E*Trade and Schwab have been dropping their rates over the past few years. I don't think IB will use this IPO to raise rates - the only scenario I see playing out is that they have to introduce some semblance of customer service, which costs more, and thus raise fees. I would think that margins are always going to be tight in the OLB business, and rolling out a higher commission structure is a good way to loose market share.
When IB goes public, say bye bye to low rates
- Thread starter myminitrading
- Start date
In terms of commissions I haven't found a broker to compete with IB. I'm not looking but in the event that the original poster is correct, any suggestions for alternatives?
Roughly 3 bucks per round turn for a ZB or ES is fairly low, in my opinion. Sure I'd love to get 1 buck per round turn, but let's get real.
Roughly 3 bucks per round turn for a ZB or ES is fairly low, in my opinion. Sure I'd love to get 1 buck per round turn, but let's get real.
I'm really not sure whether they'll raise their rates or not.
But going public does allow them to change the way things are ran. One thing sure is that, they are having plans of expanding their business, if not they wouldn't be going IPO.
So what is IB missing, which made the firm decide on going IPO? Why does IB need large amount of cash?
I'll be considering things under IPO cash vs. raising rates, bi-standard:
1. Are they trying to increase their market to newbies, by offering better customer service? If IB was serious about client relations, they would have increased their staff and take some time training them. It doesn't cost them to a point where they would need to go public, and if IB were to raise rates for this reason, they would have already.
2. Are they trying to acquire other firms? I think this is the most rational reason they're going public. I'm guessing they're trying to expand their business to other investment vehicles. Brokerage licensing is a pain-in-the-arse, especially, in non-US countries so it makes perfect sense for IB to buyout mid-sized firms to expand their international presence. This also allows IB to offer international products to their current customer base and offer the current line of products to the new ones.
One business model they can be following would be Man Financial. Man continuously bought out mid-sized brokerages to become the firm it is now. I wouldn't be surprised if IB were to do the same.
3. Are they trying to be an institution, rather than a broker? There's plenty of financial services IB hasn't tapped into. Tax service, fund administration, their own ECN... who knows...
But going public does allow them to change the way things are ran. One thing sure is that, they are having plans of expanding their business, if not they wouldn't be going IPO.
So what is IB missing, which made the firm decide on going IPO? Why does IB need large amount of cash?
I'll be considering things under IPO cash vs. raising rates, bi-standard:
1. Are they trying to increase their market to newbies, by offering better customer service? If IB was serious about client relations, they would have increased their staff and take some time training them. It doesn't cost them to a point where they would need to go public, and if IB were to raise rates for this reason, they would have already.
2. Are they trying to acquire other firms? I think this is the most rational reason they're going public. I'm guessing they're trying to expand their business to other investment vehicles. Brokerage licensing is a pain-in-the-arse, especially, in non-US countries so it makes perfect sense for IB to buyout mid-sized firms to expand their international presence. This also allows IB to offer international products to their current customer base and offer the current line of products to the new ones.
One business model they can be following would be Man Financial. Man continuously bought out mid-sized brokerages to become the firm it is now. I wouldn't be surprised if IB were to do the same.
3. Are they trying to be an institution, rather than a broker? There's plenty of financial services IB hasn't tapped into. Tax service, fund administration, their own ECN... who knows...
To answer the OP - I don't think they will be raising commissions as part of their strategy - they are highly profitable already without further gouging being necessary.
A quick glance of the red herring answers some of these questions. After their technology I.P., low commissions are one of their main competitive advantages and they are more likely to aggressively go after market share (volume) than increase prices.
The IPO proceeds are going straight out the door to existing shareholders. $500M for 5% of a closely controlled company seems rich - but I guess the ratios stack up. They will then have a currency for future acquisitions (and incentives for staff). In the mean time it is business as usual - gobbling up volume wherever they can e.g. consolidating smaller hedge funds' operations.
Who'd have thought IB has an implied MCAP of $10bn? Nice business...
def
Sponsor
can't believe you took the bait from the original poster - who cries conspiracy whenever the wind blows and hasn't had a nice thing to say about IB from day 1 - and actually believe there is any truth in what he says. IB's mission statement has NOT changed. "Create technology to provide liquidity on better terms. Compete on price, speed, size, diversity of global products and advanced trading tools."
4. There may be an exchange or two looking for a new owner...
Can you please amend the first part to read "Create stable and reliable technology..."? Perhaps if it's in your mission statement then your development teams and their managers will pay attention.
I've been a relatively happy IB customer for a few years, but the technology problems as of late are testing my patience and costing me money. I know that I'm not the only customer who feels this way.
I have recommended and defended IB, both on and off this board, many times; however, lately it seems like there's no light at the end of the tunnel when it comes to achieving a stable and reliable execution platform. I don't want to take my business elsewhere because I think IB offers a lot of value to the professional trader. I want you to fix the problem so I don't have any reason to leave. I expect professionalism on IB's part, which can be demonstrated by improving the quality control in your software and communicating potential problems to your customers in a timely fashion.
Thank you for your consideration.
And we all know that scotty gets his jollies maligning IB. Check out his early posts --- a loser's loser. 
No one cares what you think scotty.
No one cares what you think scotty.