DERIVATIVES

Interactive Brokers shuts down options market making business

Options market making business to be phased out over next few months.

By Hayley McDowell hayley.mcdowell@strategic-i.com March 09, 2017 10:15 AM GMT

Interactive Brokers will discontinue its options market making business globally after 25 years of operation, shifting focus towards its brokerage platform. 

Chairman and CEO, Thomas Peterffy, explained, “it’s been painful for me to see it deteriorating in the last few years.

“But we do not have a choice in this matter. Today, retail order-flow is purchased by large order internalisers and joining them would represent a conflict we do not wish to have.”

Interactive Brokers will instead focus on building out its brokerage platform to provide clients with execution and management services at low costs.

“40 years of market making gave us the financial resources and the unique expertise to develop our superior brokerage platform for cost and execution sensitive, professional investors and traders, and to give them the edge to successfully compete in the marketplace,” Peteffry added.

Growing competition for derivatives market making activity has seen slow take-up of services for several firms, including Virtu Financial and KCG.

In January, KCG explained it had decided to shut its options market making business following a drop in revenues.

Similarly, Virtu Financial struggled to expand its market making services to the interest rate swaps market following its launch in 2013.

Interactive Brokers explained it would rebalance its composition of currencies by increasing the relative weight of the US dollar vs. the other currencies to approximately 70% from its current approximately 47% weight.

It added management will complete its review of services and staff in the near future.