Interactive Brokers Group - Earnings Call - Q1 2025

Executive Summary

• Record topline and operating leverage: GAAP net revenues rose 19% YoY to $1.43B and adjusted net revenues to $1.40B; GAAP diluted EPS was $1.94 and adjusted EPS $1.88, with a 74% reported (73% adjusted) pretax margin. Commission revenue hit a record $514M on strong volumes (stocks +47%, options +25%, futures +16%).
• Customer growth and activity accelerated: Accounts +32% YoY to 3.62M, total DARTs +50% YoY to 3.52M, customer equity +23% YoY to $573.5B; sequential DARTs +13% QoQ.
• Capital actions and near-term tailwinds: Dividend increased to $0.32/quarter and a 4-for-1 forward stock split announced (record 6/16/25; trading split-adjusted 6/18/25). SEC fee rate drops to zero effective May 15, providing a cost tailwind to execution/clearing from mid-Q2 onward.
• Estimate context: Q1 revenue slightly beat S&P Global consensus ($1.407B actual vs $1.405B est)* while EPS was essentially in line/slightly below on a split-adjusted basis (Primary EPS $0.47 actual vs $0.483 est); results were driven by record commissions while lower benchmark rates pressured seg cash yields within NII.

What Went Well and What Went Wrong

What Went Well

• Record commissions and total net revenues on broad-based volume strength: commissions +36% YoY to $514M; total net revenues $1.43B. “Quarterly commission revenue was a record… as were total net revenues” (CFO).
• Scalable model drove high profitability: reported pretax margin 74% (73% adjusted) vs 72% a year ago; expenses well controlled (compensation 11% of adjusted net revenues).
• Robust client growth and engagement: accounts +32% YoY to 3.62M; DARTs +50% YoY to 3.52M; margin loans +24% YoY to $63.7B; credits +19% YoY to $125.2B. “We added 279,000 new accounts, a record… Total account growth was 32%”.

What Went Wrong

• NII headwind from lower rates: NII +3% YoY to $770M, but lower yields on segregated cash offset higher balances; NIM 2.10% vs 2.41% prior year. CFO noted a 100 bps YoY decline in average Fed funds rate; seg cash interest income fell 13%.
• Higher regulatory/market structure costs: execution, clearing and distribution fees +20% YoY to $121M, driven by higher SEC fee rate and new FINRA CAT fee.
• April post-quarter moderation: Management cited a ~10–12% early-April drop in margin balances amid volatility, with mix shifting to futures/FX and normalizing activity thereafter.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Interactive Brokers Group First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Nancy Stuebe, Director of Investor Relations. Please go ahead.

Nancy Stuebe (Senior Director of Investor Relations)

Thank you. Good afternoon, and thank you for joining us for our First Quarter 2025 earnings call. Joining us today are Thomas Peterffy, our founder and Chairman; Milan Galik, our President and CEO; and Paul Brody, our CFO. I will be presenting Milan's comments on the business, and all three will be available at our Q&A. As a reminder, today's call may include forward-looking statements which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. Our actual results and financial condition may differ, possibly materially, from what is indicated in these forward-looking statements. We ask that you refer to the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC.

We saw in the first quarter the value of a global automated platform that can leverage its low costs and offer a broad range of products and markets. After a solid January buoyed by post-U.S. election enthusiasm, market indexes around the world reached peaks in February in the U.S. and early March everywhere else after two years of nearly unbroken market increases. After that, cracks in the market began to show. News of DeepSeek and its less capital-intensive AI caused the market to give back half its gains in February. Talk about tariffs further accelerated the decline in March. The S&P 500 ended the quarter down 5%, but it was off 9% from its February peak. Six of the Magnificent Seven, the seven stocks that have dominated investor attention, fell significantly more than the market this quarter. However, Interactive Brokers does not need up markets to generate revenue.

Our customers were active and remained faithful to their favorite names. Of our 25 most active names, 22 saw net buying activity. We also saw global interest from investors, both institutional and individual, in opening accounts. Internationally, it remains the case that investors want broad portfolios, with some invested in securities in their home markets and a more significant portion overseas. Product-wise, the popularity of options continued, with our contract volumes up 25% to a quarterly record. Futures volumes were up 16%, also to a record, and stocks' volumes were up 47%. Our volume growth rates were ahead of industry volumes. What all of the above has meant for our business starts with strong account growth as we add more investors to our platform. In the first quarter, we added 279,000 new accounts, a record that well surpassed even the meme stock days of the first quarter 2021.

Total account growth was 32%, with even faster growth internationally. New accounts meant more cash in those accounts, which helped raise our client credit balances 19% to a record $125.2 billion. Our client equity rose 23% versus 2024 to $573.5 billion and was up 1% in the quarter despite the drop in the market. This translated into strong financial results. Quarterly commission revenue was a record, reaching $500,000 for the first time, as were total net revenues. We do not only focus on the top line, however. Our expenses remained well-controlled, and our adjusted pre-tax profit margin was an industry-leading 74%, the eighth time our adjusted pre-tax margin reached 70% or more.

In recognition of this, and as a sign of confidence in the strength of our business model, its growth potential, and of our capital base, we revisited our allocation of capital and decided to increase the amount of dividend we pay to $0.32 a quarter. We will also split the stock four for one to achieve greater liquidity in our float and to make it more affordable for shareholders to buy round lots in the company. With respect to M&A, we have not stopped looking at potential acquisitions. Realistically, there is a dearth of opportunities at a price that makes sense for us. In most cases, because target companies charge more and pay less interest than we do, when we run their accounts using our pricing, the income we estimate and put a multiple on is lower than what they wish.

We will keep looking, but in the meantime, for now, returning capital to shareholders via the dividend makes sense. In terms of how the business looked on the client front, our accounts and client equity once again grew fastest in Asia, with Europe a close second. Again, the trend of growing numbers of investors worldwide wanting access to international and particularly U.S. markets has not waned. Individuals saw the fastest account growth among our five client segments, with introducing brokers and proprietary traders not far behind. On the client equity side, individuals grew fastest, with introducing brokers and proprietary trading clients just behind them. Commission-wise, individuals saw the fastest growth, followed closely by proprietary traders, while net interest growth was led by individuals, followed by financial advisors. Regarding introducing brokers, our pipeline of potential clients remains healthy.

We are onboarding iBrokers to the platform and adding prospective ones to it at a steady pace. Onboarding iBrokers can take time. Since we offer a variety of ways for them to come onto our platform, the more complex the iBroker, the more time needed. We customize our offering for larger iBrokers' needs, with many needing special programming on our part to make sure their clients' investment, tax, and compliance needs are met. We are up to the task. In terms of new product introductions, we had a busy quarter. We began offering our ForecastEx contracts in Canada as well as across the EEA for professional clients, and we will soon roll them out to the general EEA population. We added to our growing portfolio of country-specific savings and investment accounts, launching Canadian First Home Savings Accounts this quarter.

We added four new cryptocurrencies: Solana, Cardano, Ripple, and Dogecoin, and last week introduced three more: Chainlink, Avalanche, and Sui, bringing our total offering to 11 cryptocurrencies. We launched trading of Nifty 50 index futures in Singapore and of equities in Slovenia. We recently made Forecast Trader available so clients using our IBKR Desktop or Trader Workstation platforms can simultaneously use Forecast Trader side by side. We continue to see increasing activity in our overnight trading hours. We offer over 10,000 U.S. stocks and ETFs, as well as U.S. equity index futures and options, and on the fixed income side, global corporate bonds plus U.S. Treasury and European and U.K. government bonds. We added a focused overnight plus day order type so clients can submit an order in the overnight hours that will remain open until the end of the next regular trading session.

Overall, our overnight volumes grew 250% from first quarter 2024 to first quarter 2025. We spent significant time this quarter on our client service and onboarding projects, our compliance and regulatory projects, and on further automating our internal operations to make them run more efficiently. We are as busy as we have ever been, with multiple projects touching all client types and geographic regions. We are excited to introduce them to you in the quarters ahead. Automating substantial parts of the brokerage business for client success is the heart of what we do. While market direction may appear significant in the short run, the long-term trend towards more global investing across multiple customer types and jurisdictions continues.

This trend and our ability to serve it with a much lower cost structure and a much broader product and toolset is what sets us apart and will continue to do so in the years ahead. With that, I will turn the call over to Paul Brody. Paul.

Paul Brody (Director and CFO)

Thank you, Nancy. Thanks, everyone, for joining the call again. We'll start with our revenue items on page three of the release. We are pleased with the financial results this quarter as we again produced record net revenues and pre-tax income. Commissions rose 36% versus last year's first quarter, reaching over $500,000,000 for the first time. We saw higher trading volumes from our growing base of active customers, with stock share volume up 47% and new quarterly volume records in both options and futures. Net interest income rose 3% year on year to $770,000,000, driven by higher balances and partially offset by lower benchmark interest rates. We saw strength from margin borrowing and from a decline in interest paid to customers, partially offset by lower yields on our segregated cash portfolio.

Other fees and services generated $78 million, up 32% from the prior year, primarily driven by higher risk exposure fees, with contributions from ForecastEx fees and from payments for order flow from options exchange-mandated programs. Other income includes gains and losses on our investments, our currency diversification strategy, and principal transactions. Note that many of these non-core items are excluded in our adjusted earnings. Without these excluded items, other income was $34 million for the quarter. Turning to expenses, execution, clearing, and distribution costs were $121 million in the quarter, up 20% over the year-ago quarter on higher volumes across all product classes. Execution and clearing costs were 19% of commission revenues in the first quarter for a gross transactional profit margin of 81%.

We calculate this by excluding from execution, clearing, and distribution $19 million of non-transaction-based costs, predominantly market data fees, which do not have a direct commission revenue component. As a note for the upcoming quarters, the SEC reduced its fee rate to zero effective this coming May 15, which should be a tailwind for execution and clearing costs thereafter. SEC fees totaled $27 million for the current quarter. Compensation and benefits expense was $154 million for the quarter for a ratio of compensation expense to adjusted net revenues of 11%, down slightly from last year's quarter. We remain focused on expense discipline, as reflected in our modest staff increase of 3% over the prior year. Our headcount at March 31 was 3,027. G&A expenses were $62 million, up from the year-ago quarter mainly on expansion of advertising.

Our pre-tax margin was 74% for the quarter, as reported, and 73% as adjusted. Income taxes of $91 million reflects the sum of the public company's $47 million and the operating company's $44 million. This quarter, the public company's adjusted effective tax rate was 18.2%, within its usual range. This is a return to expected tax levels from the fourth quarter, which benefited from the annual revaluation of our deferred tax asset and from some foreign tax credits. Moving to the balance sheet on page five of the release, the consistent strength of our business and our healthy balance sheet support our raising the dividend from $1 per year to $1.28, returning capital to shareholders while still maintaining an ample capital base for the current business and future opportunities. Our total assets ended the quarter 19% higher at $158 billion, with growth driven by margin lending and rising cash balances.

We have no long-term debt. Profit growth drove our firm equity up 19% to $17.5 billion. We maintain a balance sheet geared towards supporting growth in our existing business and helping us win new business by demonstrating our strength to prospective clients and partners, while also considering overall capital allocation. Turning to our operating data on pages six and seven, our trading volumes for all customers outpaced industry growth over the prior year quarter in all three major product classes. Options and futures contract volumes rose 25% and 16% respectively, and stock share volume rose 47%. On page seven, you can see that total customer DARTs were 3.5 million trades per day, up 50% from the prior year and strong in all product classes.

Commission per cleared commissionable order of $2.76 is down from last year due to both smaller average order sizes and earning higher rebates, which reduce the cost of a trade and are generally passed through to the customer. Page eight shows our net interest margin numbers. Total GAAP net interest income was $770 million for the quarter, up 3% on the year-ago quarter, and our net interest margin table, net interest income, was $794 million, up 4%. We include for NIM purposes certain income that is more appropriately considered interest, but that for GAAP purposes is classified as other fees and services or as other income. Our net interest income reflects both the strong increases in balances and the decline in benchmark rates, resulting in a rise in margin loan interest income and lower interest expense on customer cash balances, partially offset by lower interest income on segregated cash.

Regarding rates, central banks in most major markets lowered their benchmarks. Several held theirs constant and a few raised. Reflecting a decline in benchmark rates versus last year, including 100 basis points of cuts in the average U.S. Fed funds rate, which represents a 19% decline in that rate, our segregated cash interest income was down 13%, while margin loan interest rose by 14% on a 38% increase in average balances. At a high level, in the first quarter of 2024, we estimated that a 1% decrease in all benchmark rates would decrease our annual net interest income by $304 million. In the past year, the U.S. Fed funds benchmark did, in fact, fall 1%, and other countries' rates moved more or less than that. Driven by higher balances, this quarter's net interest income represented an annualized increase of $128 million.

The average duration of our investment portfolio remained at less than 30 days. The U.S. dollar yield curve remains inverted through the medium term so that we continue to maximize what we earn by focusing on short-term yields rather than accept the lower yields and significantly higher duration risk of longer maturities, particularly in an unpredictable economic environment. This strategy also allows us to maintain a relatively tight maturity match between our assets and liabilities. Securities lending net interest remained muted for a couple of reasons. There are fewer names that are hard to borrow industry-wide, as some of the typical drivers of securities lending, including IPOs and merger and acquisition activities, have remained subdued. Despite this, we've been consistently successful in raising the total notional dollar value of securities we lend.

As benchmark interest rates rose from near zero in 2022, more of what we earned from securities lending became classified as interest on segregated cash. We estimate that if the additional interest earned and paid on cash collateral were included under securities borrowed and loaned, then securities lending net revenue would have been $186 million this quarter versus $167 million in the prior year quarter. Interest on customer credit balances, the interest we pay to our customers on the cash in their accounts, declined on lower benchmark rates despite higher balances from new account growth. As we have noted in the past, the high interest rates we pay on customer cash, currently 3.83% on qualified U.S. dollar balances, is a significant attraction to new customers. Fully rate-sensitive customer balances ended the current quarter at $20.3 billion versus $18.5 billion in the year-ago quarter and $19.1 billion at year-end.

Now, for estimates of the impact of changes in rates, given market expectations of further rate cuts in the future, we estimate the effect of a 25 basis point decrease in the benchmark Fed funds rate to be a $65 million reduction in annual net interest income. Our starting point for this estimate is March 31, with the Fed funds effective rate at 4.33% and balances as of that date. Any growth in our balance sheet and interest-earning assets would reduce this impact. About 25% of our customer cash balances is not in U.S. dollars, so estimates of a U.S. rate change exclude those currencies. We estimate the effect of decreases in all of the relevant non-U.S. benchmark rates would reduce annual net interest income by about $29 million for each 25 basis point decrease in those benchmarks.

At a high level, a full 1% decrease in all benchmark rates would decrease our annual net interest income by $364 million. In conclusion, we started the year with another financially strong quarter, reflecting our continued ability to grow our customer base and deliver on our core value proposition to customers while scaling the business. We raised our dividend in recognition of our financial strength. Our business strategy continues to be effective, automating as much of the brokerage business as possible and expanding what we offer while minimizing what we charge. With that, we will turn it over to the moderator and take questions.

Operator (participant)

Thank you. At this time, if you would like to ask a question, please press star one on your telephone. You'll hear an automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before you proceed with your question. One moment while we compile the Q&A roster. The first question that we have today is coming from James Yaro of Goldman Sachs. Your line is open.

James Yaro (VP of Equity Research)

Sorry. Hello? Can you hear me? Oh, hi. It's James. Sorry. The moderator got cut off there. Just two questions here. The first one, could you just speak to the impact of retail pressure on equity market levels on your business in April? Has there been any notable deleveraging across your client base? What has this meant for trading activity? Separately, could you just speak to a shift in client allocations to cash versus in risk assets and the impact on margin loans?

Milan Galik (President, Director, and CEO)

I'll take it. Thank you for your question. We have seen very significant volumes as the market dropped and then it bounced back up. We saw record volumes. There were some shifts that we noticed. Our clients traded fewer options. They traded more futures than usual. As you would expect, we saw more trading in the fixed income instruments and foreign exchange. I think our customers are very happy that from a single platform, they can access all these asset classes. As there are market dislocations, like we noticed a week ago, they can seamlessly trade from the single account all these asset classes. I think it's a great benefit that our customers enjoy and appreciate. As far as the deleveraging is concerned, we saw a slight decrease, around 10% or so, 10-12% decrease in margin loans, which is something you would expect.

When there is such a large move downward, you would expect the customers to reduce their risk posture. We also saw somewhat less aggressive positions in options and futures. I think that roughly summarizes what we've recently seen.

James Yaro (VP of Equity Research)

Thank you, Milan. That's very helpful. Just one other one here. I know you talked a little bit about continued appetite for U.S. investments by non-U.S. customers, but any change in the appetite for U.S. stocks since the tariff news began? I guess just your longer-term expectations for what tariffs could mean for that non-U.S. appetite for trading U.S. stocks, given that, of course, the fact that you do offer U.S. markets is a key aspect of your value proposition versus local brokers?

Milan Galik (President, Director, and CEO)

As I mentioned earlier, we saw a very significant influx of new accounts, and most of them were coming from overseas.

We do not yet see any decrease in the appetite of our non-U.S. clients for opening accounts and trading mostly U.S. markets. As to what the tariffs can mean in the long run, I mean, it's very difficult to gauge because I think we see a lot of inconsistency as to what's announced, what goes into effect, and then it gets reversed a few days later. I don't think anybody can guess as to what the tariffs will ultimately mean, but I think the investors probably remember that there are other tenets of the administration posture. They did announce tariff increases, but their plans called for lower taxes and lower regulation. These two effects should help the markets and should continue generating a lot of appetite in our customers for investing in the United States.

James Yaro (VP of Equity Research)

Okay. Thanks a lot.

Operator (participant)

Thank you. One moment for the next question. Our next question will be coming from the line of Craig Siegenthaler of Bank of America. Your line is open.

Craig Siegenthaler (Managing Director)

Good evening, Thomas, Milan. Hope everyone's doing well. I wanted to ask that last question a different way, but we view IBKR's model as the ability to provide global assets to mostly individual investors around the world at a low cost. Given this new emerging trade conflict, we could see a period where investors, especially individuals, focus more domestically and less on the U.S. market, even though you haven't seen this yet, as you pointed out. How do you think this could impact IBKR's global model with most of your accounts coming from outside the U.S.?

Milan Galik (President, Director, and CEO)

We do not think that it will impact our model because, as you recall, our aim is always to offer not just U.S. markets but local markets side by side on the same platform to our clients so that they can have their assets in a single account and be able to deploy their capital to investments outside their home country or region, as well as in the United States. We do not think that this will negatively affect us in any way. More importantly, something that I explained a little earlier, something that we noticed last week was we are very well positioned, exceptionally well positioned for volatility and the type of market movement like we saw last week. As our customers noticed changes in yields, they were able to act on them. They were able to trade sovereign bonds as they saw changes in the currencies. If their fear is that the U.S.

Dollar is weakening, they can buy other currencies on the same platform or do the investments via forex futures. If they think the oil or copper is undervalued, they can buy them through futures. If they want to increase their allocation in gold, they can buy bullion on our platform. We think that we are very well positioned for markets that are as uncertain as we have seen last week.

Craig Siegenthaler (Managing Director)

Thanks, Milan. I actually had a follow-up on James' first question too, but wanted to go outside of trading. We wanted to see if you could provide any insight on how client activity was tracking month to date. Specifically, we're curious if you saw any deviations to your Q1 trajectory for account growth, customer credit balances, and margin loans.

Milan Galik (President, Director, and CEO)

We saw very significant client inflow. Our department that approves new accounts saw a significant increase in the number of approved accounts. These were obviously not all of them were funded. The funding event happens days later. There was an influx of new accounts. I'm sorry, what was the other part of your question?

Craig Siegenthaler (Managing Director)

What I wanted to get at is account growth, customer credit balances, and margin loans. Did you see any deviation in the trajectory of those three in the first two weeks of April?

Milan Galik (President, Director, and CEO)

There was the drop in the margin loans by around 12%. There was greater than I would expect inflow of cash, which could be somewhat related to the leveraging but could also be related to new funds coming in. We do not separate these two numbers, so it's hard for me to tell. As far as the trading activity is concerned, the values that we see roughly correspond to average volume levels in the previous quarter. We are back to the normal trading.

Craig Siegenthaler (Managing Director)

Great. Thanks for taking my question, Milan.

Milan Galik (President, Director, and CEO)

Pleasure.

Operator (participant)

Thank you. One moment for the next question. Our next question will come from the line of Patrick Moley of Piper Sandler. Your line is open.

Patrick Moley (Senior Research Analyst)

Yeah. Good afternoon. Thanks for taking the question. Maybe shifting to the product side of things, you are on pace to nearly triple the size of your crypto offering this year. Can you talk about what drove the decision and your comfortability with expanding that offering? Going forward, how are you thinking about the growth opportunity here? Is this something you think could be a significant growth driver, or is this more of just you're plugging a previous or what you view as a previous product gap? Thanks.

Milan Galik (President, Director, and CEO)

We have added seven currencies. We mentioned in one of the previous earnings calls that we would do that as soon as we see changes in the regulatory environment by the SEC. We indeed see that there were several changes that took place. The accounting guidance that requires that we record the obligation associated with safeguarding crypto assets on the balance sheet has been rescinded by the SEC. That is one change that we saw. Another change that we saw was there was an announcement that the SEC tends to decrease the regulation by enforcement going forward in crypto. We also saw that the Coinbase lawsuits have been dismissed.

All these changes increased our appetite for the crypto space, and we added the seven currencies as well as we increased the limit that governs how much assets a client account can hold in cryptocurrencies. We went from 10% to 30% of NLV. These are the changes that we have made. As far as what the crypto space means to us, we would obviously like it to grow. It's not growing as fast as we would like, which to me personally is somewhat of a surprise because if you look at the cost of trading of crypto assets on our platform, it is significantly lower than the cost that our competitors charge. Yet we do not see a huge influx of cryptocurrency traders to our platform. I would expect more.

For now, we just have to be satisfied with rounding up our offering, giving our clients and financial advisors access to the crypto cash so that they can access these asset classes for themselves and for their clients as well.

Patrick Moley (Senior Research Analyst)

All right. Great. And then just to follow up on the ForecastEx platform and maybe event contracts more broadly, we've seen one of your competitors has really leaned into event contracts, specifically sports events contracts. I know that IBKR in the past has been a little bit more hesitant to pursue launching sports-related event contracts, but just curious on your thoughts about expanding that offering and maybe whether you could in the future look to maybe rethink about sports contracts. Thanks.

Milan Galik (President, Director, and CEO)

I would answer this question in two parts. Interactive Brokers is the owner of the ForecastEx exchange, which ForecastEx exchange can have other FCM members. ForecastEx exchange will be listing sports contracts so that other FCMs can offer them to their clients. We at Interactive Brokers, we have not yet made a decision as to whether we will or will not offer them. That is where we currently are.

Patrick Moley (Senior Research Analyst)

All right. Great. Thanks. That's it for me.

Operator (participant)

Thank you. One moment for the next question. Our next question will come from the line of Chris Allen of Citigroup. Your line is open.

Christopher Allen (Managing Director)

Yeah. Afternoon, guys. I wanted to ask actually about Europe. Over the course of the first quarter, I saw really strong overall European equity volumes. Anecdotally, it sounds like European retail investors are starting to increase their activity and becoming a little bit more like U.S.-based customers. I'm just wondering, are you seeing similar things from that region? Where do things stand from adoption of options as well? Any color on that front would be helpful.

Milan Galik (President, Director, and CEO)

Our international clients are busy trading options, mostly U.S. options because that's where the volumes are. We are offering European options as well as Asian options, and we see significant volumes in Asian options being traded by Asian clients. I am sort of curious whether Europe is going to have their own Magnificent Seven or Six. I don't know how many it is. There is some talk of the defense stocks in Europe taking up that role, so it's going to be interesting to see whether that happens.

Christopher Allen (Managing Director)

Thanks. Just maybe on net interest income related to SEGCASH, just the sequential movement, just given the color last quarter, it seems that, I mean, it basically implies that you saw an overall decline of about 100 basis points across central banks. Is that correct? Was this just driven by movements in benchmark rates, or is there anything else underneath the surface, maybe shortening duration, anything like that that impact the SEGCASH in a?

Paul Brody (Director and CFO)

Yeah, I'll take that. Yes, primarily the drop in rates. There were several drops by the Fed in late fourth quarter. The fourth quarter itself carried some higher rates from earlier, really right through the middle of the quarter. The full impact of those decreases were felt in the first quarter. Some of the foreign rates dropped at least that much on a percentage basis. For example, I think the euro went from a 3% benchmark to 2.5%. That does impact all the SEGCASH. As well, it impacts what we're paying our customers on the other side. We do have offsets there.

Christopher Allen (Managing Director)

Thanks, guys.

Operator (participant)

Thank you. One moment while we prepare for the next question. The next question will be coming from the line of Benjamin Budish of Barclays. Your line is open.

Benjamin Budish (Director and Senior Equity Analyst)

Hi. Good evening, and thanks for taking the question. I wanted to follow back up on the earlier comment on margin balances. Just want to make sure we're kind of clear. When you commented that margins declined 12% from the end of the quarter, is that as of sort of the lowest point, perhaps a week ago, or is that as of yesterday? Just hoping to get a better sense of kind of where we are currently.

Milan Galik (President, Director, and CEO)

The drop happened very quickly, and then it remained the same for several days. No further decreases. There was a significant reaction, but I would not even call it significant. 12% is not that big. There was a reaction by our clients initially, and then they remained the same.

Benjamin Budish (Director and Senior Equity Analyst)

Understood. Very helpful. One other kind of modeling nuance, maybe for Paul, in terms of making sure we kind of calibrate our models correctly given the SEC fee reduction. I think you said $27 million for the current quarter. Should it be fair to assume those kind of equally come out of commissions and transaction-based expenses? Is that the way to think about the impact going forward?

Paul Brody (Director and CFO)

Yeah. The regulatory fees are passed through, right? It was about $27 million out of that total number for execution, clearing, and distribution line.

Benjamin Budish (Director and Senior Equity Analyst)

Very helpful. Maybe one other super kind of small one, but just curious, for the market data fees, I think you said $19 million of expense in the quarter. If I recall, that was $21 million last quarter. I know that line goes up very, very gradually over time, and I think it's kind of assumed there's constant inflation. Curious if there was any reason that number went down, anything you can kind of comment on there.

Paul Brody (Director and CFO)

Sorry, you're saying just the market data fees?

Benjamin Budish (Director and Senior Equity Analyst)

Yeah, the $19 million.

Paul Brody (Director and CFO)

That's fairly even with prior quarter and up a little bit from the—it's actually up a little bit from the prior quarter and maybe $2 million from the year-ago quarter.

Benjamin Budish (Director and Senior Equity Analyst)

Okay. All right. Thank you for that clarification.

Operator (participant)

Thank you. One moment for the next question. Our next question will be coming from the line of Dan Fannon of Jefferies. Your line is open.

Hi. This is Jun on behalf of Dan. Could you maybe just remind us what your excess capital was as of March 31? That's the capital available for M&A and any changes in terms of your inorganic priorities or maybe progress on sourcing a new deal?

Paul Brody (Director and CFO)

Yeah. It kind of remains in the $6 billion-$7 billion range as this business grows, we earn more and we have more capital, and more of it is devoted into the business to support things like customer trading and clearing fund deposits where we are self-clearing in most places and various buffers that have to be maintained both for regulatory purposes and for standard operating liquidity buffers. It does take a lot of capital, which is why we maintain it. We are profitable enough that we determined we could raise a dividend and still grow that capital.

Just in terms of M&A, has there been any progress on sourcing a new deal, any new prospective talks here?

Milan Galik (President, Director, and CEO)

Not really. We still look at all the opportunities that arrive on our desks. We have not yet found anything that would work. The last significant one, we did not succeed in purchasing the competitor. We tried. Actually, we were able to offer a very significant and attractive price. The deal did not happen because we were interested in buying the entire ownership 100%, and one of the sellers was not interested. We would be able to only acquire 70%, which was a deal breaker. That is why we did not do it. It's difficult for us to find an acquisition that we would like. Obviously, it cannot be too small because it would be just a distraction. But so far, we haven't succeeded.

Okay. That was helpful. Thank you.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone. Our next question will be coming from the line of Kyle Voigt of KBW. Your line is open.

Kyle Voigt (Managing Director of Equity Research)

Hi. Good evening. Maybe I could ask a question about your dividend policy. You increased the dividend again this year after an increase at the same time last year. Can you just speak a bit more about your policy?

Paul Brody (Director and CFO)

Should investors expect an annual increase in the dividend going forward, whether you would be open to targeting a specific dividend payout ratio over time or whether you're instead targeting a certain implied dividend yield on the shares?

Thomas Peterffy (Founder and Chairman of the Board of Directors)

Yes. We target our dividends to be between 0.5% and 1% of the stock price.

Kyle Voigt (Managing Director of Equity Research)

Okay. Understood, Thomas. Thank you. Milan, you spoke about the 12% pullback in margin balances in April, just given the equity market volatility and a move towards less risky positioning by your clients more broadly. Within your other fees and services line, it looks like your risk exposure fees fell sequentially in Q1 for the first time in over two years. Is it also fair to assume that those fees move lower throughout the first quarter and also likely move lower into April as well? Is there anything else to note that's driving that line and the decline in the first quarter?

Milan Galik (President, Director, and CEO)

The exposure fees, they fluctuate more than the margin balances. The margin balances tend to be very steady, and they obviously reflect the income from shares that the customers buy in margin. The exposure fees are generated based on the exposure that we, as a firm, can have from clients, options, and futures positions, not only the leveraged stock position. They tend to fluctuate more. The clients of ours are very nimble. They reduce their options exposures quickly as the markets fall. We expect these exposure fees to fluctuate more than the margin balances.

Kyle Voigt (Managing Director of Equity Research)

Understood. Thank you very much.

Operator (participant)

Thank you. That does conclude today's Q&A session. I would like to turn the call back to Nancy for closing remarks. Please go ahead.

Nancy Stuebe (Senior Director of Investor Relations)

Thank you, everyone, for participating today. As a reminder, this call will be available for replay on our website, and we will also be posting a clean version of our transcript on the site tomorrow. Thank you again, and we will talk to you next quarter end.

Operator (participant)

Thank you for joining today's conference call. You may all disconnect.