was a kid, most banks and insurance companies traded OTC, because they didn't want customers confusing their stock price with financial stability.
 
Quote from Ghost of Cutten:

Not good. Any IB comment on this?
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They've said that their restatement of prior financials may extend to earnings per share calculations.

The Company is in the process of completing an analysis of the restatement issues and believes that for certain prior periods reported earnings per share will be impacted.

http://www.sec.gov/Archives/edgar/data/1381197/000138119712000048/ibkr_nonreliance.htm

While this accounting error does not affect the financial stability of the group including the brokerage, IBKR shareholders who bought prior to June 2012 may want to follow this issue closely.
 
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