CHAPTERS
- 0:00 – 1:37
Meet Thomas Peterffy and the Colossus Profile
David Senra introduces Peterffy's staggering wealth and Interactive Brokers' efficiency, and explains how he found the Colossus profile by Dom Cooke. The profile opens with the writer arriving at Peterffy's Aspen house, where Peterffy is surprised anyone would travel to meet him.
- •Peterffy is 81 and worth $80 billion
- •Interactive Brokers made $3.7B profit on $5.2B revenue in 2024
- •Senra found him through a Colossus profile and called its founder
- •Peterffy was surprised the writer flew in from London instead of using Zoom
- 1:37 – 3:13
Childhood in Budapest and the Metal Bathtub
Peterffy was born during a Soviet bombing raid and grew up poor with an absent father. He learned about capitalism from his grandmother's French classics and ran early ventures selling gum and hauling scrap metal.
- •Born in 1944 during a Soviet bombing raid; father fled when he was two
- •Learned about capitalism from Balzac, Hugo and Zola
- •Cut gum sticks into pieces and sold them at school
- •Organized children to collect scrap metal, including a huge bathtub
- 3:13 – 6:34
Arriving in America and Learning to Program
At twenty-one Peterffy reached West Germany and then New York, where he worked at a highway engineering firm. He taught himself to program an Olivetti desktop computer, cutting twenty-minute calculations down to thirty seconds.
- •Got a short-term visa to West Germany, then applied to immigrate to the US
- •Landed in New York in December 1965
- •Volunteered for the unused Olivetti Programma 101
- •Built a library of programs that colleagues lined up to use
- 6:34 – 8:38
Ramp Sponsor Break and Into Wall Street Consulting
After a Ramp sponsor message about automation, Senra returns to the story. Peterffy meets fellow Hungarian Janos Arany and begins consulting for Wall Street firms, which introduces him to finance.
- •Peterffy wrote programs for client reports like price-to-earnings and book value
- •Janos Arany became the first of several people who changed his trajectory
- •Arany introduced him to psychiatrist Henry Jarecki
- 8:38 – 11:37
Working for Jarecki: Silver, Comex and Automated Quotes
Jarecki, who ran a bullion trading firm, asked Peterffy to model a silver strategy. Peterffy built a system that printed bid/ask quotes from math rather than intuition, and he described himself as a programmer rather than a trader.
- •Comex used a prehistoric pit and handwritten prices
- •Peterffy said Wall Street felt like Alice in Wonderland
- •He built a system from scratch that printed quotes on green bar paper
- •In a 1971 Barron's interview he predicted staff could go on permanent vacation
- •By 1976 he led eighty programmers
- 11:37 – 13:50
Break With Jarecki and Going Out on His Own
Peterffy saw wide spreads at the Chicago options exchange and wanted to trade stock options, but Jarecki refused. Having watched his boss succeed, he concluded he could too, left with $200,000 and bought an American Stock Exchange seat.
- •Jarecki refused to expand into stock options
- •Peterffy had invented an options pricing equation and tested it on silver options
- •He concluded that if a psychiatrist could figure out markets, so could he
- •He learned not to let conventional wisdom cloud his mind
- •He bought an exchange seat for $36,000 in 1977
- 13:50 – 15:29
Pocket Sheets, Early Losses and the Birth of Timber Hill
On the AMEX floor Peterffy used folded computer sheets in his pockets while others thought he was mad. After losing half his capital on one trade, he began hedging everything and rebuilt, founding Timber Hill in 1982.
- •Printed fair-value sheets distributed among pockets by stock
- •Traders watched with fascination and unease
- •He lost half his capital on one bad trade
- •He hedged every trade and rebuilt from 1977 to 1982
- 15:29 – 19:31
Tapping the Data Feed and Hiring Women as Traders
Injured and confined to his office, Peterffy cut into a Quotron data wire with an oscilloscope to get real-time prices. To get around specialists who ignored him, he hired six women to trade for him, then an anecdote about a bet involving Melvin Van Peebles and the film Trading Places.
- •He tapped the Quotron wire after the company refused to sell him data
- •His algorithms spotted options trades faster than anyone
- •Hired women to trade, and specialists fought to fill their orders
- •Aaron Russo bet that a filmmaker couldn't last a year as a trader; Peterffy won
- •Russo went on to produce Trading Places
- 19:31 – 22:25
Handheld Trading Computers and the Color-Coded Screen
Specialists forced Peterffy to become a market maker, so in 1983 he invented a handheld trading computer. Exchanges banned the devices, so he created a color-coded display read from across the room.
- •Handheld devices needed updating after five trades, with clerks running them back to the office
- •The Chicago exchange banned analytical devices on the floor
- •The NYSE allowed monitors only thirty feet from the pits
- •Digits flashed as colors that traders learned in a day or two
- 22:25 – 26:26
First Fully Automated Trading System and the Typing Robot
In 1987 Peterffy achieved the automated trading system he had envisioned in 1971, by hijacking a Nasdaq terminal's data line. When Nasdaq demanded keyboard entry, he built a robot that typed orders. Timber Hill then grew rapidly and he turned down Goldman Sachs offers.
- •Fully automated trading came sixteen years after his 1971 prediction
- •He wired a Nasdaq terminal into his own computer
- •Nasdaq's keyboard-entry demand was answered with mechanical typing fingers
- •Timber Hill made $25M and then $50M in following years
- •Goldman offers up to $900M were rejected; he named a $3B price
- 26:26 – 28:49
Launching Interactive Brokers and Leaving the Speed Race
Interactive Brokers launched in 1993 but waited for markets to go electronic. As floor traders became obsolete, they became customers. Peterffy declined to join the microsecond race that Timber Hill lost, because market making no longer interested him.
- •Interactive Brokers was a solution to a problem that didn't yet exist in the 1990s
- •Floor traders moved to screens and became customers
- •Market making turned into a speed contest involving microwave towers
- •Peterffy said he feared the cost and no longer found market making interesting
- 28:49 – 30:31
The IPO and a Lean, Automated Brokerage
Peterffy took Interactive Brokers public in 2007 mainly for advertising, using a Dutch auction that saved $80 million. He shut down Timber Hill in 2017, leaving a lean brokerage with few employees, mostly engineers, and very low fees.
- •The IPO was for public name recognition, not capital
- •A Dutch auction saved $80 million and avoided a roadshow
- •Timber Hill closed in 2017 after forty years
- •The firm has four million customers and three thousand employees
- •Value grew from $12B at IPO to over $120B
- 30:31 – 31:42
Common Sense, Staying Active at 81 and Closing Scene
Peterffy credits hard work and common sense, says he has never read a business book or been to Costco, and stepped down as CEO in 2019 but remains chairman. He says he's proudest of the money saved for customers, and the profile ends with him checking the markets.
- •He summed up his story as hard work and common sense
- •He stepped down as CEO at 75 but still owns nearly 70%
- •He now runs sales and marketing and is learning as he goes
- •Proudest of saving people money and making markets more efficient
- •Senra notes he made $1.7B during the three-hour interview
