Someone pointed me to the following link in which it was announced that Timber Hill is on the chopping block. Can anyone confirm or has more details? http://www.amsterdamtrader.com/2016/11/degiro-starts-us-derivatives.html (scroll down or search for 'Timber Hill')
Just wanted to add, if this is true this might have quite a lot of implications for IB customers, among other potential improvements: * Lower broker credit/default risk (Timber Hill was/is quite a large market maker and without this unit IB will lower its exposure to high volatility, black swan events and it can entirely focus on serving its clients) * Less incentives to pursue interests that are not aligned with client interest * Potentially more/better services tailored to its customer base, for example, potentially better support for historical data... * Potentially more opportunities to trade lower latency/high frequency because there would be no conflict of interest between the client and a market maker such as Timber Hill (for example IB currently (to my knowledge) applies a cancellation fee for directed orders in order to discourage competition with Timber Hill, which pretty much kills any hft approach via IB (among many other factors which make hft with IB a bad idea to start with). This would obviously necessitate a change away from snapshot data to a complete data feed and tape and potentially even the ability to co-locate more easily with IB's server (already possible but,...) Potential risk of this: * Less diversification benefits for IB. A profitable market maker adds to the bottom line but more importantly p&l from market making correlates lowly or even negatively with the brokerage revenue stream. If this news is correct this might be quite a big story for all IB customers, not with immediate impact but going forward. It would also signal changes in the industry, signaling potential further exits of firms from the market making industry which might on one side possibly lower liquidity during normal market regimes, but it could also mean that hft and market making has become less profitable meaning trading and price patterns may be impacted and change.
On the last IB conference call TP was discussing competing with Virtu. Decision to be made within a year.
interesting, thanks for sharing this, that obviously negates some of the comments I made above (in terms of interpreting the sale of Timber Hill as a change of momentum in the hft world). But what do I know...for what its worth TH might just be floated and spun off/carved-out.
http://seekingalpha.com/article/398...-results-earnings-call-transcript?part=single TP does mentions simulating HFT and making a decision in a year. One of the questioners mentions Virtu not TP.
ups, just saw it on a later page, sorry and thanks for posting that link. I think that will be good news for IB's retail and institutional customers.
IB offers the best price improvement for retail. unlike other firms it does not get paid for order flow.
Affiliation with Timber Hill discouraged IB so far to offer retail clients certain directed order privileges other brokers afford their clients. Reason: Conflict of interest. Internalizing orders for TH's benefit is another issue...not saying its a huge issue but when you have an affiliate that has opposing interests to clients then that always poses potential problems.