Global trading platform Interactive Brokers isn't well-known in Switzerland, despite a sizable office in Zug. Jonathan Chait, the company's chief operating officer, spoke to finews.com about the company's plans.
At Interactive Brokers (IB), orders aren't executed by humans, but rather by machines or to be more precise, algorithms. The trading platform of the global electronic brokerage offers access to a large number of trading venues worldwide, as well as to 22 currencies from one single account.
The fully-automated nature of IB's systems and direct membership to the exchanges allow them to carry out transactions at much lower all-in execution costs, which includes commissions, exchange fees, and price slippage, than traditional brokers or big banks can.
In fact, some of the largest banks and hedge funds worldwide execute their trades through IB.
European Hub in Zug
«Our goal is to develop the best trading technology in terms of price and product diversity,» explains Jonathan Chait, chief operations officer of Interactive Brokers in Zug, told finews.com.
The company, which is widely known in the U.S. but hardly so in Switzerland, maintains its operational center for Europe in Zug, central Switzerland, where it has 120 employees of 1,200 worldwide. About two-thirds of those are software engineers.
Strategic Decision
Interactive Brokers, founded by the Thomas Peterffy, a native Hungarian, 40 years ago, decided in March to cease market-making activities and to focus on its fast-growing brokerage division.
with its high density of asset managers and banks, Switzerland is an interesting market for IB; however, the company has still a lot of work to do to convince financial institutions of the advantages of its proprietary brokerage system, Chait said.
Swiss Banking License an Option
The big reasons why Swiss financial institutions hesitate to work with IB? Its core technology is at home in the U.S. and IB is not a Swiss bank.
As a result, «we are thinking of applying for a banking license with Finma,» says Chait. Interactive Brokers’ Swiss subsidiary already hold a securities dealer license from the Swiss financial market supervisory authority. Thus the additional expenditure for a banking license would be manageable.
Rapid Growth of Assets Under Management
The persistent pressure on margins and the tendency to outsource asset management processes that aren't part of the core businesses gives Chait confidence that IB can grow the business in Switzerland too.
According to IB, the company executes some 1.3 million trades per day, a figure comparable with volumes at large investment banks. Assets under management amounted to $103 billion (as of May 2017), an increase of 42 percent from a year ago.
IB had a pretax profit of $761 million in 2016. The company is listed on Nasdaq's technology exchange. The company's employees own 83 percent of the firm.
Jonathan Chait is chief operating officer of Interactive Brokers and a member of its steering committee. In 2002, Jon moved from the trading operations to the company’s client services division and has acted as director of client operations globally. He joined the company in 1984, when company was still known as Timber Hill. The Canadian-American has spent more than two decades in Switzerland.
