During their Q1 conference call with shareholders and analysts, Interactive Brokers (IB) painted a rosy picture for the future. Speaking on the call, IB CEO Thomas Peterffy highlighted how the broker was chosen by Scottrade to support a number of their high net worth clients. In addition, he revealed that they had purchased social advisory firm, Covestor, and that plans for adding new platforms to appeal to a broader range of clients were in the advanced development phases.
Peterffy also stated that events such as the Swiss franc volatility of January and overall decrease of risk taking by prime brokers had led IB to become an alternative for small brokers and hedge funds for their trading clearing needs. As such, despite realizing a $121 million loss from the January move in the franc, the overall market trends it caused were presented as beneficial to IB.
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So far, traders and investors appear to be buying into Peterffy’s views of the future. After setting another all-time record high yesterday at a closing price of $42.74, shares of IB have risen 46.6% in 2015. During the same period, Interactive Broker shares are also outperforming rival online brokers (see chart below).
Catering to a wide array of clients, IB has carved strong market share thanks to both offering deep discount trading, and arguably the largest selection of assets available to trade from one account. As a result, beyond individual investors who benefit from low commission rates, the firm has been able to attract asset managers and hedge funds who use IB to trade nearly every exchange-traded asset available on the globe.
Compared to prime brokers, what is missing from IB, is the ability for customers to source credit to trade directly with other counterparties or trading venues. As such, lacking this feature inhibits IB from attracting larger players who require personal relationships with investment banks to source shares in new stock offerings, customized currency liquidity and off-exchange asset types. Nonetheless, with its volumes in 2015 ahead of 2014 levels, IB is showing that there is strong interest for its ‘plain vanilla’ low expense brokerage products.