Interactive Brokers interested in Refco Securities

U.S. broker-dealer Interactive Brokers Group (IBG) has the highest known offer on the table for Refco's futures unit, at about $858 million, after a group led by J.C. Flowers & Co. suddenly withdrew from the fray on Monday.

Whether IBG bids on Refco broker-dealer Refco Securities would depend on what the due diligence process determines, Peterffy said in an interview.

IBG is the parent of global market-making and proprietary firm Timber Hill and global customer brokerage Interactive Brokers LLC.

IBG is the largest privately-held securities firm with capital of $2 billion and $18 billion in assets and trades equities, options, futures, forex and bonds on 50 exchanges and markets in 14 countries around the world.

The Refco Securities unit of Refco Inc. said it began to wind down its business on Oct. 14.

The U.S. Securities and Exchange Commission had at that time also said that it restricted the ability of Refco Securities to make withdrawals of equity capital or unsecured loans or advances. ((Reporting by Chris Sanders, editing Bernard Orr; chris.sanders@reuters.com; Reuters Messaging: chris.sanders.reuters.com@reuters.net; 646-223-6343))

By Chris Sanders

NEW YORK, Oct 25 (Reuters) - Thomas Peterffy, whose company Interactive Brokers Group is the top known bidder for the futures business of bankrupt broker Refco Inc., is on a mission to get the world to trade securities electronically.

Peterffy, a Hungarian immigrant computer whiz who built his electronic trading company into the largest privately-held U.S. securities firm with capital of $2 billion and $18 billion in assets, has offered about $858 million for Refco's futures business in the six-way fight to win the sought-after unit.

"It wasn't long ago when nobody would listen to him," said Hans Stoll, professor of finance and Director of the Financial Markets Research Center at Vanderbilt University, who has known Peterffy for nearly two decades.

"A lot of vested interests don't want to be replaced by computers," Stoll added.

If Peterffy wins the Refco battle, he said it would quadruple the number of accounts at his firm and double customer deposits.

Peterffy added that with the Refco unit -- many of whose clients trade by phone or through floor brokers -- convincing its customers to trade electronically "is a matter of time."

"I can't imagine my grandchildren trading any way other than electronically," he said in an interview on Tuesday.

IBG, where Peterffy is chairman, is the parent of global market-making and proprietary firm Timber Hill and global customer brokerage Interactive Brokers LLC. It trades equities, options, futures, foreign exchange and bonds on 50 exchanges and markets in 14 countries around the world.

In the early eighties, Peterffy started Timber Hill as an equity market maker. One year later, Timber Hill became the first trading system where its brokers used handheld computers on the trading floor.

"He is driven by a single-minded objective to make trading more efficient and lower costs," Stoll said.

For now, Interactive Brokers Group has the highest known offer on the table for Refco's futures unit. At least six other groups have expressed interest in buying Refco's futures trading arm.

"Without purchasing Refco, it would take us three to five years to get there," he said.

Peterffy said his company may also be interested in acquiring Refco Inc.'s regulated broker-dealer unit, Refco Securities, depending on whether the due diligence process comes up clean. That unit had begun to shut down in mid-October.

He also said that should the merger work, he hinted lay-offs would be likely.

"With more efficient technology you would use fewer numbers of people with clearing and settling and order management."

New York-based Refco began disintegrating two weeks ago as its Chief Executive Phillip Bennett was charged with securities fraud over hidden debt. The scandal shook some clients' faith, spurring them to pull their assets. It went into Chapter 11 bankruptcy last week.

Source: Reuters