Author Topic: IBKR - Interactive Brokers  (Read 130112 times)

philly value

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Re: IBKR - Interactive Brokers
« Reply #20 on: March 10, 2015, 07:59:25 PM »
On the valuation, in the VIC writeup and the writeup just posted, the treatment of a substantial portion of the excess capital as effectively an excess asset seems a bit aggressive. I suppose it is possible that the % excess over regulatory requirements could be reduced over time, but has management shown any inclination to reduce this figure? The assumption here does make a sizable difference in returns on capital today and going forward.

I've thought previously about the GEICO comparison which the author obviously is implying. However, based on market cap, IBKR is already substantial enough today that it seems hard to underwrite the level of growth forecasted. Market cap is $13B today, if the business grows at 20%/yr for a decade and the multiple didn't decline, you'd be looking at a $80B business. Schwab, TD Ameritrade, and E*Trade have a combined market cap of $67B today. The business models are obviously very different, but at some point you wonder how much economic market share IBKR could capture. They do have the ability to tap significant markets that the others mentioned do not (smaller hedge funds, for example) but, as great as IBKR's product is, I also don't see your average retail investor being satisfied with the platform vs. the features you get at the higher cost brokerages.

Would like to hear other's thoughts especially on the size issue.


Rust Belt Capital

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Re: IBKR - Interactive Brokers
« Reply #21 on: March 11, 2015, 06:53:46 AM »
$13B mkt cap is a typo I'm assuming? It's ~1.9 billion as of this morning

philly value

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Re: IBKR - Interactive Brokers
« Reply #22 on: March 11, 2015, 07:04:29 AM »
$13B mkt cap is a typo I'm assuming? It's ~1.9 billion as of this morning

You're only seeing the publicly traded shares. If you buy IBKR you are buying stock in IBG Inc, which has a market cap of $1.9 billion. IBG Inc is a holding company that owns a 14.5% economic interest in IBG LLC. The rest is held predominantly by Peterffy.

Rust Belt Capital

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Re: IBKR - Interactive Brokers
« Reply #23 on: March 11, 2015, 07:10:14 AM »
Ahh I see, thanks for the heads u

KCLarkin

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Re: IBKR - Interactive Brokers
« Reply #24 on: March 11, 2015, 07:14:06 AM »
On the valuation, in the VIC writeup and the writeup just posted, the treatment of a substantial portion of the excess capital as effectively an excess asset seems a bit aggressive. I suppose it is possible that the % excess over regulatory requirements could be reduced over time, but has management shown any inclination to reduce this figure? The assumption here does make a sizable difference in returns on capital today and going forward.

Thomas has been pretty clear that the capital in the brokerage is not excess. Having that excess capital is part of IB's competitive advantage.

LowIQinvestor

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Re: IBKR - Interactive Brokers
« Reply #25 on: March 11, 2015, 07:19:38 AM »
(Newbie to IBKR)

Can someone explain why they believe IBKR is the lowest cost broker? They advertise as having the lowest commission rate. But it is based on 100 shares.
https://www.interactivebrokers.com/en/index.php?f=1590

If I have a Schwab account I can buy/sell $10M worth of Apple stock for under $10 (fee). If I placed the same order through IBKR wouldn't I pay significantly more based on their fixed pricing structure of (USD 0.005 per share). In this case more like a $400 commission.

What am I missing?

Thanks

philly value

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Re: IBKR - Interactive Brokers
« Reply #26 on: March 11, 2015, 07:33:56 AM »
(Newbie to IBKR)

Can someone explain why they believe IBKR is the lowest cost broker? They advertise as having the lowest commission rate. But it is based on 100 shares.
https://www.interactivebrokers.com/en/index.php?f=1590

If I have a Schwab account I can buy/sell $10M worth of Apple stock for under $10 (fee). If I placed the same order through IBKR wouldn't I pay significantly more based on their fixed pricing structure of (USD 0.005 per share). In this case more like a $400 commission.

What am I missing?

Thanks

For someone trading those volumes, the fixed pricing (0.005 per share) is unlikely to be the best option. IB also has tiered pricing, where the price depends on the number of shares traded and also on the type of orders you are putting through: https://www.interactivebrokers.com/en/index.php?f=commission&p=stocks2

writser

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Re: IBKR - Interactive Brokers
« Reply #27 on: March 11, 2015, 07:37:06 AM »
On average hardly anybody enters single orders for 100k shares AAPL. Almost everybody is better off paying $.005 per share rather than a $10 fixed fee per order.

Also IB allows you to collect rebates from exchanges.

And IB probably gives you better fills since it doesn't sell its order flow, as opposed to Schwab.
« Last Edit: March 11, 2015, 07:40:09 AM by writser »
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KCLarkin

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Re: IBKR - Interactive Brokers
« Reply #28 on: March 11, 2015, 07:57:10 AM »
Market cap is $13B today, if the business grows at 20%/yr for a decade and the multiple didn't decline, you'd be looking at a $80B business. Schwab, TD Ameritrade, and E*Trade have a combined market cap of $67B today.

If Schwab grows at 7% per year, it would also be worth about $80 B in 10 years. Is it conceivable that IBKR will be worth as much as Schwab in 10 years? 20%/yr seems unlikely buy 15% seems achievable.

writser

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Re: IBKR - Interactive Brokers
« Reply #29 on: March 20, 2015, 05:02:10 AM »
Just a brainfart: I really like IB as a broker and I would love to own the stock but it just looks to expensive for my taste. Has anybody considered setting this up as a pair trade? E.g. long IBKR, short AMTD and/or ETFC. All brokers have relatively high valuations, if you can set this up with low margin requirements it might be a nice bet 'on the side' that IBKR will perform better than its competitors.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.