IB Bid for Refco. Mistake???

Discussion in 'Retail Brokers' started by ssternlight, Oct 21, 2005.

  1. I'd hate to see IB spend a lot of time and effort to absorb a firm that could have all sorts of potential landmines -- if only the one that many current REFCO accounts might not want to use IB.

    Any thoughts?
  2. Choad


    I'm a bit leery of it too.

    I just wish IB would "stick to their knittin'" and concentrate on CS and fixing TWS problems.

    UNLESS...there was some way for them to bring in pit traded futures!

    Beans and Bellies! :D
  3. The only bidding going on...
    Is for the "regulated" business...
    Where there are no "landmines".

    The prize is millions of account customers and names and addresses...
    Most of whom are leaving in droves...
    But the list is still worth a lot.

    As for the "unregulated side"...
    For example hedge funds and "prop" arraingements...
    That's all going to zero...
    Bankrupcy and lawsuit legal fees = remaining assets...
    The common stock is going to zero.

    And why is everyone so down on TWS?
    The problems are minor...
    And business = dealing with minor problems on a daily basis.
    And what does TWS have to do with IB business expansion?

  4. just21


    Does the regulatory capital requiremnet decrease as money leaves Refco futures accounts? Apparently 40% has left so far.
  5. Well,

    There aren't millions of accounts to get at REFCO for starters. But mostly what bothers me is two-fold.

    First, there is the distraction that acquistions bring with systems and employee integration.

    Second, there is the potential to simply make a bad deal and leave your shareholders holding the bag - a la Refco itself. This can be translated into smaller budgets for TWS development and systems support, slower addition of servers to manage the load, higher fees!, etc...

    Personally, I'd like to see IB earn those acounts through better use of technology and reduced fees than to simply try to buy them in to the existing technology set. There were reasons those accounts were at REFCO and not IB.

    Just some thoughts...
  6. As the previous poster said, very few REFCO accounts would prefer to be at IB for the obvious reasons of unstable TWS platform and non-existent cust service.

    I think if IB buys REFCO they'll be surpised that they wont iwn all the current REFCO accounts, they'll go elsewhere.

    I think a true competitor of REFCO like Calyon Financial (former Carr futures) or FIMAT or an aggressive IBank like JPM, Morgan Stanley is the best acquirer for REFCO, INC ( regulated & non-regulated entities).

    I pray REFCO, Inc is acquired by such a competittor and I think it just may happen.

    Also, it seems everyne wnats to allow RCM to die, more reason why a player like Calyon or FIMAT with similar in house structures to RCM & Refco Securities should purchase REFCO, that way current existing REFCO customers can continue biz fairly easily.
    That won't happen with IB, as IB lacks OTC & FX prime Brokerage facilities.
  7. folks,
    the people who work on possible mergers and acquisitions and people who focus on TWS software ARE not the same, they are not even in the same universe...
  8. Ever check IB financials?

    They have a stable 30% return on capital over 20 years...
    And have grown to $2 billion in assets from zero.

    They stick to a very conservative business model...
    Technology = lower costs...
    No employees = lower costs...
    And take no risks of any kind...
    e.g. do not extend leverage.

    To compare them to Refco is laughable.

    IB not interested in "prime brokerage" or "hedge funds"...
    Just people that want to trade e-futures at $1.40/contract.

  9. just21


    So why do they want to buy refco then?
  10. I agree and you make my point, so why does IB want REFCO... the average REFCO lcient is not a fit for the IB model, and the few that are can be won over with aggresive marketing NOT a full-fledged bid for the company.
    #10     Oct 21, 2005