On July 13, Reuters characterized recent statements made by IBKR Chairman and CEO Thomas Peterffy as follows:
"Peterffy said lower trading volumes and tighter spreads will eat into revenue from the company's market-making segment."
"Interactive Brokers now generates about a third of its revenue from brokerage and the rest from market-making, but expects a 50-50 split within two years."
In addition, an IBKR press release of its Electronic Brokerage monthly performance metrics for June 2009 recently said that IBKR had "328 thousand Daily Average Revenue Trades* (DARTs) in June 2009, down 4% from June 2008."
Finally, on July 7, 2009, a Barrons column entitled "THE STRIKING PRICE DAILY" made the following statement:
"For the first half of 2009, an estimated 1.82 billion exchange-traded options contracts have changed hands. Average daily volume has increased 5 1/2% from last year, putting the industry on track toward a seventh consecutive all-time yearly high."
OK, now for the analysis:
1) The options market making industry is not experiencing the "lower trading volumes" that IBKR is experiencing, which is a conclusive demonstration that IBKR's declining competitive ability continues to manifest itself.
2) If brokerage revenue shrinks slightly, and market making revenue shrinks massively, then a 50/50 revenue split should occur at some point. IBKR tries to make it sound like that implies brokerage growth. Actually, it implies disastrous decline in market making.
3) This writer, whose understanding of IBKR share prices is obviously superior to that of anyone else (see "PLAY THE IBKR FLIP TRADE" if you doubt that), has an IBKR price target of $9.85 occurring within a small number of days of the next earnings release, and today sees no reason to modify his view one iota.
The no-name fund that has been referred to above is managed by idiots who have already lost 2% on their investment, and are about to get clobbered by the "IBKR FLIP TRADE." These clownheads are so stupid that they don't even know how to read Yahoo! message boards so that they can learn how to trade. Not only that, but they bought 10% of the outstanding shares in IBKR, and the stock did nothing in response to it. Indicating that the rest of the market doesn't respect either the buyer or IBKR. When the "IBKR FLIP TRADE" massacres them, and they dump that 10%, this writer's $9.85 price target will definately be realized as the stock plummets below it.