Interactive Brokers Calls for Execution Costs Transparency – July Volumes Up

Interactive Brokers has sent a proposal to the SEC outlining new reporting standards for the industry. The broker published execution

Interactive Brokers has reported positive trading performance for the month of July. Amid the news of stronger growth in trading activity, the brokerage firm reported that it is proposing a new reporting policy for US brokerage firms which publish monthly costs of execution.

The broker is leading by example and has included execution costs statistics in its July volumes data. The move comes on the back of increasing focus on Best Execution for retail and institutional investors in light of new trading strategies and approaches, including algorithmic and high-frequency trading.

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Interactive Brokers reported its July monthly trading figures. For the month its Daily Average Revenue Trades (DARTs) were 528,000, 14% higher than figures reported a year earlier and 7% higher on a month-on-month basis. The broker has also added a new section to its monthly reporting whereby it publishes execution costs.

During the month of July, the broker saw strong performance across the board, its closing client credit balances were $28.5 billion, 21% higher than the previous year and 1% higher than figures reported in June. The broker also saw an uptake in the number of accounts held, there were 266,000 customer accounts, 17% higher than the prior year and 1% higher than prior month.

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Interactive Brokers earns from volume traded, last month its average commission per cleared customer order was $4.14, this figure includes exchange, clearing and regulatory fees. The firm earns the most revenue from futures and options contracts, according to its findings.

Interactive Brokers’ founder, Chairman and CEO, Thomas Peterffy, sent a letter to the SEC encouraging them to request more detailed trade execution data from its member brokers on the 1st of August 2014.

The letter, entitled,’ Proposal for Brokers to Publish Simple Monthly Cost of Execution Statistics’, proposes that the financial watchdog considers requiring all broker-dealers conducting customer business to publish simple monthly statistics comparing all-in execution cost to the daily VWAP value for all executions for the month for their customers. Interactive Brokers started providing this information in our most recent monthly brokerage metrics report.

Mr. Peterffy suggests that brokers should add complementary information to their standard Rule 606 routing reports, publishing simple monthly statistics comparing all-in execution cost to the daily VWAP value for all executions for the month for their customers.

The costs and monitoring of providing Best Execution have come under scrutiny after global custodian banks were found guilty of overcharging pension funds, furthermore, regulators are assessing the way regulated firms deal with client orders in line with Best Execution proceedings.

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