Yes, I agree with what you say about IB [financially speaking]. However, two weeks ago people would have said the same about REFCO. Nonetheless, that financial history is why I keep an account there. I'd hate to see them dilute that record by doing the equivalent of buying in risk. Even if all they do is "size up", that is going to create some headaches for awhile. Like I said, I'd much rather they drew in new clients incrementally due to improvements in the overall product. From an existing customer point of view, this makes much more sense than trying to buy in your blowing up competitor's accounts. I don't see an edge for existing customers in this potential transaction... Of course, there is always the theory that IB is not making a serious offer but rather buying in some cheap marketing to try to get REFCO clients. That would be more in keeping with IB as I have known it.
Just a blurb to show how messed up things are on the other side... Refco's bankruptcy hasn't socked only p.e. firm Thomas H. Lee Partners, but also 11 hedge fund creditors that are lining up to get at least some of the $1 billion they risked in the futures brokers' bonds, Financial News reports. These unlucky 11 are among Refco's biggest creditors, and a couple are really far out on a limb: VR Capital Group and Jim Rogers, a commodities HF manager, have a combined total exposure of $835 million. But Moscow-based VR is not sitting back and waiting for things to happen. The hedge fund announced Friday that it is going to challenge Refco's bankruptcy, arguing that its $472 million at Refco should not become part of the bankruptcy kitty. "Those assets are our assets," VR founder Richard Deitz told Reuters. "We vigorously reject the notion that any assets form part of the estate of Refco." Based on financial sources in Moscow, Reuters reports that VR's total AUM is around $600 million. In addition, Refco owes Capital Management Select Fund $109 million, and Leuthold Funds $107 million, while the remaining four firms are due between $17 million and $27 million. None of these funds can necessarily expect any relief from whoever wins an Oct. 24 action for the futures business. Until yesterday, J.C. Flowers held the highest bid and his deal excluded assumption of liabilities. But now Greenwich, Conn.-based The Interactive Brokers Group has outbid Flowers. Whether Interactive deal includes a similar provision that would spare the buyer from assuming liabilities is not yet clear. One thing has been reported, however: The bid by Interactive, unlike Flowers', does not include a break-up fee.
I had the same thoughts about integration being a bad fit. Is Refco's futures business profitable? Perhaps the idea is to continue to operate it as is, not necessarily integrating it. Is there a reasonable ROI here? I _do_ like the idea of at least an arm's-length integration, where you could call the Refco desk and have them execute for you in the pit or via their own CME or CBOT connex when IB's connex are down.