Interactive Brokers Puts The Clamp Down On Option MM’s (SPX)
The past two years the options markets have seen all kinds of screwy crap go down. Including liquidity drying up, penny wide markets, synthetic market makers making markets inside already quoted markets, not honoring quotes etc etc. Apparently Interactive Brokers is not happy with the bullshit either. Their computers cannot even keep up with speed of their customers computers. The HF firms are causing interactive brokers to lose money…
Regulate this junk and be done with it or bring back a human market maker.
(Bloomberg writes) Interactive Brokers Group Inc. may withdraw from some options market making because its regulatory obligations allow firms with the fastest computers to take advantage of the company, Chief Executive Officer Thomas Peterffy said.
Most exchanges require market makers to provide bids and offers in options across many strike prices and maturities. Because the contracts are derivatives whose value is tied to stocks or exchange-traded funds, market makers must constantly update quotes to reflect price fluctuations in the underlying security.
Interactive Brokers provides bids and offers for investors to trade against i n about 300,000 products in the U.S., Peterffy said. His company isn’t able to update options prices fast enough to prevent high-frequency trading firms from profiting from inefficiencies when they’re too high or low given moves in the stock market.
“If there are no changes in the regulations, then we may discontinue as market makers in certain products on certain exchanges,” Peterffy, the company’s chairman who founded Interactive Brokers in 1977, said yesterday. “High-frequency trading firms are looking at the same input variables and it takes them much less time to pick off a handful of quotes that haven’t yet moved than it takes us to move the quotes.”