Thomas Peterffy has been battling inefficiency in the financial markets for three decades. Since he arrived in New York in 1965 speaking no English, the Hungarian-born computer-programmer-turned-options-trader has pushed numerous exchanges to embrace electronic trading and has built his Greenwich, Connecticutbased firm, Interactive Brokers, into one of the country's biggest securities-trading houses. Now the 61-year-old billionaire is taking on a new challenge: single-stock futures.
Last month Interactive Brokers bought a 40 percent stake in electronic stock futures exchange OneChicago, making Peterffy's firm the market's biggest single owner. (The Chicago Mercantile Exchange, the Chicago Board Options Exchange and Chicago Board of Trade, which co-founded One-Chicago in 2001, retain smaller stakes.)
OneChicago has largely failed to live up to the high expectations that surrounded its launch, but lately its volume has started to grow exponentially as investors have become more familiar with stock futures and exchange officials have begun to pitch new uses for them (Institutional Investor, December 2005). In particular, hedge funds and other traders have taken to using the futures as an alternative to borrowing shares when short-selling.
Peterffy, who also is part-owner of and market maker at the two-year-old Boston Options Exchange, is intimately familiar with OneChicago: Interactive Brokers' Timber Hill subsidiary has done business on the stock futures market from day one. He says he hopes to attract more volume to the exchange by bringing to bear his firm's customer base and advanced technology. Though light on details, Peterffy is supremely confident in his bet.
"This is a mechanism that hedge funds, professional investors and traders will find just too compelling to ignore," he says of OneChicago. He won't disclose how much Interactive Brokers paid for its stake -- sources say it's less than $10 million -- but maintains that only a significant ownership position will allow him to achieve his goals. "We find that you must have a large stake -- or stick -- in order to get an organization to move quickly and efficiently."
