The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

Present at the Creation

Thomas Peterffy, one of the architects of the modern securities market, is concerned that exchanges and regulators have little control over the marketplace.

“Technology, market structure and new products have evolved more quickly than our capacity to understand or control them,” he said in a 2010 speech in Paris at a meeting of the World Federation of Exchanges. For him to tell the world’s top exchange executives of such concerns is like Steve Jobs or Bill Gates fretting that technology destroys people’s attention spans and turns people into instant gratification junkies.12

Peterffy was one of the first traders to use technology to trade stocks and options. His firm, Timber Hill, is one of the world’s most influential trading firms. Peterffy eventually founded an online, discount brokerage firm, Interactive Brokers, to offer investors professional level trading tools. Since the flash crash, Peterffy changed his business model.

Peterffy instructed his Timber Hill market makers to stop making markets in 50 exchange-traded funds. He now closely watches market conditions to determine if his firm should widen prices, and reduce the size of trading commitment. Many other trading firms base their prices and liquidity—the amount of securities they are willing to buy or sell—off Timber Hill’s markets. If Timber Hill steps away from the market, other firms are likely to follow, and investors may find that prices for stocks, commodities, options, and futures are worse ...