Question-and-Answer Session
Operator
(Operator Instructions)
We’ll take our first question from Niamh Alexander - KBW.
Niamh Alexander - KBW
I’d like to go back to your comments earlier, Thomas, about the counterparty caution that caused you maybe not to trade as actively in the Market Making operation? Can you expand a little bit on that, was it one particular counter party that you were concerned about or was it some clearinghouse risk?
Thomas Peterffy
My worry is that if one of the clearinghouse members is unable to come up with the margin, and as you know, there are several clearinghouse members among them there are many smaller ones. If they are unable to come up with the margin, the clearinghouse just comes into the market and closes out the position at any price that they are offered.
And this happened in ?87 and we know what havoc that can wreck in the market and in the closing prices. So what happens then is that, long expiration options can be marked up to very crazy prices, which then can reflect back on the holders of those long positions and then the next guy can come up with the margin, it can develop into a domino effect.
So in a situation like that, you want to be sure that you don’t have any large positions out there and for that matter, you can provide maybe some liquidity at that time.
Niamh Alexander - KBW
Okay. And just to be clear, you are no longer as concerned about that particular clearing member?
Thomas Peterffy
I didn’t say anything about a particular clearing member; I said that my fear is general. There is not one particular clearing member I am worried about. It is general and my fear is just the same as it’s been for the last three months. So we are still not providing liquidity for options further out than the six months.
Niamh Alexander - KBW
Okay. Thanks for clarifying that. And then if I could just move on to the customer trading activity, and we saw some really strong volume in the brokerage business, congratulations. And can you help me understand if there was any mix shift in customers if maybe some more of the institutional customers participated, if there was any unusual activity in the professional customer through the quarter?
Thomas Peterffy
There was no unusual activity; there is a steady shifting in our customer base from the less professional towards the more professional; from the smaller accounts to the larger accounts; from the less frequently trading accounts to the more frequently trading accounts.
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