Lessons from a Market-Making Kingpin

Published on
February 4th, 2020
26 minutes

Lessons from a Market-Making Kingpin

The Expert View ·
Featuring Thomas Peterffy

Published on: February 4th, 2020 • Duration: 26 minutes

Thomas Peterffy, the billionaire founder of Interactive Brokers, joins Real Vision to discuss how his company revolutionized the market-making industry and ultimately became the largest electronic brokerage in America. He describes how Interactive Brokers rendered traditional open-outcry exchanges obsolete, whose remarkable inefficiency he saw as a tremendous opportunity. Peterffy argues that high-frequency trading poses black-swan risks to markets worldwide, and proposes several solutions to mitigate those risks. Filmed on January 23, 2020, in West Palm Beach, Florida.



  • SB
    Stewart B.
    11 May 2020 @ 17:59
    What an amazing man, amazing career and warning on the dangers of Socialism.
  • HS
    Hisham S.
    16 March 2020 @ 16:42
    Great interview with an awesome man. This explains so much why IB is so focused on developing their API and letting retail traders get involved in algorithmic trading.
  • DY
    Dmytro Y.
    17 February 2020 @ 14:59
    Great! American young folks should really listen to his last advise on socialism.!
  • VP
    Vincent P.
    12 February 2020 @ 19:30
    Mr Peterffy is truly a pioneer of electronic trading. Wish he would've elaborated as to what he thinks would trigger that large market collapse (like Lehman)? Functionally sure, pulling HFT algo bids after big boys get out but why? Rate hike? Trump tweet? Some flu bug? WWII? Bank failure? His statement of the market environment being very good etc.... was a little boiler plate and insincere but he has to because of IBKR. That's understandable. Nothing about all the liquidity coke and heroin injections by central banks though? There's your liquidity. Here's suggestion, how about suspending overnight futures trading in the S&P? How would PPT fix everything?
  • TR
    Travis R.
    5 February 2020 @ 03:47
    HFT have extorted billions form the system and this guy believes the customer has not suffered since it isnt too much out of any individual trader/investor's pocket. Get real. It is theft plain and simple. Zero benefit to allowing them to operate in the system. Any trade held for less then 1 minute needs to be taxed at a 99% capital gains rate.
    • TR
      Travis R.
      5 February 2020 @ 04:31
      Case in point why one should watch the entire interview before commenting. The random holding time would definitely put HFT out of business. The last 5 min of the interview is worth watching a few more times.
    • MT
      Mike T.
      6 February 2020 @ 16:00
      Travis certainly the term HFT has negative connotations, but please drill down and be precise. Where do you believe in the market structure they play a negative roll? HFT is widely reference term but grossly mis-understood by many. I will restrict my forthcoming comments to one specific part of the market i.e. US Options on Equities and Futures. I'm not qualified to know what happens to Stocks traded out of hours or in so called 'dark pools'. Now specifically US **OPTIONS** Market Makers are order flow 'Aggregators' that use High Frequency Technology, they have to pay Brokerages for order flow and is a highly competitive business, where the Brokerages will only route their orders to Market Makers that offer the best liquidity, best tight bid and ask spreads, fastest order execution. The end result being (remember I'm only commenting on US Options) the introduction of such Market Makers is the best thing that ever could have happended for the 'retail Equity Option trader' e.g. SPY $0.01 spreads and also due to the fierce competition between the MM's the retail Option Trader has extremely low, almost neglible commissions. HFT Options Market Makers such as Jump, Citidel Securities, Susquehanna make their money, not by picking the pocket or trading against you, but through tiny %'s on massive order volume where they make a very small profit per individual Option trade, think $0.0001 so to speak in return the customer gets optimum Liquidity and very low trading commissions. As soon as these companies receive an Option order they immediately 'delta hedge it' in order to avoid carrying direction risk. The Option Market they enable is also completely, totally, unequivocally fair e.g. if my 1 lot trade is a milli second ahead of a 1000 lot Institutional order I will get filled first. Dont believe me, suggest go and actually visit a Jump, Citidel Securities or Susquehanna. With regards to Options on US Listed ** Futures** HFT Market Makers such as the aforementioned are not active in this market as orders on Futures, and Futures Options go direct to the CME.
    • MT
      Mike T.
      6 February 2020 @ 16:12
      One last comment on Interactive Brokers itself, for anybody that wants to trade underlyings as listed on almost every exchange around the world AND has less than $50Million, then IB is pretty much the only game in town, i.e. IB is the poor mans prime brokerage. The downside with IB, their desktop trading platform is in serious need of investment/development. It doesn't come close when compared with the TD's Think or Swim or more recently with Tastyworks as developed by the same team that did the original TOS. Tastyworks is far and away the best Trading platform I've ever seen. Neither I or any of my family or friends have personal relationships with the folks at Tastyworks.
    • VP
      Vincent P.
      12 February 2020 @ 19:19
      Citadel ain't gonna like it. Neither would the Mnuchin Cartel.
  • RC
    RJ C.
    11 February 2020 @ 11:37
    IB is my broker and has been going on 15 years. Getting to hear Peterffy's thoughts was fantastic. This man changed the game and allowed traders like me to move from working at a fund to managing private money without needing a lot of infrastructure. I will forever be grateful to IB and their API team for going above and beyond many many times over the years. Thanks for doing this interview RV!
  • JE
    James E.
    4 February 2020 @ 20:55
    Very nice guy. A please listening to him.
    • JE
      James E.
      9 February 2020 @ 21:51
      Sorry, A pleasure listening to him.
  • NI
    Nate I.
    5 February 2020 @ 18:23
    TWS is a good platform, but I think Peterffy understated the competition from ThinkorSwim. I use both nearly all day everyday and IMO there are definitely things about ThinkorSwim that are superior. Huge kudos to Peterffy's comment about how young people want to throw away America in favor of socialism. That one really hit home with me. I couldn't agree more as my family came from communist Russia. American youth clamoring for communism are horribly uninformed and it's extremely worrisome. The appalling ignorance of American youth pose a far greater danger to the US than Russia or China. We need a $trillion dollar defense budget dedicated to teaching history - not to building bigger battleships. Thanks to RV for having Peterffy on. Hopefully he'll be back for another interview. Great guy!
    • SC
      Sean C.
      6 February 2020 @ 20:23
      "young people want to throw away America in favor of socialism"? The majority of young people are no more socialist than the old white farmers taking government subsidies. You've been reading too much Republican Fear Mongering.
    • BT
      Bryan T.
      6 February 2020 @ 23:05
      i agree. I am still with IB...but moved most of my trading funds to TDA and the Thinkorswim platform a while back so I too use them both and have come to really appreciate the form and functionality of TOS over IB's Trader Workstation - TWS. The whole TDA experience is superior to IB, customer service, communicating with them... I could go on but I've made my intended point. I'm a TDA fan.
    • NI
      Nate I.
      9 February 2020 @ 20:11
      To Sean C. You might want to have a look at Bernie Sanders numbers. Young people might not be sophisticated enough to know that it's socialism, but they are on-board big time for the free s*it Sanders is promising. I would also point out that Alexandria Ocasio-Cortez was elected to congress. That wasn't a bunch of libertarians who cast those votes for her.
  • IM
    Istvan M.
    9 February 2020 @ 20:09
    Jo munkat tamas
  • ET
    Eduard T.
    9 February 2020 @ 02:34
    Excellent! Thank you
  • AL
    Alfonso L.
    8 February 2020 @ 23:45
    I liked his idea of the randomized delay on liquidity removing orders. Sounds like that would make the market a bit more orderly.
  • vm
    vaz m.
    7 February 2020 @ 15:15
    I am so gratefull for this interview. Thank you Mr. Peterffy for your time.
  • NR
    Nelson R.
    6 February 2020 @ 23:35
    Thomas is a self made billionaire that made his billions making things better for others. I am a huge fan of his, he is also a survivor of the horrors of socialism, and strongly opposes it in all its forms. Thanks for bringing him on RV.
  • ra
    rehan a.
    5 February 2020 @ 23:52
    Time for market structure week by Ed H !
  • GD
    Gianluca D.
    5 February 2020 @ 17:59
    Great story, what an amazing guy. An inspiration
  • AR
    Anthony R.
    4 February 2020 @ 23:24
    That one down-vote on the video must be a fat-finger. How do you down-vote Mr Peterffy? Old school class, all the way.
    • DS
      David S.
      5 February 2020 @ 15:36
      A down vote without a comment is difficult to interpret. DLS
  • PC
    Peter C.
    5 February 2020 @ 06:12
    Really enjoy listening to Thomas Peterffy and am 1 of his happy customers at IB
  • WB
    William B.
    5 February 2020 @ 04:21
    Thomas Peterffy. An American Hero.
  • JB
    John B.
    5 February 2020 @ 00:12
    These are the kinds of interviews that make RV worth any price. Straight to the point, actual insight from people who really live it and not just repeating things that I can find with a google search in 10 minutes.
  • MR
    MARK R.
    4 February 2020 @ 22:24
    I have had the pleasure to meet TP on a few occasions over the years. He was my geeky idol when starting out in this business and my uncle worked with him on his first incarnation of the hand-held on the floor waaaay bk in the day. He has seen so much and is always so generous with his time and the knowledge he shares with the youth. A true master in electronic trading along with Nader Tay and Peter Levine. It is these sort of interviews I see here and read lately that reminds me how much info you can get out of just listening to people who has been there seen it and made the T shirt!!! Mark Ralph
  • IS
    Ionel S.
    4 February 2020 @ 20:13
    nagyon szépen köszönöm mr Peterffy!
  • DK
    Daniel K.
    4 February 2020 @ 15:55
    Love this guy
    • JH
      Jesse H.
      4 February 2020 @ 19:00
      Haha - my thought exactly within the first 5 min. This guy rocks. Thanks, RV. Awesome.
    • JH
      Jesse H.
      4 February 2020 @ 19:03
      This man is incredibly humble. My goodness. Lol.
  • ME
    Michael E.
    4 February 2020 @ 12:22
  • Nv
    Nick v.
    4 February 2020 @ 12:16
    A legend. Best trading platform, in safe hands
  • HK
    H K.
    4 February 2020 @ 09:16
  • FM
    Federico M.
    4 February 2020 @ 08:23
    I would love to see Mike Green sit down with Thomas Peterffy for proper in-depth interview.
  • BA
    Bruce A.
    4 February 2020 @ 08:10
    No bullshit. No hype. Straight up old style entrepreneur. Love it.