739f11d1b60a2d0b21d74ed3d22579c4f95dfd458ad476561b092e7e9229b768

9bc87de18a49eaed326250a1a009ebfa650d2dc91cd7f571f78dc443a60f5c40

Adjustments for Non-Cash Items

Stock-Based Compensation (USD, millions)

Changes in Working Capital

Capital Expenditures (CapEx) (USD, millions)

Proceeds from / Repayments of Debt

Share Repurchases

Dividend Payments (USD, millions)

Net Change in Cash (USD, millions)

1973d47a775589e2312c89293758bb02fca2ac6fa541fef18d42eccdcec8035a

United States Revenue

International Revenue

Total Net Revenues

a40cb83d7c45d47721c67d07bf379baf24fa328570e42b17245e52f9e5803c8e

Interactive Brokers Group, Inc. (IBKR) is an automated global electronic broker that specializes in executing and clearing trades across a wide range of financial instruments. The company operates on more than 150 electronic exchanges and market centers in 34 countries and 27 currencies worldwide. IBKR provides services to a diverse customer base, including hedge and mutual funds, registered investment advisors, proprietary trading groups, introducing brokers, and individual investors, offering a comprehensive trading platform that supports multiple products and currencies from a single account  **[0001381197-24-000083_ibkr-20231231x10k.htm:4]** **[0001381197-24-000083_ibkr-20231231x10k.htm:65]** .

1. **Interest Income** - Earns interest on customer margin loans and other interest-earning assets, contributing significantly to the company's revenue  **[0001381197-24-000124_ibkr-20240630x10q.htm:50]** .
2. **Commissions** - Generates revenue from executing and clearing trades in stocks, options, futures, foreign exchange instruments, bonds, mutual funds, ETFs, and precious metals  **[0001381197-24-000124_ibkr-20240630x10q.htm:50]** .
3. **Other Fees and Services** - Includes fees for various services provided to customers, enhancing the company's service offerings  **[0001381197-24-000124_ibkr-20240630x10q.htm:50]** .
4. **Other Income (Loss)** - Involves income or loss from activities not classified under the main segments, impacting overall financial performance  **[0001381197-24-000124_ibkr-20240630x10q.htm:50]** .

0e099d8704283a4abecaa3125ca8e35717f529435abccad7a796b7c2719cba22

| Name              | Position                                              | Start Date       | Short Bio                                                                                                                                                                                                                                                                                                                                                   |
|-------------------|-------------------------------------------------------|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Thomas Peterffy   | Chairman of the Board of Directors                    | November 2006    | **Thomas Peterffy** is the founder and Chairman of the Board of Directors at Interactive Brokers Group, Inc. He has been a pioneer in applying computer technology to automate trading and brokerage functions since emigrating from Hungary to the United States in 1965. He was among the first to apply a computerized model to value equity option prices  **[0001381197-24-000083_ibkr-20231231x10k.htm:32]** **[0001140361-24-011717_ny20019932x2_def14a.htm:47]** . |
| Earl H. Nemser    | Vice Chairman and Director                            | November 2006    | **Earl H. Nemser** has been the Vice Chairman of Interactive Brokers Group, Inc. since November 2006. He has served as Vice Chairman of IBG LLC and its predecessors since 1988 and acts as an Independent Advisor to the law firm Dechert LLP. He holds a BA in economics from NYU and a JD from Boston University School of Law  **[0001381197-24-000083_ibkr-20231231x10k.htm:32]** **[0001140361-24-011717_ny20019932x2_def14a.htm:47]** **[0001140361-23-010698_ny20005483x2_def14a.htm:11]** .                        |
| Milan Galik       | Chief Executive Officer, President, and Director      | October 2019     | **Milan Galik** joined Interactive Brokers Group, Inc. in 1990 as a software developer. He has served as CEO since October 2019 and as President since October 2014. He has been a director since November 2006 and previously served as Senior Vice President of Software Development  **[0001381197-24-000083_ibkr-20231231x10k.htm:32]** **[0001140361-24-011717_ny20019932x2_def14a.htm:48]** **[0001140361-23-010698_ny20005483x2_def14a.htm:12]** .                                                                |
| Paul J. Brody     | Chief Financial Officer, Treasurer, Secretary, Director | November 2006    | **Paul J. Brody** has been serving as the CFO, Treasurer, and Secretary of Interactive Brokers Group, Inc. since November 2006. He joined the company in 1987 and has held the position of CFO of IBG LLC since December 2003. He holds a BA in economics from Cornell University  **[0001140361-24-011717_ny20019932x2_def14a.htm:48]** **[0001381197-24-000083_ibkr-20231231x10k.htm:32]** **[0001381197-23-000014_ibkr-20221231x10k.htm:31]** .                                                                    |
| Thomas A. Frank   | Executive Vice President and Chief Information Officer | July 1999        | **Thomas A. Frank** joined Interactive Brokers in 1985 and has served as Executive Vice President and CIO since July 1999. He holds a Ph.D. in physics from MIT, received in 1985  **[0001381197-24-000083_ibkr-20231231x10k.htm:33]** **[0001381197-23-000014_ibkr-20221231x10k.htm:32]** **[0001381197-24-000083_ibkr-20231231x10k.htm:60]** .                                                                                                                                                                 |
| Lawrence E. Harris| Director (Independent)                                | July 2007        | **Lawrence E. Harris** has been an independent director at Interactive Brokers Group, Inc. since July 2007. He is a professor of Finance and Business Economics at USC and has served as Chief Economist of the U.S. SEC. He is recognized as an expert in securities market microstructure  **[0001140361-24-011717_ny20019932x2_def14a.htm:48]** **[0001381197-24-000083_ibkr-20231231x10k.htm:33]** **[0001381197-23-000014_ibkr-20221231x10k.htm:32]** .                                                          |
| Philip Uhde       | Director (Independent)                                | April 2019       | **Philip Uhde** has been a director at Interactive Brokers Group, Inc. since April 2019. He managed Echinus Partners, an investment partnership, from 2012 through 2020 and has led investments in several financial services companies  **[0001381197-24-000083_ibkr-20231231x10k.htm:33]** **[0001140361-23-010698_ny20005483x2_def14a.htm:13]** .                                                                                                               |
| William Peterffy  | Director                                              | April 2020       | **William Peterffy** has been a Director at Interactive Brokers Group, Inc. since April 2020. He is the Chair of the Investment Committee of the Peterffy Foundation and leads ESG efforts at IBG LLC. He is the son of Thomas Peterffy  **[0001140361-24-011717_ny20019932x2_def14a.htm:49]** **[0001381197-24-000083_ibkr-20231231x10k.htm:33]** **[0001140361-23-010698_ny20005483x2_def14a.htm:13]** **[0001381197-23-000014_ibkr-20221231x10k.htm:33]** .                                                                                                       |
| Nicole Yuen       | Director (Independent)                                | July 2020        | **Nicole Yuen** has been an Independent Director at Interactive Brokers Group, Inc. since July 2020. She has over 20 years of experience in investment banking and served as Managing Director at Credit Suisse, leading its brokerage business in mainland China  **[0001140361-24-011717_ny20019932x2_def14a.htm:49]** **[0001381197-24-000083_ibkr-20231231x10k.htm:32]** **[0001140361-23-010698_ny20005483x2_def14a.htm:13]** .                                                                                   |
| Jill Bright       | Director (Independent)                                | April 2022       | **Jill Bright** has over three decades of experience in human resources management. She is an operating executive at Crestview Partners and has held positions at LionTree LLC and Condé Nast. She has been an Independent Director at Interactive Brokers Group, Inc. since April 2022  **[0001381197-24-000083_ibkr-20231231x10k.htm:33]** **[0001140361-24-011717_ny20019932x2_def14a.htm:49]** **[0001140361-23-010698_ny20005483x2_def14a.htm:13]** .                                                              |

19409c2727b3c0d9c75d07bfa51edfcbaf5311c408093ac17ceb5a0947331b70

1. Given your estimate that a 25 basis point decrease in the Fed funds rate would reduce annual net interest income by $64 million  **[IBKR_3402841_3]** , how do you plan to offset potential declines in net interest income in a lower rate environment?

2. With the opening of your new office in Dubai aimed at attracting sophisticated accounts  **[IBKR_3402841_15]** , what specific strategies are you employing to grow your presence in the Middle East, and how do you expect this expansion to impact your overall business performance?

3. Considering that competitors are planning to introduce index options at lower price points, potentially increasing pricing pressure in the industry  **[IBKR_3402841_6]** , how do you anticipate this affecting your market share and pricing strategy in the U.S. options trading market?

4. Given that your securities lending net interest income has been affected by factors such as fewer hard-to-borrow names and decreased market volatility  **[IBKR_3402841_3]** , what measures are you taking to enhance securities lending income in the current market conditions?

5. Regarding your ForecastEx platform, with initial volumes driven by political contracts and around 800 clients trading so far  **[IBKR_3402841_5]** , when do you expect this platform to reach a scale that materially impacts your financial results, and what risks does it pose to your balance sheet  **[IBKR_3402841_7]** ?

8c3d71ebe8b37088f7ac6e52e0fe6df7c16b41c205b06e5792309b7cde1206e1

Average Securities Borrowed Balances (Billion USD)

Average Securities Loaned Balances (Billion USD)

Options Contracts Traded (Thousand Contracts)

Futures Contracts Traded (Contracts)

Stocks Traded (Shares)

Execution, Clearing, and Distribution Fees (Million USD)

Customer-held Fractional Shares (Million Shares)

Crypto-asset Safeguarding Asset Value (Million USD)

c3df86265bd75f9c19fa028fd13bd8b76b2506cf0304fe9275d31d4d90c32624

Commissions

Other Fees and Services

Other Income (Loss)

Total Non-Interest Income

Interest Income

Interest Expense

Total Net Interest Income

Market Data Fees

Risk Exposure Fees

Payments for Order Flow

FDIC Sweep Fees

Other

7fa01396860b1b5a1ed64a06a334285533de21900dad3eb951f3ed458056e0a1

- **Interactive Brokers is the least expensive provider of margin loans to retail and institutional customers, contributing to sustainable growth in margin balances.**  **[IBKR_3370286_13]**
- **Despite anticipated interest rate cuts, the company expects earnings in 2024 to be higher than in 2023, driven by increasing customer activity and growth in new accounts.**  **[IBKR_3370286_11]**
- **Interactive Brokers has significant cash reserves and is actively seeking acquisition opportunities to further grow the business.**  **[IBKR_3370286_6]**

4dabb5f9d0271e667b01c44635a52dd100bb8fe7b9f57518edfde4f91293e4e5

- **Strong and sustainable account growth**, particularly among **individual accounts** and **introducing brokers**, with a pipeline of **2 to 3 dozen brokers integrating**, including a **top 10 global bank** starting operations. This suggests continued growth in the customer base and potential increases in trading volume.  **[IBKR_3379868_12]** **[IBKR_3379868_10]**
- **Introduction of new products and services**, such as the **high-touch prime brokerage service** and the new **IBKR Desktop** platform, which are receiving **positive feedback** and may attract larger funds and more active traders, potentially increasing revenues.  **[IBKR_3379868_21]** **[IBKR_3379868_15]**
- The company is leveraging **AI and technology** to improve operational efficiency in areas like **customer service** and **surveillance**, which may enhance margins and profitability over time. Additionally, **AI could accelerate trading activity** in the future as clients use AI tools to trade more efficiently.  **[IBKR_3379868_22]** **[IBKR_3379868_17]**

fff8cf8de0eed60f09cfc77795df4ee9d0f3c78119e3de8995ecd6e54e465087

- **IBKR's options trading volumes increased by 36% year-over-year, reaching record highs, driven by the popularity of 0-day-to-expiration options, with expectations for similar growth internationally.**  **[IBKR_3393381_7]**
- **IBKR plans to launch ForecastEx in mid-August, allowing clients to bet on economic indicators and climate events, a market the company believes will become popular and grow significantly over time.**  **[IBKR_3393381_8]**
- **There is a strong pipeline of Introducing Broker prospects, including banks with large client bases, which can expand IBKR's reach and contribute to future growth.**  **[IBKR_3393381_15]**

c8d5047501a6d5fd14f39dd034b97cfaa310f9be2b5f308c892e9a3e738909c5

- **IBKR is attracting more sophisticated clients**, such as prop traders and hedge funds, who generate higher commissions and bring more cash into accounts. Commissions from prop traders **"increased faster than any other segments"**, contributing to stabilized and improved trading activity per account.  **[IBKR_3402841_9]** **[IBKR_3402841_11]** **[IBKR_3402841_12]**
- **Expansion into new growth regions**, with the opening of a new office in Dubai aimed at attracting wealthy investors and hedge funds, is expected to significantly boost growth. The company has **"optimistic expectations"** for this initiative due to the influx of expats and high-net-worth individuals in the region.  **[IBKR_3402841_15]**
- **The ForecastEx platform is anticipated to scale up significantly**, especially with the upcoming elections. This platform focuses on economic indicators and climate contracts, representing a long-term growth opportunity for IBKR. The company is **"extremely excited"** about its potential impact.  **[IBKR_3402841_7]**

bc920199ce5ef8c2466c52b029e4076a3c9524448df86658d8c682fbec9732cb

1. **ForecastEx Potential**  
   **Q:** When will ForecastEx materially impact results?  
   **A:** Thomas Peterffy expects ForecastEx to scale **later this year**, especially in the days leading up to the election. The high interest in political contracts is drawing in customers who will become clients for economic and climate contracts—their long-term focus.  **[IBKR_3402841_7]** 

2. **Interest Income Outlook**  
   **Q:** How will declining rates affect net interest income?  
   **A:** Milan acknowledges a predictable hit to net interest income from lower rates impacting uninvested cash. However, he expects offsets from continued account growth and new free cash inflows, anticipating a "tug of war" between these effects but remains optimistic about future growth.  **[IBKR_3402841_12]** 

3. **Trading Activity Stabilization**  
   **Q:** Is trading per account improving due to prop traders?  
   **A:** Milan notes that prop trading accounts have increased their commissions **faster** than other segments, contributing to the stabilization and slight improvement in trading activity per account this year.  **[IBKR_3402841_11]** 

4. **RIA Channel Growth**  
   **Q:** Is the RIA client base changing and growing?  
   **A:** Milan states they are attracting larger RIAs but not as many as hoped. They are enhancing the RIA platform with new functionality expected this quarter or next, aiming to attract more advisors.  **[IBKR_3402841_8]** 

5. **Legal Reserves Increase**  
   **Q:** What's behind the $9 million legal charge?  
   **A:** Paul explains they regularly assess open cases and increased legal reserves accordingly. Milan adds that regulatory scrutiny led their legal department to advise a reserve increase this quarter.  **[IBKR_3402841_14]** 

6. **Competitor Index Options**  
   **Q:** Will new competitor affect index options pricing?  
   **A:** Milan believes it's difficult to estimate the impact until the competitor launches and announces pricing, noting index options have recently attracted a more diverse clientele.  **[IBKR_3402841_6]** 

7. **Dubai Expansion Plans**  
   **Q:** What are your plans for the Dubai office?  
   **A:** Milan says they're aiming to attract sophisticated accounts, including hedge funds and significant investors. Dubai is a "hot place" with many expats, and they have optimistic expectations for the new office.  **[IBKR_3402841_15]** 

8. **Election Trading Dynamics**  
   **Q:** How will elections affect trading activity?  
   **A:** Milan expects increased volatility and higher volumes approaching election day, similar to previous elections, leading to more trading activity on their platform.  **[IBKR_3402841_16]** 

9. **IPO Market Impact**  
   **Q:** How will a rebound in IPOs affect you?  
   **A:** Milan anticipates participating in IPOs, especially in Asia, leading to fees from new listings and increased trading volumes. Paul adds that securities lending opportunities typically rise around IPOs.  **[IBKR_3402841_17]** 

10. **Chinese Stimulus Effects**  
    **Q:** What impact did Chinese stimulus have?  
    **A:** Milan notes the recent Chinese stimulus led to a sudden run-up in Chinese securities prices but does not yet have information on its effect on customer accounts; more details are expected next quarter.  **[IBKR_3402841_13]** 

11. **Cash in New Accounts**  
    **Q:** Are new accounts holding more cash?  
    **A:** Paul mentions new accounts generally bring more cash. Thomas adds that prop traders, who are increasing, have more cash and generate more volume than individual traders.  **[IBKR_3402841_9]** 

12. **Marketing Spend Outlook**  
    **Q:** How will marketing expenses change?  
    **A:** Milan plans to increase marketing spend by approximately **20% annually**, continuously adjusting based on channel performance to support account growth.  **[IBKR_3402841_10]** 

13. **Thomas's Stock Sales**  
    **Q:** Will you resume selling your stock?  
    **A:** Thomas says he may sell if large bidders emerge but won't sell into the market, as public sales tend to depress the stock price below his desired level.  **[IBKR_3402841_18]** 

14. **ForecastEx Global Expansion**  
    **Q:** Can ForecastEx be offered abroad?  
    **A:** Thomas explains they are working with regulators to offer economic and climate indicator contracts internationally but currently can't provide political contracts outside the U.S. due to regulatory constraints and the need for reliable arbiters.  **[IBKR_3402841_14]** 

098eefb64b3832f48ff4054dbe9c81e19e2e0181de89a08ab38ab2bcede305ee

1. **Capital Management and Dividend Policy**  
   **Q:** Will you increase dividends amid M&A outlook?  
   **A:** We have raised the dividend to **$0.25**, approximately a **15% payout ratio** of earnings, which we believe is sustainable while allowing us to build capital for potential M&A opportunities.  **[IBKR_3379868_6]**  Capital is important to us; we have a "fortress balance sheet" attracting institutional clients, and we intend to maintain it.  **[IBKR_3379868_9]**  We have around **$6 billion** in excess capital not necessary to run the business, and we're carefully looking at opportunities but remain extra diligent in M&A.  **[IBKR_3379868_13]** 

2. **Account Growth Sustainability**  
   **Q:** Is recent account growth sustainable?  
   **A:** The strongest segment in new accounts is individual accounts, followed by introducing brokers.  **[IBKR_3379868_10]**  We believe this growth is very sustainable, with a pipeline of **2 to 3 dozen** introducing brokers integrating with us.  **[IBKR_3379868_10]**  We've onboarded virtual banks in Asia and a large global bank starting operations in the Middle East.  **[IBKR_3379868_12]** 

3. **High-Touch Prime Brokerage Service**  
   **Q:** How is the new high-touch PB service progressing?  
   **A:** We've just launched a high-touch prime brokerage service, inviting about **30 hedge funds** on our platform.  **[IBKR_3379868_16]**  The goal is to attract funds larger than **$100 million** in equity and retain those that have grown.  **[IBKR_3379868_16]**  We're providing a **24x5 global outsourced trading desk** and access to subject matter experts, offering the elevated service larger hedge funds expect.  **[IBKR_3379868_16]**  There are ancillary fee revenues associated with this service.  **[IBKR_3379868_21]** 

4. **Use of AI and Efficiency**  
   **Q:** How are you leveraging AI for growth?  
   **A:** We're using AI in customer service for both clients and representatives, mapping natural language questions to relevant documents and applying generative AI for answers.  **[IBKR_3379868_18]**  Our goal is to improve efficiency without increasing headcount proportionally.  **[IBKR_3379868_17]**  While we don't currently offer AI-based trading tools to clients, we have ideas for the future that could accelerate trading and volume growth.  **[IBKR_3379868_22]** 

5. **Margin Loan Growth and Market Impact**  
   **Q:** Can margin loans go higher from here?  
   **A:** We hope margin loans do not go much higher because historically, when margin loans shoot up, it is followed by a market collapse. That's been my experience over almost **50 years**.  **[IBKR_3379868_14]** 

6. **New Desktop Platform**  
   **Q:** What does the new IBKR desktop offer?  
   **A:** We've launched a brand new desktop platform, simpler than the original, aimed at active traders.  **[IBKR_3379868_15]**  It went online this first quarter, and client feedback is very good.  **[IBKR_3379868_15]**  We're considering making it available to professional accounts and introducing brokers due to demand.  **[IBKR_3379868_15]** 

7. **Securities Lending Activity**  
   **Q:** What's needed to boost securities lending?  
   **A:** Activity is subdued industry-wide due to less interest in shorting stocks.  **[IBKR_3379868_11]**  We excel in lending stocks in high demand, but there haven't been many "hot" hard-to-borrow stocks recently.  **[IBKR_3379868_11]**  When opportunities arise, we have the tools to make the most of them.  **[IBKR_3379868_11]** 

8. **Impact of 0DTE Options**  
   **Q:** Could 0DTE options burn out investors?  
   **A:** 0-day options are powerful tools but can be misused and require responsibility.  **[IBKR_3379868_20]**  We've always had them on expiration dates, but now they're available daily.  **[IBKR_3379868_20]**  Both professionals and retail clients participate in trading them.  **[IBKR_3379868_23]** 

9. **Investment Strategy Amid Yield Curve Inversion**  
   **Q:** Will you extend duration as yield curve changes?  
   **A:** As long as the yield curve remains inverted, we'll stay with our current profile, leaning into the shorter end.  **[IBKR_3379868_8]**  When it changes, we'll consider extending maturity depending on the circumstances.  **[IBKR_3379868_8]** 

10. **Expenses and Compensation Growth**  
    **Q:** Should we expect expense growth to persist?  
    **A:** Headcount growth is easier to control, but compensation is increasing due to inflation and competition for talent.  **[IBKR_3379868_19]**  We need to pay more to retain and attract skilled employees in a competitive market.  **[IBKR_3379868_19]** 

11. **Other Income and Market-Making Activity**  
    **Q:** Why did other income increase?  
    **A:** Trading activities produced better results this year, and we invest house capital in instruments reported as other income under GAAP.  **[IBKR_3379868_24]**  Our small remaining market-making operations are performing well, operating in India and Hong Kong.  **[IBKR_3379868_24]** 

58602381c8fbdad88f5b9c199545eedb5ed756dca7ef7b47b945038e05eab066

- **Securities lending revenue is under pressure due to decreased short-selling activity and lack of 'hard-to-borrow' stocks, limiting a significant revenue source for the company.**  **[IBKR_3379868_11]**
- **The company does not expect to replicate the exceptional trading volumes and account growth experienced during the pandemic and meme stock mania, suggesting future growth may be slower.**  **[IBKR_3379868_7]**
- **Rising compensation costs due to inflation and competition for talent are increasing operating expenses, potentially impacting profit margins despite efforts to limit headcount growth.**  **[IBKR_3379868_19]**

920563cd1a9955308273b1c89624bb61836c3a560169559e54b7600f0da617a7

- **Potential Decrease in Net Interest Income Due to Rate Cuts**: IBKR estimates that a 25 basis point decrease in the Federal Reserve benchmark rate could reduce their annual net interest income by **$59 million to $77 million**, highlighting significant sensitivity to interest rate movements.  **[IBKR_3393381_14]** **[IBKR_3393381_20]**
- **Stagnant Growth in Introducing Broker Pipeline**: The pipeline of introducing broker prospects remains "**pretty much the same size**" as a year ago, indicating a lack of growth in this segment.  **[IBKR_3393381_13]**
- **Delays in New Product Launch Affecting Revenue Opportunities**: The launch of ForecastEx has been delayed due to additional work required, potentially postponing expected revenue from this new offering.  **[IBKR_3393381_15]**

73c0cbb7e6cbb184fedcc71344a555b5a4836b657d61d2d4ec3d50913e52dd29

- **Increased Legal and Regulatory Charges:** The company increased its legal reserves by **$9 million** due to legal and regulatory matters, impacting General and Administrative expenses ( **[IBKR_3402841_13]** ). This indicates higher ongoing legal and regulatory risks.
- **Potential Competitive Pressure from New Entrants:** A large mobile-based competitor plans to launch index options at lower price points, potentially creating pricing pressure and impacting Interactive Brokers' competitive position in index options trading ( **[IBKR_3402841_6]** ).
- **Founder Considering Selling Shares:** Founder and Chairman Thomas Peterffy indicated he might offer stock to large bidders, though he is hesitant to sell into the market due to concerns about the stock price declining ( **[IBKR_3402841_18]** ). This suggests potential insider selling, which could negatively affect the stock price.

781d2c73204099a9fc17f91f3e7c3a45d31431feb7a95b519b33fac5668a2853

- **Expected Interest Rate Cuts May Reduce Net Interest Income by Approximately $230 Million**: Management anticipates a 75 basis point reduction in interest rates over the year, which could lower net interest income by about **$230 million**, potentially impacting earnings.  **[IBKR_3370286_11]**
- **Rising Operating Expenses Due to Inflation and Increasing Compensation Costs**: The company has a significant headcount of **2,900 employees** and expects compensation expenses to increase due to ongoing inflation, which may pressure profit margins if not offset by revenue growth.  **[IBKR_3370286_16]**
- **Challenges in Utilizing Excess Capital Through Acquisitions**: Despite significant cash reserves, the company has been unable to find suitable acquisition targets due to high prices or integration difficulties, which could lead to inefficient capital deployment and limit growth opportunities.  **[IBKR_3370286_6]**

9984f27ef20ee4f73d2066e6d8f3f76722832a4022e5b487021b3776c3ee6e32

1. **M&A Outlook**  
   **Q:** Plans for deploying excess capital through M&A?  
   **A:** Management stated they have significant cash reserves and are actively seeking acquisition targets within their industry, focusing on less efficient brokers.  **[IBKR_3370286_6]**  They have looked closely at several potential acquisitions but found prices too high or integration too burdensome.  **[IBKR_3370286_6]** **[IBKR_3370286_15]**  They emphasized the importance of maintaining a strong balance sheet and would not use up their excess capital on acquisitions.  **[IBKR_3370286_16]** **[IBKR_3370286_17]**  They are open to opportunities globally, with no regional preference, focusing on efficiencies and synergies with their current offerings.  **[IBKR_3370286_18]** 

2. **Earnings Amid Rate Cuts**  
   **Q:** How will anticipated rate cuts affect earnings?  
   **A:** Management expects interest rates to decrease by **75 basis points** this year, potentially reducing interest income by about **$230 million**.  **[IBKR_3370286_11]**  However, they believe increased activity and new account growth will offset this reduction, resulting in higher earnings in 2024 compared to 2023.  **[IBKR_3370286_11]**  They aim to maintain around a **70% pretax margin**, though interest rate decreases may affect this.  **[IBKR_3370286_9]** **[IBKR_3370286_16]** 

3. **Margin Loan Growth**  
   **Q:** Is growth in margin loan balances sustainable?  
   **A:** Management believes the growth in margin loan balances is sustainable, attributing it to being the **least expensive provider of margin loans**, especially to retail customers.  **[IBKR_3370286_13]**  Margin balances are influenced by interest rates, market volatility, and opportunities. As account numbers grow, margin balances are expected to increase over time.  **[IBKR_3370286_8]** **[IBKR_3370286_12]** 

4. **Expense Management**  
   **Q:** Outlook for expenses amid changing rates?  
   **A:** Management acknowledged that expense growth, particularly compensation due to **inflation**, needs close attention.  **[IBKR_3370286_16]**  They hope to keep headcount steady and offset potential increases by leveraging advances in **AI** and **automation**, aiming to maintain efficiency without compromising customer service.  **[IBKR_3370286_16]** **[IBKR_3370286_19]** 

5. **Account Growth Expectations**  
   **Q:** Expected account growth for the coming year?  
   **A:** Management expects account growth to be similar to historical trends, suggesting a continuation of roughly **20% growth**.  **[IBKR_3370286_10]**  The mix of business segments may vary, but they anticipate consistent growth across individual clients, introducing brokers, hedge funds, prop trading firms, and financial advisers.  **[IBKR_3370286_10]** 

6. **Prime Brokerage Prospects**  
   **Q:** Outlook for prime brokerage and attracting larger hedge funds?  
   **A:** IBKR has been successful in attracting smaller hedge funds that larger primes decline due to higher costs.  **[IBKR_3370286_7]**  As hedge funds grow, they often consider competitors due to the **brand recognition** of large banks. IBKR hopes their significant capital and strong balance sheet will make them more attractive to larger hedge funds concerned about asset safety.  **[IBKR_3370286_7]** 

7. **Securities Lending Outlook**  
   **Q:** Expectations for securities lending revenues?  
   **A:** Management noted that securities lending revenues are **opportunity-driven**, influenced by overall market shorts and hot stocks with high borrowing demand.  **[IBKR_3370286_14]**  As market volatility and IPO activity increase, they expect more opportunities in securities lending, potentially boosting revenues.  **[IBKR_3370286_14]** 

8. **Impact of Bitcoin ETF Approval**  
   **Q:** Effect of Bitcoin ETF approval on business?  
   **A:** IBKR was among the first brokers to make the new Bitcoin ETFs available on their platform, with customers trading them immediately.  **[IBKR_3370286_20]**  Management believes this will make cryptocurrency investing more mainstream, and their active, sophisticated clientele may capitalize on new trading and arbitrage opportunities.  **[IBKR_3370286_20]** 

9. **Active Trader Segment**  
   **Q:** Opportunity from competitor integration impacting active traders?  
   **A:** Management does not see the integration of thinkorswim into Schwab as an opportunity to gain accounts, as thinkorswim will be available to active traders on the Schwab platform.  **[IBKR_3370286_8]** 

10. **Hiring and Compensation**  
    **Q:** Outlook on hiring needs and compensation pressures?  
    **A:** Management feels sufficiently staffed in technology and aims to maintain current headcount.  **[IBKR_3370286_19]**  They are monitoring customer service metrics closely and may adjust staffing if account growth necessitates it but are focusing on automation to improve efficiency.  **[IBKR_3370286_19]** 

9b5e06e64287c10d27eed5455439324e9faed5bad09a119334c6f12a870bfbf1

1. **Interest Rate Impact**  
   **Q:** How will rate cuts affect net interest income?  
   **A:** If the Fed lowers interest rates by 25 basis points, our annual net interest income will decrease by **$77 million** globally. A Fed-only rate cut would reduce NII by **$59 million**.  **[IBKR_3393381_14]** **[IBKR_3393381_20]** 

2. **HSBC Partnership**  
   **Q:** What's the impact of the HSBC UAE launch?  
   **A:** We are onboarding **10,000 accounts** from HSBC's existing business in the UAE, migrating from Pershing in August. Other countries will start from zero, gradually increasing accounts as HSBC offers our platform to their banking clients.  **[IBKR_3393381_9]** 

3. **Hedge Fund Offerings**  
   **Q:** How is the enhanced hedge fund offering progressing?  
   **A:** We've onboarded exactly **30 hedge funds** onto our enhanced High Touch Prime service. Feedback is good; hedge funds appreciate having a point person and access to experts. This aims to retain funds as they surpass the **$100 million** threshold where large primes compete.  **[IBKR_3393381_11]** 

4. **Options Volume Growth**  
   **Q:** What's driving the 36% increase in options volumes?  
   **A:** Growth is largely due to **zero-day to expiration options** and weekly options. U.S. options volumes dominate, even among overseas investors. Our platform is well-positioned to capitalize on this, serving from active traders to beginners.  **[IBKR_3393381_17]** 

5. **ForecastEx Launch**  
   **Q:** What's the update on ForecastEx and its opportunity?  
   **A:** There's a slight delay; we're now aiming for a mid-August launch after additional work on booking of swaps. We believe forecast contracts can become a very popular and growing area, similar to the development of equity options over the past 40 years.  **[IBKR_3393381_15]** 

6. **Hedge Funds Increasing Leverage**  
   **Q:** Are hedge funds increasing leverage on your platform?  
   **A:** Yes, hedge funds are borrowing larger amounts from us, contributing to higher net interest income and increasing balances to **$55 billion** this quarter.  **[IBKR_3393381_12]** 

7. **NYSE Loss**  
   **Q:** Can the NYSE loss be recovered?  
   **A:** Unfortunately, no. Despite efforts to have trades busted and seeking compensation under Rule 18, recovery is unlikely. We're proposing rule changes to the SEC to prevent such issues in the future.  **[IBKR_3393381_18]** 

8. **Introducing Broker Pipeline**  
   **Q:** How is the introducing broker pipeline and competition?  
   **A:** The pipeline is similar to last year's. Our offering is unique with global exchange access, and prospects value this. Competitors are mainly in Asia and Europe.  **[IBKR_3393381_13]** **[IBKR_3393381_19]** 

9. **Market Uncertainty and Trading Activity**  
   **Q:** Will uncertainties affect trading activity?  
   **A:** Despite uncertainties like wars and elections, we don't expect trading activity to slow down. Uncertainty often leads to volatility and higher trading volumes as customers adjust positions.  **[IBKR_3393381_14]** 

10. **Expense Efficiencies**  
    **Q:** What efficiencies are you realizing in expenses?  
    **A:** Our headcount remains at **2,950 employees**, unchanged from a year ago despite significant account growth. We're using technology to maximize scalability without adding staff, though we monitor and adjust customer service as needed.  **[IBKR_3393381_21]** 

c89746859064bc845ca522ff4eb496fe6c374670f62b231b1ad90f2ae065dbf0

Interactive Brokers Group Inc (IBKR)

Financials