Brokers Interactive Chairman Thomas Peterffy said the broker’s move to reduce trade in speculative names is to protect the market and the clearing companies that regulate the trades.
“We are concerned about market integrity and the cleaning system,” Peterffy told CNBC’s “Closing Bell” Thursday.
On Thursday, Brokers Interactive entered option trading to melt on a handful of volatile stocks such as GameStop, AMC Entertainment and Koss, which have cut shorts of hedge fund-looking retail investors in their names. The company also raised margin requirements, or how much money an investor needs to have using leverage and yields in their bankruptcy account after buying stock, on some securities.
“We are concerned about the potential of the market and the cleaning systems, through the elimination of orders, continue to provide liquidity. And we are concerned about the financial viability of intermediaries and the houses cleaning, “he said.
Clearing is the reliable transfer of securities and money between the buyer and the seller, an essential action on Wall Street. Some other online brokers clean themselves, meaning they have their own cleaning company, while others rely on a third party to clean the transactions. Robinhood, E-Trade, TD Ameritrade, Charles Schwab and Vanguard are among those already self-evident.
Peterffy said Brokers Interactive has not received any pressure from market makers to set parameters on stock and options trading.
“The broker stands between those buyers and the clearinghouse,” Peterffy said. “So when some custodians make money, the refinery has to give us the money to give to our customers, while other options custodians, sellers or buyers on the losing side we have to collect money from them and give it to the laundry. If our customers cannot pay for the loss we have to put up our own money. “
Brokers Interactive Equity has $ 10 billion to cover those payments if needed, but Peterffy said he can’t say the same about other brokers with full confidence.
Peterffy also called what has been going on GameStop stock this week “illegal” and “manipulative.” He said Interactive Brokers’ clients will be able to trade the speculative names once the trade becomes “normal” again.
Peterffy also said he doesn’t know if major institutions are on the tight side of the big GameStop rally.
“They may all be just individuals but I doubt because a lot of money is needed for this,” Peterffy said.
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