IB Communiqué - October 6, 2006

IB is hard at work as we continue to lead the trading industry in technological innovation. To ensure that you continue to lead the market in trading, we'd like to keep you abreast of the latest news and enhancements.

ISE Stock Exchange Midpoint Match

The International Securities Exchange (ISE) Stock Exchange, LLC now offers its Midpoint Match facility that allows US stock traders and investors to buy or sell at the average of the bid and ask price, instead of having to buy at a higher ask price and sell at a lower bid price. This unique matching platform is now available to IB customers and furthers the quest of professional traders and investors to minimize their trading costs. Customers choosing IB SmartRouting^SM will automatically be able to take advantage of Midpoint Match as an additional routing destination for price improvement. Over the coming weeks the ISE Stock Exchange will be increasing the number of stocks listed. For more information on Midpoint Match, click here and for exchange hours and available listings click here .

New Products

We have recently added NYMEX physical energy futures, CME (Globex) Korean Won futures, CME (Globex) Chinese Renminbi futures, CFE BuyWrite Index futures, and Singapore Exchange FTSE/XINHUA China A50 futures. To view details on these new futures contracts and all our available products, see our Exchange Listings page.

In addition, the CFTC has recently approved the FTSE XINHUA China 25 Index and the Hang Seng China Enterprise Index for trading by US residents.

TWS Enhancements

Since we last spoke, we have introduced the following enhancements to the Trader Workstation:

Several chart enhancements, including the addition of Fibonacci trend lines, and the ability to write and import your own chart indicator using Java.
A new template to create Option/SSF combination orders.
The ability to create multiple combination orders at the same time from the new "Multiple" combo tab on the Combination Composition box.
Price histograms in BookTrader that show trading volume for the day at each price level.
The ability to automatically attach an opposite side limit or market order to a combination order. This feature creates a new buy or sell combo order with the legs reversed.
Import market data from a formatted text file into ticker rows on a TWS trading page.

For details on these and all TWS upgrades, see our release notes.

TWS API (Application Program Interface)

We are constantly at work enhancing our TWS API technology, which allows you to:

Rapidly place significant numbers of orders;
Subscribe to market data, market depth, and the market scanner;
Extract historical market data and trade data; and
Create automated rule-based trading systems that take advantage of IB's high-speed order routing functionality and broad market depth.

The APIs let you trade the same products you can trade using TWS, including stocks, options, futures, forex, and bonds, and support multiple programming languages, including DDE for Excel, Java, Visual Basic 6.0 and .NET for ActiveX, and C++.

The latest enhancements to our TWS API offerings include support for the following:

Volatility Orders, which allow you to trade options based on volatility with automatic delta hedging;
Historical data queries and scanner subscriptions that display in your Excel spreadsheet;
Subscriptions to options market implied volatility and delta computations, and option model values;
Bond trading;
Multiple order types, including trailing stop limit orders;
Financial Advisor account configuration and order allocation.

For more information on these and other TWS API-supported features, see the API Release Notes and the API Reference Guide.

New Third-Party Educator Program

IB has just launched a new educator program, which allows third parties to offer their tutoring services to IB customers. We have categorized these services into five groups for easy viewing: Trading, Products, Trader Workstation, Industry, and Miscellaneous. We also provide IB customers with the ability to rate these services. All terms of engagement are between the third-party provider and the IB customer.

In addition, we have added new sorting and voting features to our third-party programming consultant, Commercial Tool third-party applications, and Freelance third-party application programs. To view the offerings, submit an application to offer services, or to vote, see the Third-Party Educator, Programming Consultants, Commercial Tools, and Freelance Tools pages.

New OCC and CDCC Threshold for Automatic Exercise

Effective with October expiration, the Options Clearing Corporation (OCC) and Canadian Derivatives Clearing Corporation (CDCC) will implement a change to the dollar threshold at which in-the-money customer equity options will be automatically exercised. Currently, equity options which are in-the-money at expiration by an amount equal to or greater than $0.25 per share are automatically exercised by the OCC and CDCC on behalf of Interactive Brokers unless contrary instructions are provided. Under the lower threshold customers no longer will need to submit to IB contrary exercise instructions on equity options that close in-the-money between $0.05 and $0.24 per share. If on the other hand, you wish to lapse an option position that is $0.05 or more per share in-the-money, a contrary instruction will be required. As of the October expiration and moving forward, this threshold is to be reduced to $0.05 per share.

Please note that this change does not impact the automatic exercise threshold at expiration for either index or currency options. In addition, this does not change the time frame or manner in which contrary exercise instructions (i.e. instructions not to exercise an option otherwise subject to this automatic exercise threshold) are to be provided to Interactive Brokers by the customer. A copy of the OCC Information Memo outlining this change is available at www.optionsclearing.com.

Options Intelligence Report and EFP Reminder

For those of you who haven't already read about our Options Intelligence Report and EFPs, we encourage you to find out more about two very important programs that IB launched earlier this year.

As most professional traders know, options market prices have built-in information which is not only useful to traders in the options marketplace, but also to traders in the stock and futures markets. Each hour starting at 12:00 until 16:00 ET, we post our Options Intelligence Report. This report shows the top twenty symbols for implied volatilities, volatility gainers, volumes leaders, volumes gainers, volatility losers, implied/historical volatility, put/call ratios, and call/put ratios, along with written commentary from our trading desks. As an IB customer, you also have the benefit of seeing these indicators and others in real-time, using our TWS Market Scanner window. Visit our Options Intelligence Report page to view hourly updates, and for more information on how to read the options report indicators.

Interest expense and interest income offsets can be the largest component of your trading costs. An Exchange for Physical (EFP) trade allows the swap of a long or short stock position for a Single Stock Future (SSF). SSFs have an interest rate built into their price that is determined competitively by numerous market participants, rather than a single broker. EFPs can save you financing costs on your long positions and increase the income earned on your short positions. IB makes it easy to compare interest saved and interest earned by displaying the EFP spread on an annualized basis net of dividends. For a detailed explanation of EFPs, click here.

2^nd Annual IB Collegiate Trading Olympiad

Interactive Brokers is pleased to announce the 2^nd annual Collegiate Trading Olympiad. Last year we gave away over $300,000. This year we plan to give away $400,000, and will consider all participants for employment opportunities at Interactive Brokers. IB started the trading Olympiad to highlight the growing importance of technology in trading and to encourage students to consider a career within the capital markets industry. The competition will begin in January and students who join will be required to design a program trading application in Excel, C++, Java, or Visual Basic. If you know of an undergraduate or graduate student who would be interested in participating in the Olympiad, please have them visit the IB Olympiad page.