Rather Than Hedge Currencies, Interactive Brokers Made Its Own

发表于 2011-02-11 13:00 | 阅读 114 次阅读

Thomas Peterffy, chief executive of Interactive Brokers Group Inc. (IBKR), has built hand-held devices for stock-options trading, financial exchanges and a company that is one of the world's biggest options traders. 
He can also cop to his own currency, the "Global." 
Five years ago, Greenwich, Conn.-based Interactive Brokers looked across its far-flung operations–currently 27 countries, 80 trading venues and counting–and decided that conventional foreign-exchange hedging didn't make sense. 
"To be completely U.S. dollar-centric is an expensive proposition," said Paul Brody, chief financial officer for Interactive Brokers. "You'd end up doing lots of trades, paying the market spread, and grinding out hedges all the time." And who knows the cost of trading better than a broker? 
Peterffy's company–a pioneer in the formulas and hardware used to calculate options prices–elected instead to hold company equity in a basket of currencies, dubbed the Global. The mix reflects the importance of different jurisdictions to Interactive Brokers' business as well as their stature in the world's financial system, Brody said. 
Into each unit of the Global goes 55 U.S. pennies, 24 European cents and three British pence. Add 10 Japanese yen, three Australian cents and four Canadian cents and you get an idea of Interactive Brokers' international currency exposure, which has changed little over the years. 
The combination has helped insulate the company from shifting forex winds, Brody said. "We've found we're more likely to have stable equity if we hold a diversified basket rather than betting on any one currency going up or down." 
On Tuesday, one Global was worth $1.11947, roughly where it was at the end of 2007. Over the last three years, the Global's quarterly value versus the U.S. dollar has stayed within a 10-cent range, moving as low as $1.06 and as high as $1.16. 
Interactive Brokers has embedded the Global measure into its market-making business, which involves the firm providing liquidity on exchanges and electronic platforms by taking the other side of investor orders. 
During the course of a normal day–which can see Interactive Brokers execute nearly one million transactions–the firm with each trade electronically recalculates its other prices in the market, applying minute tweaks aimed at maintaining its preset currency targets and ensuring that big positions don't accumulate in any one monetary unit. 
"It's expensive if you build up a position and then have to pay the market to take it off your hands," said Brody. 
The novel concept has sometimes vexed analysts and investors parsing Interactive Brokers' quarterly results, which are reported in U.S. dollars. It is analogous to keeping houses in 27 different countries and reporting the combined rent in a single currency, making it hard to tell how much the rates may have changed at any one property. 
Brody acknowledged the concept is "somewhat different than what others do." But investors can get more familiar with the Global by trading it against other currencies through Interactive Brokers' online workstation, where it was recently introduced. 
"People who invest in our stock, and maybe others who view the world as we do, may want to trade that product since for us and maybe for others it's a meaningful measure," he said. 


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