dmcmahon wrote: ↑Fri Jan 29, 2021 12:57 am
the way wrote: ↑Fri Jan 29, 2021 12:54 am
dmcmahon wrote: ↑Fri Jan 29, 2021 12:19 am
rchmx1 wrote: ↑Thu Jan 28, 2021 10:03 pm
dmcmahon wrote: ↑Thu Jan 28, 2021 9:19 pm
Please watch the CNBC interview with Peterffy today, he explains what’s going on. He’s protecting the firm and it’s clients from an MF Global type event IMO.
I'd call this a very generous interpretation. He went out of his way to say that IB had the resources to cover the financial obligations this event has and continues to generate, but he wasn't sure about the solvency of other brokerages. If that is true, then his firm doesn't need protection. And what is he protecting his clients from? Losing money in the stock market? Isn't that a nice thought, that IB or any other brokerage in reality gives zero sh*ts about.
I would say the more accurate interpretation is that IB chose to protect one source of revenue, the clearance houses etc, at the detriment of another source of revenue, it's retail clients. IB absolutely does not get to come off as a valient actor in this situation.
Not sure what you think he should do instead. Allow trades to continue with no assurance that the other side of the bet is covered, and put his entire firm at risk of an implosion that leaves everyone trapped for 2 years in a legal limbo?
I also think his answer was reversed, and therefore fishy. If he's worried the "other side of the bet" doesn't have the money, then that person must be a buyer, and the IB client must be a seller. Then why is IB blocking buys instead of sales then?
And he could make buys on IB safe by just requiring settled funds to purchase, instead of banning buys completely.
I suspect if he puts the client’s trade to the clearing house, he may not get the shares and yet has to make them good to the client. At which point his firm is effectively short the shares of a stock that’s going to Pluto.
"Luckily enough, we have 9 billion dollars of equity, so we don't have a problem." ~ Thomas Peterffy
So what is the problem? If, as the man says himself, they don't have a problem "if [their] customers are not able to pay for their losses and so they have to put up [IB's] own money," because they "have 9 billion dollars of equity," then what exactly is their justification for removing GME from new purchases?
You're reading into the situation something perfectly reasonable, but the fact is that in this interview Mr Peterffy himself contradicts what you're saying. He explicit states that they have a huge amount of equity, and robust risk management software, so they "haven't gotten hurt." Then, directly after making those statements, he follows by saying, "I cannot say the same thing with full confidence about other brokers. So I'm extremely concerned." This was his answer to the question, "Why have you, like Robinhood, decided to restrict trading in shares like GME." Does this really not strike you as a suspicious answer? Boiled down, his response is, "We have the capital and software in place so that we're fine, and yet we still restricted trading because of problems with other brokerages." Wut??
Also, and you might be more knowledgeable here then me, but when you say, "I suspect if he puts the client’s trade to the clearing house, he may not get the shares and yet has to make them good to the client," is that really how things work? If I place an order for a very illiquid asset, and there is no seller, then my buy order just sits there not completing, surely. Just the fact that my broker has sent my order to the clearing house doesn't mean that anyone is on the hook for anything, if there is no seller on the other end of the transaction. Right?