Interactive Brokers expects $25m in one-time restructuring costs due to halt of options market making activities

Maria Nikolova

The rate of continuing losses at the market making segment markedly slowed after the company started winding down its options market making activities.

Electronic trading firm Interactive Brokers Group, Inc. (NASDAQ:IBKR) has earlier today posted its earnings report for the first quarter of 2017, with the results of the market making segment heavily affected by the company’s decision to wind down its options market making activities globally and the low volatility during the three-month period.

As reported by FinanceFeeds, on March 8th this year, Interactive Brokers announced its intention to close its options market making business across the globe.

Thomas Peterffy, Chairman and CEO, explained back then that “Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity”.

In today’s earnings release, Interactive Brokers said it expected to phase out these operations significantly over the coming months. The company forecast it will incur approximately $25 million in one-time restructuring costs, with a substantial portion of them set to be defrayed by continuing certain market making activities until the restructuring is complete. As a result of closing its options market making operations, the company expects that around $39 million in annual net expenses will be absorbed by the electronic brokerage segment.

The decision to wind down options market making had an impact on the income of the Market making segment. The segment registered a pre-tax loss of $22 million in the first three months of 2017, with the company blaming lower trading volumes and decreases in volatility and in the actual-to-implied volatility ratio for the result.

Interactive Brokers said that for the year to date through the company’s announcement on March 8, 2017, the market making segment had posted net losses, and the segment was not forecast to return to meaningful profitability. The rate of continuing losses, however, slowed down markedly after Interactive Brokers started taking action to halt its options market making activities. Pretax profit (loss) margin was (275)% for the quarter to March 31, 2017, compared to a 34% profit margin in the equivalent period in 2016.

Read this next

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.

Digital Assets

Crypto trading volume spikes at Swiss bourse amid FTX collapse

The shockwaves from the historic collapse of Sam Bankman-Fried’s crypto empire are still being felt across the industry, but some trading venues are actually doing better because of it.

Executive Moves

CMC Markets adds Camilla Boldracchi to institutional sales

UK’s biggest spread better, CMC Markets has promoted Camilla Boldracchi to take on an expanded role within its institutional sales desk.

Institutional FX

FXSpotStream reports $1.48 trillion in monthly volume for November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2022, which moved higher on a yearly basis but reflected weak performance across executed trade volumes when weighed against the figures of the prior month.

Retail FX

Interactive Brokers’ client activity drops 30% YoY

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.95 million daily average revenue trades, or DARTS, in November 2022 compared to 1.96 million transactions in the prior month.

Digital Assets

The rise of Crypto ETPs in traditional exchanges as crypto winter deepens

Institutional investors are increasingly looking at traditional regulated exchanges as their first route into digital assets amid market turmoil caused by the crypto winter and the collapse of several big names within the space, including FTX. Acuiti and Eurex surveyed 191 buy and sell-side firms on their views of the digital assets markets in order […]

Digital Assets

TP ICAP’s crypto arm receives FCA’s go-ahead

UK interdealer broker TP ICAP has received a regulatory go-ahead to launch its cryptocurrency services in the UK. The bid shows that the recent collapse of FTX exchange has done little to damp the interest of big names in running their own crypto business.

Industry News

Coin Signals founder to pay $2,847,743 after prison sentence over crypto Ponzi scam

The U. S. District Court for the Southern District of New York has ordered Jeremy Spence, founder of Coin Signals, to pay $2,847,743 in restitution to victims of a fraudulent virtual currency scheme.

Digital Assets

CME Group goes DeFi: Reference rates and real-time indices of Aave, Curve, Synthetix

“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”

<