Interactive Brokers Lands a Spot in the S&P 500

Trading activity has pushed Interactive Brokers’ stock through the roof, and the firm is getting a trade of its own: Today it is replacing Walgreens on the S&P 500.

Walgreens Boots Alliance (WBA) is leaving the index due to its pending acquisition by Sycamore Partners. Interactive Brokers, which was previously included in the S&P MidCap 400, has seen its stock (IBKR) price increase 35% so far this year and 95% over the past 12 months. However, the stock has been volatile, starting the year at above $45 a share before climbing to nearly $59 in February, only to fall to $36 in early April. It’s since risen to about $62, though it saw a high of over $67 earlier this month. Five years ago, it was trading at $13.

“It’s only taken us 48 years since we started trading on the floor of the AMEX,” Interactive Brokers founder and chairman Thomas Peterffy said in a live interview Tuesday with CNBC. “We didn’t expect this, because it has never happened [that] S&P will induct a firm that is still more than two-thirds owned by the original founders, or for that matter a firm that has less than 3,500 employees.”

There Are Options

Interactive Brokers saw an average of 3.5 million daily average trades on its online brokerage in July, which was a 27% increase over volume from a year prior, according to a recent disclosure by the firm. Its quarterly report published last month showed a 32% increase year over year in the number of customer accounts and a 34% increase in customer equity, at nearly $665 billion. The company’s growth simply follows the rising use of options trades, Peterffy said. “Most of our customers are professional options traders,” he said. “That’s why the firm has grown so greatly over the years.”

Of course, the company provides a range of trading services, which have expanded to predictions akin to betting:

• Last year, Interactive Brokers expanded to include trades on economic events, what it calls “forecast contracts.”
• That includes wagering via yes-or-no predictions on political events, such as whether New York State Rep. Zohran Mamdani will be elected as New York City mayor.
• The forecast trading service also includes a 3.83% “interest-like incentive coupon,” according to the firm.

Riding the Wave. While Peterffy said he expects the options trading market to keep growing, since it’s been rising over 54 years, the milestone of getting into the S&P 500 isn’t such a big deal. “Considering that I have been working at this for the past 48 years, it is not such a remarkable achievement,” he said in a statement to Advisor Upside.