Thomas Peterffy, chairman of Interactive Brokers, said the broker's move to curb speculative name trading is to protect the market and the clearing houses that do the business.
"We are concerned about the integrity of the market and the clearing system," Peterffy said on CNBC's Closing Bell on Thursday.
On Thursday, Interactive Brokers liquidated options trading on a handful of highly volatile stocks like GameStop, AMC Entertainment and Koss that have brought together an army of retail investors looking to crush hedge funds that are shorting out the names. The company also increased margin requirements, or how much money an investor using leverage and derivatives must have in their brokerage account for certain securities after buying shares.
"We are concerned about the ability of the market and clearing systems to continue providing liquidity through the onslaught of orders. And we are concerned about the financial viability of intermediaries and clearing houses," he added.
Clearing is the trustworthy transfer of securities and funds between buyers and sellers, an essential function on Wall Street. Some other online brokers are self-clearing companies, meaning they have their own clearing company, while others rely on a third party to clear the transactions. Robinhood, E-Trade, TD Ameritrade, Charles Schwab and Vanguard are among those who are already clear about themselves.
Peterffy said Interactive Brokers received no pressure from market makers to set parameters for stocks and options trading.
"The broker stands between these customers and the clearing house," said Peterffy. "So if some option holders are making money, the clearing house has to give us the money to give to our customers, while other option holders, sellers or buyers on their own side lose money, we have to collect money from them and give it to the clearing house our customers cannot pay their losses, we have to raise our own money. "
Interactive Brokers has $ 10 billion in equity to fund these payments if necessary, but Peterffy said he couldn't say the same about other brokers with complete confidence.
Peterffy also called what was wrong with GameStop's stock this week "illegal" and "manipulated". He said Interactive Brokers clients will be able to trade the speculative names once trading returns to "normal".
Peterffy also said he doesn't know if there are any big institutions on the side of GameStop's massive rally.
"May they all be individuals, but I doubt it because it takes a lot of money," Peterffy said.
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