Corzine famously told Congress
Interactive Brokers chairman and CEO Thomas Peterffy, who oversaw the purchase of
This, he said, “should give our customers additional comfort and allows us to demonstrate to the industry that the firms who are well-automated do not need the extra time over the weekend to figure out their segregation requirements.”
His comment came in a quarter of great “drama,’’ as he put it, for Interactive Brokers. Figures from Interactive Brokers’ quarterly results were “misrepresented” by a major news agency and contributed to withdrawals of customer funds.
“As a result in the November-December period for the first time in our history, we experienced net withdrawal of customer funds to the tune of some $300 million,’’ he told analysts.
He said MF Global was in great need of an integrated brokerage platform. But, in the end, Interactive Brokers lost $39 million for the year including $29 million in the fourth quarter on its purchases of MF Global stock.
Petterffy said:
We had a fairly hard time convincing some of our customers that other than cash and [foreign exchange] balances, we do not have positions in non-exchange traded assets. And other than that, with central clearinghouses, we do not carry open positions and therefore have no counterparty credit risk. Our proprietary Market Making business is conducted as a separate entity from our brokerage business. We do not commingle customer assets with proprietary operations and our brokerage company does not engage in proprietary trading.
He said customer equity is segregated in special bank or custody accounts.
Regulations require U.S. security brokers to perform a detailed reconciliation of customer funds and securities every Friday to make sure that sufficient funds are set aside for customers.
Interactive Brokers, he said, has now “ taken this further” and begun to calculate and segregate funds on a daily basis.
He said the company also protects customer funds by calculating collateral requirements on a real-time basis.
“We watch our money like a hawk and since we would have to lose our own money before our customers would lose theirs,’’ he said.
Tom Steinert-Threlkeld writes for