Interactive Brokers’ Jonathan Chait Traces the Industry’s ECM-style Evolution

Jonathan Chait lends his perspective on the evolution of the firm’s platform along with the forging of the current ECM-style

3. What are the advantages and disadvantages of your platform relative to other players?

I would say the advantages are that you have a complete access to the forex market – that means you get the spot cash, and you get it like banks get it, which is a settled product. After two days we actually settle the cash balances to you. That gives you the opportunity to buy EUR/USD, sell euros to us, and trade dollars to us, thus ending up with no effective position. This gives you full flexibility as to how you can manage your currency exposure.

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However, we also give you access to the futures market and the forex futures are probably not as liquid as the spot, but they sometimes offer advantages to people who like to hold a long-term position and they do that with futures. Where the time slippage is not so important for say three weeks, and then trade around that through the spot. I think that is a big advantage for that and you can also utilize options around this strategy as well – we are a multi- asset class.

Perhaps most importantly, we are very religious about the fact that we preach no conflicts of interest. Our job is to give the best possible execution and we charge a small commission for this, but our benefit is fully transparent. We charged a define commission that you know up front and so the price you see on the screen is the price you get.

The main disadvantage is that we are a full scope broker-dealer. What this means is that to open an account with us you actually have to go through a long application process. This probably takes 45 minutes to do the application and we ask all the questions that a broker-dealer is required to ask. Conversely, the benefit you get is that you have access to our whole offering from a broker-dealer.

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