The CME document shows that during the sell-off and subsequent rally, other active traders in e-minis included Jump Trading, Goldman Sachs [GS 143.23 -1.42 (-0.98%) ], Interactive Brokers, JPMorgan Chase [JPM 39.89 -0.92 (-2.25%) ] and Citadel Group. http://www.cnbc.com/id/37151476 Is there anyway IB trades against its own clients like GS? Any thoughts
Read the history: http://www.interactivebrokers.com/en/general/about/about.php They started as a trading group. They might well take the other side of your trade (through the market) but this isn't necessarily a bad thing - they don't win 100% of the time either.
Amongst several other things this proves they have a dominant position in the industry. With every trade you execute, someone takes the opposite side and trades against you. It can be your own broker, some other broker, or an MM. Why do you care if it is IB or GS or even ML? Someone has to do the dirty job and take the opposite side of your trades. If they are right, they win. If they are wrong, they lose. This is the name of the game. What unimformed geeks like you are doing is scaring other unimformed geeks away and the market is deprived of the liquidity. This is one of the negative impacts of forums on the market.
I know that IB (through Timber Hill) makes markets in various options, but for them to be doing huge volumes in the Eminis is a bit more of a surprise. That is, unless the trades referenced in the article were client trades attributed by the author to IB itself. As a client, it'd certainly be a concern if IB or its subsidiaries are engaging in substantial speculative prop trading activity, especially given the schizo market that seems to only be getting worse. IB's competitive advantage IMO rests on a) diversity of markets accessible from one account/platform, and b) reputation for risk management. This potentially calls the second bit into question.
If you read the risk disclosure carefully, they do state that they engage in taking opposite trades of clients but that is dictated often by the nature of the business. I see no risk in that.
The problem I am worried about is an inherent conflict of interest, if IB engages in a heavy dose of trading their own capital, and they know that a large percentage of their clients portfolio is leaning one way, and they can run a bunch of client stops just because they see an easy opportunity, this is not what I want in a broker. I want a broker to represent my interests first and foremost, I want their primary business to be in providing best in class access to markets, with platform tools to trade these markets. If I wanted a firm that specializes in trading, I could open an account with GS, JPM. I expect GS to potentially trade against me, but they don`t have access to wether I am heavily levered up in a position, and could be easily shaken out by an "artificial market move". The crux of the issue is whether there is a "chinese wall" between any proprietary trading ib may participate in, and their own clients position data.