Why would use Knight as a point of comparison? Market Cap < 1 billion... And shares that went from $75 to $3 only a few years ago. Which is total mismanagement on top of a shaky business model. IB is still very much a growth firm... And their management and strict business model is the anti-thesis of NITE. IB has a culture that verges on Cult Religion... Something you can only build from scratch over a long period of time. IB is actually unique... not unlike GOOG... And it's PE will be unique.
But can the market making in options make as much as they move to penny pricing and hedge funds (carlin) enter the business?
I suggest you check your math. I am surprised noone else did. Recompute your quarterly revenue figure for Schwab. You used this figure to support the rest of your post. -Raystonn
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Markets change all the time. Look what happened to NITE with decimalization. Specialist firms are all down 80-90% in spite of owning all that NYX stock. IB, meanwhile, has been almost completely unaffected by industry changes. The thing about IB... And what makes them similar to GOOG... Is that they have a unique, ** lowest cost ** infrastructure. IB can provide almost any service cheaper than anyone else... Just like GOOG can provide any service cheaper than anyone else. If you are not an engineer... This cannot be explained adequately in layman's terms. What gives IB and GOOG a big competitive advantage... is that this: You cannot "evolve" your culture and infrastructure to be like IB or GOOG... You have to build a company like this from scratch. Old line companies try to evolve towards the "leading edge" ** all the time **... But they usually fail because the "leading edge" keeps moving faster than they can modernize.