I've said this before but IBKR is basically a monopoly, NO ONE can compete with them. Just look at their 10-k and monthly metrics.
IBKR was an almost risk free buy around $13 to $15. As Peterffy used say on the conference calls that he would buy back the stock at or below $13. I dont think IBKR ever went below $13.
How are they a monopoly? It's not that nobody can compete with them... it's that they don't want to drive the prices down so much... I don't know why, but any other broker can do the same as them.
User habit is definitely a moat. The competition does not just need to match pricing, they must match pricing, provide the same breadth of services, and provide a reason to look elsewhere (which was price...good luck finding something better). By decentralizing access to information, they've cultivated the habits of a solid majority of mid-market (read: not prime) traders...they have inertia in addition to any qualitative advantages. You'd have to pay-to-play for years just to get a taste of IB margins in the same scale; all the while IB is clipping coupons.
@beerntrading the connectivity they provide to world wide markets is definitely a need for me.... that's probably the hardest part for others to do. IB has basically been leaning on the global connections of Timberhill and had retail piggy back. But if a broker can team up with a larger market maker to get global connectivity costs down, for sure they can set-up similarly. Initial cost will obviously be high and they still need to keep the pricing low, but I think they would be getting a bigger slice of the pie. I wish other brokers had global connectivity, what would give me more options to choose from... I don't think LightSpeed is going to global, @Robert Morse ?
Unfortunately, retail brokers usually stick to the country they reside. Professional firms are global with execution cost much lower than even IB, but they are limited in clientele. Once a broker decides to undercut IB, the road to zero will be very quick.
I know professionals trade with far lower costs... but IB definitely had the advantage of their MM side Timberhill being connected on a global scale, therefore for them it was easy to use TH as a way to cut costs, I assume. It's not really about undercutting... I'm just surprised that there are not that many brokers willing to offer global reach, especially in todays global society. I'm just hoping that at one point someone else will offer anything similar... doesn't even have to be undercutting IB.