Interactive Brokers President Thomas Peterffy said the broker’s decision to restrict speculative name trading was to protect the market and the clearing firms that settle the trades.
“We are concerned with the integrity of the market and the clearing system,” said Peterffy at CNBC’s Closing Bell on Thursday.
On Thursday, Interactive Brokers put options trading in liquidation of a handful of highly volatile stocks like GameStop, AMC Entertainment and Koss, which brought together an army of retail investors looking to smash the hedge funds that sell the names . The company also increased margin requirements, that is, how much money an investor using leverage and derivatives must have in his brokerage account after buying shares in certain securities.
“We are concerned with the ability of the market and clearing systems, through the attack of orders, to continue providing liquidity. And we are concerned with the financial viability of intermediaries and clearing houses, ”he added.
Compensation is the reliable transfer of securities and funds between the buyer and the seller, an essential function on Wall Street. Some other online brokers carry out automatic clearing, which means that they have their own clearing firm, while others rely on third parties to clear transactions. Robinhood, E-Trade, TD Ameritrade, Charles Schwab and Vanguard are among those who have already identified themselves.
Peterffy said Interactive Brokers did not receive any pressure from market makers to set parameters in the stock and option trades.
“The broker is between these clients and the clearinghouse,” said Peterffy. “So when some option holders make money, the clearinghouse has to give us the money to give it to our customers, while other option holders, sellers or buyers lose money, we have to collect money from them and give it to the camera compensation. If our customers are unable to pay for their losses, we have to put in our own money. “
Interactive Brokers has $ 10 billion in equity to cover these payments, if necessary, but Peterffy said it cannot say the same about other brokers with complete confidence.
Peterffy also called what is happening with GameStop’s actions this week “illegal” and “manipulation”. He said Interactive Brokers’ clients will be able to trade speculative names as soon as trading becomes “normal” again.
Peterffy also said he doesn’t know if there are any big institutions on the squeezing side of GameStop’s big rally.
“That everyone is just individuals, but I doubt it, because it requires a lot of money,” said Peterffy.
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