From Rags to Automation
By Tim Clark
Wall Street & Technology
June 13, 2006
Since 1977, when Thomas Peterffy left a job developing commodities-trading software to become an operations trader on the AMEX, he has refused to accept the status quo of the trading community. Rather, Peterffy has made it his mission to move the industry away from manual processes and closer to automation.
In the process, the one-time refugee from communist Hungary, who was born in the basement of a Budapest hospital during a 1944 bombing raid by the Russians, has constructed Interactive Brokers Group, a global provider of electronic broker-dealer services. In 1965, Peterffy abandoned his engineering studies in Budapest and moved to New York. Though he spoke no English, he soon landed a job as a draftsman designing highways for an engineering firm, where he one day volunteered to program a new computer. Peterffy says his background in computer programming still powers his ideals today.
"I think the way a CEO runs his company is a reflection of his background," says Peterffy. "Business is a collection of processes, and my job is to automate those processes so that they can be done with the greatest amount of efficiency."
A vast majority of CEOs have sales-oriented backgrounds, according to Peterffy, which is why their emphasis is on sales. While sales-oriented CEOs tend to hire the best investment bankers and analysts, Peterffy says, Interactive Brokers Group tries to hire the best computer programmers to build the best systems. "Having just gone through a period of rapid technological change, the business for the time being is doing well, which means that we appear to have made the right choice," he says.
Peterffy adds that technological changes will continue at an ever-increasing rate in the immediate future, which is the No. 1 reason he feels electronic markets are needed on a global scale. "[Electronic platforms] reduce costs and errors while increasing speed and transparency," he says. "Reduced transaction costs means greater volume."
Peterffy stresses that his goal, however, is to improve business opportunities for customers. "The only way to permanently grow our business is to give our customers better odds than investing in equities in other markets," he says. "Better odds means more commission, and the only way to accomplish this is through superior technology."
Out of the Back Office
Peterffy believes most CEOs view technology as a part of the back office, but as the global marketplace becomes more electronic, brokers also will have to compete on technology. "The new products that come into the marketplace could not be created or valued without computers," asserts Peterffy. "Banks and brokers that must rely on outside vendors usually do not understand the applications, which is a distinct disadvantage to firms that either have their own technology or use the technology of other firms in the business."
For several years, customers with more tech-savvy brokers have been able to directly access numerous markets simultaneously and manage one or more portfolios consisting of different classes of assets denominated in different currencies, Peterffy notes. "My view is that the business is becoming more digital by the day, and firms that are not supported by strong technology teams will be left behind," he says. <<<
Thomas Peterffy
Founder, Chairman and CEO
Interactive Brokers Group |
