Wind-down of options market making operations weighs on Interactive Brokers’ trading gains in Q3’2017

Maria Nikolova

Trading gains in the quarter to September 30, 2017, dropped 71% from the equivalent period a year earlier, due to lower market making trading volumes as the broker completed the wind down of its US options market making business.

Electronic trading firm Interactive Brokers Group, Inc. (NASDAQ:IBKR) has earlier today reported its key financial and operating metrics for the quarter to September 30, 2017, with the wind-down of its US options market making business having an apparent impact on the results.

Trading gains amounted to $11 million in the third quarter of 2017, the company announced. The number is down 71% from the $38 million registered in the year-ago quarter. The drop was attributed to lower market making trading volumes as Interactive Brokers finalized the wind-down of its US options market making business.

As FinanceFeeds reported earlier this month, Two Sigma Securities, LLC (TSS), the market-marking affiliate of Two Sigma Investments, LP, has completed the acquisition of the United States options market-making business of Interactive Brokers.

The US options market-making business of Interactive Brokers used to be conducted by its Timber Hill affiliate. Upon completing the acquisition, TSS assumes about 1,300 exchange specialist assignments previously operated by Timber Hill. TSS intends to offer its broker-dealer clients access to listed options across all US exchanges, on top of its existing offering of more than 8,000 US exchange-listed equities in 2018.

The deal was first announced in May this year, a couple of months after Interactive Brokers made public its plans to halt its options market-making operations. 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”.

Let’s note that, as per the numbers published today, Interactive Brokers’ market-making segment saw some positive developments too in the third quarter of 2017, as income before income taxes increased to $11 million in the quarter ended September 30, 2017, due to lower operating costs, as the company completed the divestment of the US options market-making business. Also, the results for the quarter include a $10 million net recovery of exit costs.

Across all segments, the results for the quarter were positively affected by a strong growth in net interest income, which increased $46 million, or 34%, and higher commissions, which increased $19 million, or 13% from corresponding quarter in 2016.

Read this next

Institutional FX

FXSpotStream volumes hit 14-month high in November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2023, which moved higher on a monthly basis.

Digital Assets

Circle denies ties with Palestinian groups, TRON founder

Stablecoin issuer Circle has denied allegations that it facilitates funding for terrorist organizations.

Retail FX

CySEC hits operator of Titanedge, TradeEU with €90,000 fine

The Cyprus Securities and Exchange Commission (CySEC) announced that it has imposed a fine of €90,000 on Titanedge Securities Ltd due to shortcomings in their regulatory obligations.

Institutional FX

Cboe FX volumes retreats slightly in November 2023

Cboe’s institutional spot FX platform today announced its trading volume for the month ending November 2023, which took a step back after a strong rebound in October.

Institutional FX

Alpha Group seals Cobase majority acquisition

Foreign exchange service provider Alpha Group International plc (AIM: ALPH) has finalized its acquisition of Financial Transaction Services, operating as Cobase.

Digital Assets

TMNG Tokens Successfully Listed on MEXC Crypto Exchange

TMN Global proudly announces the successful listing of its native TMNG token on the MEXC crypto exchange, effective December 1st, 2023. This strategic partnership marks a significant milestone for TMN Global in the crypto space.

Institutional FX

Marex completes acquisition of TD Cowen’s PB business

London-headquartered commodities broker Marex has completed the acquisition of TD Cowen’s prime brokerage and outsourced trading business, which will be integrated into Marex’s capital market division. This division was established following the acquisition of ED&F Man Capital Markets in 2022.

Digital Assets

Talos introduces decentralized liquidity and onchain settlement with Uniswap and Fireblocks

“At the cornerstone of the DeFi ecosystem, Uniswap has the breadth of assets and depth of liquidity that institutional traders need. And to have this partnership powered by Fireblocks, a digital assets infrastructure provider trusted by some of the most renowned institutions, is very fitting.”

Digital Assets

FINMA-regulated crypto bank SEBA Bank rebrands to AMINA

“As we look forward to 2024, our ambition is to accelerate the growth of our strategic hubs in Switzerland, Hong Kong, and Abu Dhabi, and to continue our global expansion, building on all the successes we have laid down over the past years.”