Market maker LaBranche calls it quits
It has been for a while now since the tick size in Euronext’s options have been lowered to 1 cent in the options with lower premiums. This “premium based tick size” is into effect since June 2009 and expanded per April ’10. The profit margins have been under unprecedented pressure. On the other side of the Atlantic exchanges have introduced the penny increments in option pricing a few years earlier.
LaBranche quits
Today another victim has announced to throw in the towel when it comes to market making. LaBranche, once the main competitor of the late Van der Moolen as powerful specialist on the NYSE big board, has given up it’s role as liquidity provider on the CBOE. Earlier it headed for the exit at several other derivative exchanges. Last year the company lost $13 million in market making, the second consecutive year in losses. The official explanation : too tight spreads in the markets. Larger firms with focus on the electronic trading spirit take a larger chunk of the pie, while smaller traders which rely more on human trading skills are squeezed out.
Low tech in trouble
This news must sound recognizable for most market participants. IMC is making very decent profits as electronic market maker, and similar firms like Tibra and Optiver will have moved along with the market as well. The low-tech market makers will face a difficult time. There’s a tremendous challenge for LaBranche to find a way back to profits in the field of derivatives. They will return, smaller and more electronic. Maybe..
Transaction costs remain high
There’s just one thing which is hard to grasp. A large difference between Euronext Europe and its American counterparts is the transaction costs. The profit margins have been squeezed, but the transaction fees haven’t dropped by Euronext. Lower fees for investors as well as for market makers would stimulate trading in the low priced options. As one commenter has put it before : when do “they finally realise volume*cost is what they have to maximize, muppets“.
Shares.nl launched
Online broker Binck/Alex has started a new “Facebook-kind of” community website for retail investors in the Netherlands and Belgium. A possible competitor for the established IEX – which is partly owned by IMC. Wish shares all the best, but their chef should quit comparing their site with Facebook (or even Hyves). Really, if shares.nl looks like Facebook, then Amsterdamtrader.com is the Holy Bible.
Rumor has it AFS Group will move away from their main shareholder Phanos. The real estate company owns the majority of the shares in the broker since november 2007. Change in ownership won’t mean much for the running business at the Oudezijds Voorburgwal.
It has been for a while NOW since the tick size…
Do something about your missing bracket you low-tech people.
Jack,
The comparison to FB has to do with the fact that it’s also possible to acquire a network of people around you. As in friend connections or joining a special interest group. On ur personal profile. a.k.a. The Pit, you get to see all the updates of the action within ur network. There are a lot of things that are not like FB but I think it’s fair to say that there are some similarities.
grt
Joost
‘As one commenter has put it before : when do “they finally realise volume*cost is what they have to maximize, muppets“.’
Trader jack is quoting me now, nice !
‘There are a lot of things that are not like FB but I think it’s fair to say that there are some similarities.’
What trader jack means is that there are so many dis-similarities, that if you try to put FB and Shares.nl in the same sentence, it displays your kiddish understanding of when/what to compare/contrast .. so stop finding similarity with FB .. FB is the latest fad, but u look like a big loser if you try to cash in on the FB hype for your own start-up ..
Got it ?
When will the exchange finally lower the index options ticksize to cents ?
their system can’t even handle the current 1cent tick-size for equity-options when things are going crazy.
so I would say: never
the right question is:
when is NYSE Euronext Amsterdam gonna lower the fees?!
to MM, as well to retail-brokers.
Who wants to buy a stake in AFS ?
given the pay levels in an exchange, i dont expect NYSE Euronext Amsterdam to have enough senior management people to know when to bring down the costs to help sustain the volumes and increase their revenues/profits .. so the likelyhood of that happening is very low without the catalyst ..
now we if look at similar egs, back in 90s, Liffe was destroyed by DTB .. The progress of DTB could be gauged from the fact that in mid-1997 the DTB had less than 25% of the market. By October, it had more than 50%, and a couple of months later LIFFE was left with only 10%.
LSE was similarly getting decimated by Chi-x, LSE finally responded by rationlizing the fees and acquiring Turquiose ..
So is any exchange/MTF in any position to challenge Euronext ams in their monopoly/high fees ? for market making biz, there sure is no liquidity in available exchanges on which dutch options could be traded..
TOM will be the challenger so let’s hope that will put some pressure on Euronext
A BATS and Chi-X combination could also be a game changer.
In addition to its US and European equity markets, BATS also launched an options market in the US in May. Though the dominance of incumbent derivatives exchanges will be a much harder task than gaining market share in cash equities.
Fragmentation has proven liquidity isn’t sticky in the cash equities markets, though the hardest thing in derivatives will be shifting open interest because interoperability in clearing isn’t envisaged in that space for at least three years.
Exchanges are now increasingly looking to establish vertical silos across clearing and trading to become more competitive in derivatives trading. NYSE Euronext revealed plans to build its own clearing houses by 2012 ditching its relationship with LCH.Clearnet in the process, while the LSE has also said it is putting its own relationship with LCH under review.
Some market participants have indicated that they would prefer that Chi-X Europe did not become part of this inter-exchange battle, but rather remained an alternative venue to prevent a reversion to pre-MiFID monopolies.
If an entity like Deutsche Börse or Nasdaq OMX bought Chi-X, the concern will be whether we go back to where we were four or five years ago. Both BATS and Chi-X are very dynamic and more responsive to change than many exchanges, so there seems to be more potential for MTFs to provide better services.
any colour on the spate of redundancies at Tibra yesterday?
i heard imc has just let 54 people go as well…
“any colour on the spate of redundancies at Tibra yesterday?”
Traders or support staff?
It was traders who were quoting too wide
Yawn . I heard,I heard .Guys this is so 2010 !
Details or shut up .
Funny that people never hear anything positive . How could that be ???
6 guys gone from London office on Friday
what the story
“6 guys gone from London office on Friday”
Traders or support staff?
Traders being made redundant would be interesting, but if it’s support staff then I don’t see what the big deal is.
Six redundancies isn’t really noteworthy for a company the size of Tibra, especially when these days redundancy is just the nice way to fire underperforming staff.
what was the P&L decline on their trading book from 09 to 10 ? was this before the bonus round (obv) ?
‘especially when these days redundancy is just the nice way to fire underperforming staff’
this is old story .. barc and gs are old hand experts in this .. optiver and imc are brutal in getting rid of underperforming trading people ..
“what was the P&L decline on their trading book from 09 to 10 ?”
From memory they had gross trading profit of $210m in 08/09 and $160m in 09/10.
Don’t know when their bonus round is.
tibra does bonus twice a year ?
I receive my bonus every month !
me 2, wat a coincidence !
2 comments after 2 days, wow.
Labranche were never a serious options player, sounds like an old floor based firm that couldnt move with the times
kindly dont speculate, if u dont know, just wait for an insider to comment, or forever hold ur peace .. we can very well make the speculations of the nature u are making .. without any proof ofcourse ..
so what about the redundancies at tibra last week? does anyone have any colour?
the profits are down, they got rid of ceo, they dont know what the fuck to do .. what more color do u need ?
Thanks for the insight. You clearly hold a nuanced and well infomed view of the inner workings of the company in question.
yah clearly i am not an insider and dont hold any information, but if no insider is answering the question, are u going to keep harping on the same issue again n again .. use ur common sense as to what might have happened and move on pls ..
if its okay, how about you post details on how big your company was, revenues, P&L, number employees, traders, geography of operation, products traded re market making/options/stat arb/high freq/event/arb, number of traders, reasons for closure, any alphabay style stealing of money from the shareholders ?
As possibly the only public company in this field left, I invite you to check the latest set of figures available from its filing, as such information is public to its shareholders. Labranche Lurker
1 trader. 3 rookie traders
rest middle office and support
relax, I am and i work here
spent some time on company’s website and bloomberg ticker .. investor relation page has got lot of information .. bloomberg company news doesnt give anything startling .. 200 or so employees, 150mn market cap .. suprisingly they got structured pdt division ?! is that brokerage, i dont think they deal that stuff on their own .. cudnt find even where it says that they are throwing in the towel .. the share price is doing same as always .. actually its gone up nicely now .. if anybody has more info, juicy or otherwise pls do post .. it’ll help all the readers !
who is Labranche Lurker ?
thats me! as per above!!!
As stated above ( by me) , you can always ask question per mail.
Structured Products alive and well actually.. broker biz is US only, but you can always contact us in london if you wish, have you seen http://www.labranche.co.uk ??
http://forums.whirlpool.net.au/archive/762684
Just a quick update on those that were wondering about the Optiver Vs Tibra.
A judgement has been brought against Tibra Capital (au and uk) branches. It turns out, they used more than just some confidential information.
Plaintiff made the case that:
1. Employees whilst at Optiver were spending time setting up and developing Tibra trading platform
2. Employees whilst employed at Optiver took code and design documents, in once instance allowing them to pass the ASX validation program in record time.
3. Employees left Optiver violating their contractual non-compete obligations
Damages are yet to be decided. So if you’re looking to get into Tibra this may be a good oppurtunity to hedge future risks by asking for a bit more in salary. 😀
“A judgement has been brought against Tibra Capital”
ABSOLUTE BOLLOCKS.
The last action in the case was on the 17th of December, where access was granted to the confidential evidence, and the next directions hearing is set down for 4th February..
https://www.comcourts.gov.au/file/Federal/P/NSD681/2009/actions
Where are you getting this from? (And don’t say “whirlpool”)
http://forums.whirlpool.net.au/forum-replies.cfm?t=762684&p=-1&#bottom
from the response on ‘whirlpool’
NO JUDGEMENT HAS BEEN MADE, and there has been no credible evidence provided that supports the claims referred to.
it took optiver more than 3 years to even present a statement of claim in a format acceptable to the court. That is, they found it very difficult to explain to the court what they were actually trying to claim. after 2 or 3 goes, they were ordered to put on some evidence before the case proceeded.
their ‘evidence’ is basically non existent, and they have been thru 4-5 experts before they found one who would go on record trying to support their claims
they have no case, and they are slowly being milked by their very smart lawyers for millions in fees ($7m and counting)
top level lawyers like Mallesons are very clever – they cant have too many losing cases (otherwise they lose their reputation as being the top firm), but they are all about maximising revenue at the end of the day and they know that only picking winning cases provides a sub-optimal revenue result. of course some cases, they are not sure about – but that happens less than you think, and this aint one of them.
So they choose their ‘losers’ carefully. They go for complex, drawn out cases, with lots of grey areas, and milk their clients for all they can knowing that they wont win.
The Partner in charge is basically ‘taking one for the team’ and the optiver/tibra case is perfect – complex and sophisticated businesses with similar business activities and strategies – very easy to make an allegation of copying etc and at least make it look plausible (as they have done)
the amazing thing is optiver havent wised up to this since it became clear there was no actual evidence of wrongdoing.
in any case,
so long as they can make a case appear reasonable, they cant be accused of failing on their fiduciary duty
optiver are a powerhouse firm no doubt, but their attack on tibra is cheap and born of hubris (they didnt like their staff leaving and forming their own firm and think its not possible for anyone else to be successful in their space).
It will eventually be shown up as lacking in substance and the lawyers will move on to the next ‘milker’
the crap about a judgment is crap –
Re: have you seen http://www.labranche.co.uk ??
i dont see a career section, u dont have any hiring coming up any time in near future for london ?
also whats the details on the article ‘Market maker LaBranche calls it quits’ .. i cant seem to find any article with relevant details or even an announcement ..
Re: thats me! as per above!!!
do u work for the company ? are u a trader/sales/management/investor relation ?
also do u have the details on the abvoe article ‘Market maker LaBranche calls it quits – http://www.amsterdamtrader.com/2011/01/market-maker-labranche-calls-it-quits.html ’ .. i cant seem to find any article with relevant details or even an announcement ..
Re: the amazing thing is optiver havent wised up to this since it became clear there was no actual evidence of wrongdoing.
There are some smart as well as some stupid partners at optiver .. robert was full of hubris .. the smart partners have wised up and either quitting or standing up and consequently being forced out .. not a surprising outcome ..
There seems to be one anonymous sniper who knows more than me.. no filings on the above article have recently been posted on bloomberg CN. I figure that Peter Chapman has slightly dated information but who knows!
Also career section welcomed under “contact us” .. And yes I work for the company as many of you have already asked me!
Labranche Lurker, whats ur role in the firm ?
trader or management or some other role ?
for “contact us”, yes thats useful information, do u have any openings currently ?
6.05, you must be the winner of the BSer of the year reward !
First year tibra trader trying to suck up to your boss ??
@6:05am
Hey Danny, is that you?
Nice tutorial on top lawyers firms practices!
@6:05am
gud tutorial !
http://noir.bloomberg.com/apps/news?pid=20601109&sid=aaS8YoQAguvA&pos=10
[…] on this news as well. Phanos is the owner of well-known broker AFS Capital Management. As indicated earlier, AFS will be sold by Phanos. Now we know […]