Building Interactive Brokers
Thomas Peterffy made his fortune by bringing computers onto the trading floor earlier than almost anyone else. In 1977 he bought a seat on the American Stock Exchange and began trading options as an independent market maker. At the time, traders priced options with rules of thumb and printed sheets. Peterffy wrote software that calculated theoretical prices and gave him an edge in quoting both sides of the market.
His trading firm, which became Timber Hill, grew through the 1980s as it expanded to more exchanges and products. Peterffy is known for an episode in which he fitted traders with handheld computers on the exchange floor, at a time when such devices were not allowed, and later for connecting his systems directly to the Nasdaq order entry terminal by building a device that typed orders mechanically. These experiments helped push markets toward automated trading.
The brokerage side of the business, Interactive Brokers, began offering its electronic platform to outside customers in the 1990s. It aimed at active and professional traders with low commissions, wide access to global markets and sophisticated tools. Over time brokerage became the larger and more profitable part of the group, while the market making unit was gradually scaled back and sold. Interactive Brokers Group went public on Nasdaq in 2007, and Peterffy kept a large controlling stake through a holding company, which is the source of his wealth.
What Peterffy owns
His holdings center on one company:
- Interactive Brokers Group: an online broker giving clients access to stocks, options, futures, currencies and bonds on many exchanges around the world
- IBG Holdings: the entity through which Peterffy and other insiders own most of the economic interest in the operating business
- Real estate: homes in Florida and Connecticut
The company's public float has always been small relative to the insider holding, which means Peterffy's wealth tracks the value of Interactive Brokers closely. Over the years he has sold some shares and the company has expanded its public float, but he remains by far the largest owner.
Interactive Brokers has grown its customer base strongly since the 2010s, attracting individual investors as well as hedge funds, advisers and introducing brokers. It has generally avoided the payment for order flow model used by some rivals for its professional pricing tier, and it earns much of its income from interest on client balances and margin loans as well as commissions.
From Budapest to Wall Street
Thomas Peterffy was born in Budapest in 1944, during the Second World War, and grew up in communist Hungary. He studied civil engineering there, and in 1965 he left for the United States, arriving in New York with little money and speaking almost no English.
He found work as a draftsman at an engineering firm. When the company bought a computer, he taught himself to program it, and he quickly realized that programming skills could be valuable on Wall Street. He moved to a commodities trading firm, where he wrote software to analyze markets and price trades. That experience convinced him that a well designed model could outperform floor traders who relied on instinct.
After buying his exchange seat he worked long hours combining trading and programming. He has often described the early years as a struggle to persuade exchanges and regulators to accept technology on the floor. Peterffy served as chairman and chief executive of Interactive Brokers for decades. In 2019 he handed the chief executive role to Milan Galik, a longtime colleague, and stayed on as chairman of the board.
Public life and political views
Peterffy has been an outspoken commentator on economic policy, shaped by his childhood under communism. During the 2012 United States election campaign he paid for television advertisements in which he spoke directly to viewers, warning against what he saw as a drift toward socialism. He has been a donor to Republican candidates and causes, while also commenting frequently on market structure and regulation.
He has argued in interviews for clear rules on market making, transparency in trading and limits on practices he considers harmful to investors. His views on automation, which once put him at odds with established floor traders, are now mainstream in the industry he helped transform.
On the charitable side, Peterffy has given to educational and medical causes. He has kept most of his giving fairly private and does not run a large public foundation comparable to some other financiers. He lives in Palm Beach, Florida, and maintains ties with Connecticut, where Interactive Brokers has its headquarters in Greenwich.