Q3 2019 Earnings Call
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<unk> any further assistance. Please press star Zero I would now like 10, the cost over to your Speaker Nancy Stuebe director of Investor Relations. Please go ahead.
Thank you.
Good afternoon, everyone. Thank you for joining us to review, our 2019 third quarter performance.
This is on the call, but has asked me to put that his comments on the business you will participate in the Q.
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 our outside of the company's control.
Actual results and financial condition may differ possibly materially from what as indicated in these forward looking statements.
We ask that you referred to the disclaimers in our press release.
You should also review a description of risk factors contained in our financial reports filed with the FCC.
The third quarter of 2019 with a strong one for interactive brokers.
Commissions were $187 million, a third highest in our history and net interest income reached a record 291 million on a net interest margin of 1.77% also a record.
At our electronic broker total accounts grew by 16% implied equity topped 156 billion, leading to brokerage revenues exceeding half a billion dollars for the first time and generating a 65% pre tax profit margin.
This occurred despite modest volatility, but the average VIX volatility index rising to 15.9 versus a low volatility quarter last year.
This increase combined with having more clients on our platform.
Helped lead us to a 30% increase in total darts.
As we stated for some time, we focus on growing our customer base and all client segments of geography as this generates more activity both from new customers coming onto our platform.
Especially in periods, where we we see volatility increasing.
From all customers trading more during these periods.
These numbers are impressive but they are now in the past.
I will share some of what we're working on for the quarters ahead.
Since the inception of our electronic brokerage business, we have prided ourselves and our commitment to offering the best platform for our customers.
The us mismatch best execution by routing orders directly to a venue and not selling customer order flow.
Isn't that routing or customers orders to whichever venue is likely to offer the best price for that specific security at that particular time.
That's platform also met paying a transparent high interest rate on idle customer cash.
Charging a transparent low rate on margin loans.
More recently, we found that not everyone shared our definition of what is best.
The some investors best not paying zero condition first and foremost.
This is what some of our customers wanted.
We decided to obliged.
We therefore introduced I'd be care like on September 26, and rebranded our existing offering at <unk>, Okay. Our pro.
And I'd be care light investors in the U.S. will pay zero Commission on U.S. stocks and <unk>.
And like our customers always have will pay nobody's costs and options trades.
As disclosed where customers like orders will be rather to liquidity providers in return for payment for order flow.
I'd be care like class will also receive interest on the idle patch higher than in any of our competitors the less than that of I.B.K. our pro platform.
And pay some of the lowest rates in the industry on their margin borrowing still higher than that of our pro platform.
There'll be no account minimum inactivity fees or market data piece.
Wide variety of other products from a stock yield enhancement program International Securities bonds, and futures will be available at a regular low rate.
I'd be care program represents our award winning platform with third party confirmed to best price execution low tiered rate some margin loans and commissions.
Access to markets and products around the globe and access to all of our trading algorithm analytics and technology.
Because we are so automated and keep our cost slow were able to offer like platform with low margin lending rates and positive cash interest rate.
It appears somewhat <unk> Zero Commission competitors thinks zero. It also apply to the interest paid cash on a customer's brokerage accounts.
I do care likes rate higher than I do care programs for margin loans and lower for interest paid on customer cash and we receive payments or their order flow to the I'd be care like platform is revenue neutral to us.
New customers, who use the light model will bring us to new revenue stream. So we positioned ourselves to capture new revenue without giving up existing revenue.
In addition to I'd be care light, we undertook a number of initiatives and expanded our range of offerings this quarter.
We constantly seek to improve our platform and to bring it to more potential clients.
This quarter saw the introduction of new portals for introducing broker and employee truck clients and significant new improvements to the already a platform.
All these features not only offer robots functionality, but have also benefited from major improvements and navigation work flow and design.
Our bond desk added a direct connection to market access and alternative trading system that can be accessed on our trader workstation.
Interactive brokers currently supports high yields in emerging markets bonds, and we anticipate adding other fixed income asset classes in the near future.
On June Thirtyth, we were proud to announce our new beds learn when simulated sports betting exchange.
This operates as a peer to peer market participants can buy sell and trade bets on actual sporting events in real time.
Players get a thousand dollars in virtual dollars euros pounds or Canadian dollars and use it to buy or sell simulated sports bats.
Winnings can be converted up too tough to $1000 in preconditions. Once a participant has opened and then interactive brokers account.
Once again, our goal here is to broaden our possible audience by attracting customers more familiar with the probabilities, a spectator sports and with financial markets.
Well it is too soon to talk about impacts we are seeing conversions from the simulated sports betting account the actual funded I.B.K., our accounts, which was our objective that this promotion.
We also recently rolled out access to the Russian stock markets, where clients worldwide.
And finally as of last Monday, our shares are listed back on NASDAQ under the same ticker I.B.K. our.
We believe in NASDAQ listing is best for our shareholders and we look forward to working with them.
Now for the breakdown by customer type of how our brokerage business is evolving.
We once again saw strong growth and accounts and quite equity. However, we saw a weaker conditions outside the Americas, submarket, so, including the Nikkei Hangsang and put C 100 indices.
As of September Thirtyth individual customers made up 50% of all accounts up 17% over the prior year, 35% of customer equity up 9% and latest 12 months commissions were 51% of total of 2% from last year.
Customer equity growth was stronger in Europe , and Asia This quarter, well commissions were up in the U.S., but weaker outside it.
Hedge funds, 1% of our accounts up 3% for the 12 month period, 9% the required equity up 3% and 9% of our conditions down 5% weakness in Asian markets.
Price execution, low overall cost and high cash interest to continue to attract institutions, both large and small.
Proprietary trading accounts were 2% of accounts up 11%, 10% the quite equity up 11% and 15% of conditions down 5% again, mainly due to weakness in international markets, particularly Asia.
Registered investment advisors represented 16% of our customer count up 9% for the latest 12 month.
23% for customer equity a 4%.
And 16% of our commissions down 2% again overseas markets declined most in commissions.
Finally, introducing brokers or 32% to for a customer accounts up 19% over the last 12 month, 23% of our customer equity up 20% at 9% of our commission income up 6%.
Introducing brokers outsource their back office to us, reducing their operational regulatory and compliance burdens.
These services in addition to the growing population of new investors in developing countries. Many from watch trade internationally helped drive the expansion of our customer base.
We look forward to resolution of trade issues in Asia. The we have not yet seen much change and the ability of mainland China accounts to find if they had in the past.
However, we are well diversified in terms of the countries and companies, we provide our I work or services to.
I don't think worth worldwide every region, where we operate.
And one last note of an interactive brokers future.
The last day of September with my 75th birthday.
As I promised earlier this year October 1st Mark The day, one Milan Gallagher, our president became our CEO well I will remain chairman.
I do not plan I'm sitting on the beach I find that much too boring.
I will be involved in strategy as much as I have been Lon will be the one calling the shots.
Well I'm not going anywhere. This is the beginning of a new chapter what will prove to be the long successful story of interactive brokers.
And now Paul Brody will take you through the numbers Paul.
Hi, good Nancy.
Welcome everyone of the call. Thank you for dialing in I'm going to review our results as usual put our numbers into context.
Within the current environment and then.
My comments will follow the format of the earnings release, and then we'll take some questions.
Starting with operating metrics, they reflected fairly active trading in a moderate volatility environment volatility as measured by the average VIX.
Rose to 15.9, this quarter or 23% increase from a low 12.9 in the year ago quarter. Once again, the average masked some intra quarter bald variability as the VIX fell in July recovered well in August and declined again in September .
This erratic volatility contributed to a mix the next year over year volume results with increases in cleared customer options and futures contract volumes.
Decreases in stocks your volume as usual those were led by low price stocks in Hong Kong.
Foreign exchange dollar volume was down as well.
Total accounts reached 666000.
16%, which contributed to customer equity grows up 10% to $156.6 billion at quarter end.
With the continued tailwind from new account growth or quarterly total darts were 859000 up 13% over last year.
In this quarter our over overall average cleared commission for Dart fell 2% versus last year to $3.69.
On a product mix that featured smaller average trade sizes in most product segments.
Moving to our net interest margin table, our net interest margin why didn't the 1.77% from 1.68% of the third quarter of 2018.
The federal reserve reduced rates like 25 basis points twice this past quarter in July and September after raising them four times over the course in 2018.
These rates were not in effect for the entire period, we should see the full affected them over the coming quarters.
On a year over year basis, the average fed funds rate was somewhat higher this quarter, which generally leads to higher net interest income.
But because our customer interest rates are pegged the market benchmarks, increasing our net interest income from benchmark related components, it's primarily due to rising customer cash balances. The same is true on a sequential basis.
Despite the decline in average fed funds rate.
Our net interest income rose along with customer credit balances.
We believe our continued success in got an asset gathering can lead to larger contributions from interest sensitive assets going forward.
As the yield curve remain flat converted we have maintaining short duration in our fixed income portfolio and <unk>, we recorded the modest mark to market loss this quarter.
$2 million on our holdings of U.S. treasuries.
As a reminder, we plan to hold these securities to maturity and as brokers GAAP requires a range require or something like banks to mark them to market in our financial reporting.
Our FDIC insured bank deposits, we program continues to grow reaching $2.2 billion.
Segregated cash management and securities lending, where the most significant contributors to our net interest margin.
Driven by higher customer cash balances and higher average fed funds rate versus last year.
Okay, Alright segregated cash interest income grew 68% over the prior year quarter.
As a reminder.
There are two factors that can cause the change in yield on our segregated cash to differ from a change in the fed funds rate.
First currently about 25% of our customer credits are not in U.S. dollar.
And second even with an average duration of our investments under 40 days there are some black diamond reinvesting a new rig.
Typically our investment or effective interest field.
Would not follow a change in the fed funds rate immediately.
The increase in segregated cash consumption of both the Grayson our accounts of the decrease in margin month.
Securities lending interest income rose, 43% from year ago quarter.
We satisfied the high demand for several hard to borrow names that investors So I'm sure.
Average margin loan balances this quarter decline from the stronger borrowing demand we observed in the market environment of last year's third quarter.
Offset somewhat by higher year on year benchmark fed funds rate.
Margin interest income declined 4%.
Now for our estimate of the impact of the next 25 basis point changing rates.
Market expectations of rate changes are typically built into the yields of instruments in which we invest therefore in our calculation we attempt to isolate the impact of our earnings unexpected rise or fall and rates.
Separate from the impact of rate hikes or cuts that have already been baked into the prices of these instruments.
We would therefore expect the next 25 basis point on anticipated increase or decrease in rates.
To result in $21 million higher or lower respectively.
Net interest income as a yearly run rate.
Turning to the segments electronic brokerage turned in a record performance.
Modest volatility volatility environment.
Net revenues were $506 million for the quarter up 14% over the last year.
Pre tax income was 331 million up 13%.
Excluding marks on our Treasury investment portfolio pre tax income was $508 million for a pre tax margin of 66%.
Execution, and clearing expenses were $64 million up 19%.
As a note last year, we received $3 million see rebate from Yossi see from a program. They have since this continued.
Without it execution and clearing would've been up 13% in line with the increase in commission revenue.
Fixed expenses in brokerage were $130 million up 14% driven by increased legal and compliance expenses.
Higher compensation and benefits in line with our hiring hiring to support the growing brokerage business work secondary factor.
Customer bad debt expense was a negative $2 million says we are able to recover some previous losses.
Market, making today consists of the customer facilitation business, we will retain as well as three markets outside the U.S., which we continue to evaluate.
Net revenues were $17 million of which 7 million were trading gains in the bulk of the remainder was net interest income.
Market, making pre tax income that was $8 million.
Corporate segment reflects the result of our strategic investments and the effects of arc and currency diversification strategy.
Third quarter, we recorded.
The mark to market loss from our investment in Tiger brokers at $13 million.
Like to date on this investment we recognize the net gain of $16 million.
We will continue to mark this investment to market each quarter.
Which may lead to further variability in our corporate segment earnings for as long as we hold disposition.
As to currency diversification effect.
We carry our equity in proportion to a basket of 14 currencies, we called the global the best reflect the international scope of our business.
The U.S. dollar strengthened against all major all other major currencies this quarter.
Kurt a net loss from our strategy.
About $74 million of which 47 million is included in earnings and $27 million reported that other comprehensive income.
We estimate the total decreasing comprehensive earnings per share from currency effects. The 15 cents with nine cents reported in other income and six cents reported.
Turning to the income statement.
Net revenues were $466 million up 6% from year ago.
Adjusted for non operating items net revenues were 525 million up 14% over last year.
Non operating items include 47 million dollar loss at our currency strategy.
10 million dollar loss on marking our investments, including Tiger brokers to markets.
Got a $2 million loss on our Treasury marks.
Commission revenue rose, 12% on significantly higher volumes and futures and options.
Somewhat offset by lower volume in stocks with smaller trade sizes and most product categories.
We noted earlier this small decrease in our overall average cleared commission per dart $3.69 reflected smaller trade sizes across most products segments.
About $291 million and net interest income.
Brokerage produced 283 million market, making 9 million incorporate the remainder.
Other income, which includes our global currencies strategy marks to market on our treasury and Tiger brokers investments and other fees and income we received was a loss of $19 million the global investment in Tiger brokers.
And Treasury marks returned losses, while other areas of other income primarily fees showed offsetting revenues that were slightly lower than less than a year ago quarter.
Non interest expenses were $185 million for the quarter up 13% from last year.
The increase in spread across several categories, including a 19% increase in execution and clearing costs.
Or up 13% when excluding that 3 million dollar currency rebate, we received last year.
And higher employee compensation and unique costs and support of our growing brokerage business.
At quarter end, our total head count stood at 1581, 15% increase over the year ago total.
Had been hiring most aggressively in the areas of compliance client services and systems development.
The largest fixed component of our non interest expenses employee compensation and benefits.
<unk> for 14% net revenues.
General these expenses reflect the opportunities we see to expand our business or automate. It further we do not have a fixed percentage increase that we seek to achieve.
Pre tax income up $281 million was up 2%.
And represented a 60% pre tax margin.
Adjusted for the non operating items I mentioned previously pretax income was $340 million up 14% and represented the 65% pre tax margin.
Diluted earnings per share were 45 cents for the quarter versus 51 cents is the same period and 28 do you.
Comprehensive diluted earnings per share, which includes all currency effects were 39 cents for the quarter versus 50 cents last year.
And without the impact from non operating items diluted earnings per share would have been 57 cents versus 56 cents last year on the same basis.
To help investors better understand our earnings the split between the public shareholders in the non controlling interest is as follows.
Starting with reported income before income taxes of $281 million.
We deduct $4 million for income taxes paid by our operating companies, which are mostly foreign taxes.
This leaves 277 million.
82% for that 225 million reported on our income statement.
He is attributable to non controlling interest.
The remaining eight for speaking person.
For $52 million is available for the public company shareholders, but as this is a non-GAAP measure it's not reported on our income statement.
After we did up taxes of $16 million owed on the 52 million net income available for common stockholders is $36 million you see reported on our income statement.
The income tax expense you see on our income statement of $20 million.
So the 60 million paid by the public company.
Plus the 4 million paid by the operating company.
Turning to the balance sheet. It remains highly liquid with low leverage we are extremely well capitalize and have ample capital to support our growth we hold excess capital in order to take advantage of opportunities as well as to emphasize the strength in depth of our balance sheet.
We continue to carry no long term debt.
At September Thirtyth.
Margin debits were $26 billion, a decrease of 16% from the more risk on environment you saw last year.
And as we've mentioned in the past this figure will likely show some swings to our success in attracting institutional hedge fund customers, who are more opportunistic and taking on leverage.
Our conservative balance sheet management supports a growing worldwide margin lending business.
Our consolidated equity capital at September Thirtyth, 2019 was $7.7 billion.
6.5 billion was held in brokerage point 9 billion in market, making and customer facilitation activities for the remainder in corporate.
Now I'll turn the call back over to the moderator and we can take some question.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your questions press the pound key.
Please standby well, we've compiled the Q and a roster.
I get to ask a question press star one.
And our first question comes from Rich Repetto with Sandler O'neill. Your line is open.
Yeah, Good evening, Thomas and good evening Paul.
I guess my first question is on the new offering I'd be careful light and I'm just trying to see Oh.
Some of the early results.
If you could give us any color or any.
Sort of.
Information on on how its going I'd be careful like Oh, so far.
So I'd be curious I lied game online yesterday.
[laughter] thought it was October one I'm sorry.
So there is not there, though we're lucky I can tell you about it.
Previous through yesterday, we had a few does that gone.
From customers that have expressed the incentive to food to dry eye big lie.
And so yesterday.
In the course of yesterday, it actually 35, new I became.
Got it.
So.
That's that's basically there is not.
Our job against that.
The average.
I said that Cogs are $52000.
On the Abbvies day hold $24000 of that the Guy.
Got it okay.
My apologies I thought it started at the beginning of the month, but Oh meal. [laughter] next question Tavis. So are you know you've seen a number or the other.
All the other online brokers go to zero and I'm just trying to see you know do you think that that will have any impact on I'd be k., our pro or do you see any you know.
You have to light offering of I guess anybody speculating that you know the difference between I'd be care pro in zero is.
That that the you're a bargain has been reduced I guess is what they're saying.
Well, that's it's too I read that we did not expect such a free three action that says that you.
You know be so that's a big come out with I'd be lying.
Very good that'd be a girl.
That's correct.
Ah Costumers and then eventually Oh there are people is starting to use seeing there maybe ill go to zero. So this is.
Very soon reaction to that surprise to us.
We learned through <unk> <unk>, we understand that.
We are usually we never gave I do think.
<unk> and disclosing.
The year old days.
We will not come from and do not do not so.
They are.
To do in the future is similar circumstances.
So are you.
Sure you asking me can you repeat.
Yeah, I was going to say do you contemplate any changes to I'd be care program or you know going forward given.
Given what the industry is done.
No no we are not contemplating any changes to brew.
I think that most of our customers are sophisticated that some who are not may go over to lie and that is completely okay. The though.
Broke customers understand that they benefit through.
Andy.
Ah well they send defense in a favorable depends through them.
<unk>.
Oh, gosh balances and and low worried that so margin borrowings.
And.
Some of these very sophisticated its cost and there's also on their side.
Good day here for those who would not be the outcome.
Yeah, I see that grade or so.
They don't have much of a choice anyway.
Understood and very last question the smart order routers are they do.
But I'd be care pro clients use.
You know you say its revenue neutral and it's easy to see the payment for order flow you know could offset the doing whatever it was a 222 equity commission at least I think it wasn't August or so but can you just maybe give us your view of the value of the smart order routers a is it.
And yeah.
Value that the client gets.
From that using the smart order routers.
<unk> well.
I think that we'd be able to provide exact numbers in about a couple of months or maybe three months has even though the yes. These are monthly stats that maybe.
That's the regularly disclose.
The first day of each bonds or be called Kool aid the all in execution goes.
We're all of our customers and that snobby have bifurcate that into two segments. We view, obviously called Kool aid.
That defense the Coke when it goes numbers for both segments that dependency would be a better.
And so rather than.
That correlate that bug that why don't I guess lead to pick up there.
Sounds good that's all I had done a good hearing from your Thomas.
Thank you.
Thank you and our next question comes from well that's with Goldman Sachs. Your line is open.
Good afternoon, everyone.
I will.
So I guess maybe to follow up on the Ivacaftor life platform or are you seeing any demand for somebody some of the foreign markets that you does operate at for a product like that and I guess, assuming the rollout go smoothly is that something that you would consider a in other markets.
So.
You know first of all.
You don't have the same high frequency trading activity in for a market.
What do you attribute the U.S. so.
There is nobody clambering goodbye.
Who import end markets so that by itself.
He's a limitation.
Well.
On the other ad.
Blaze <unk>.
Let's consider.
Going to zero, but otherwise.
That is no <unk>.
We don't have anybody that we would compete Andy that right.
So.
No the answer is no.
Got it makes sense and I guess, Oh Commission revenue do you have a sense for how much is coming from kind of U.S. based accounts versus what's coming from abroad.
[laughter] I have some sense, but I have done.
I don't know that or.
Oh, you know bye bye.
And don't forget we beat basically we get we did I have more commission from options them for them.
Then from stocks.
And.
Chose commissions are also.
You know a significant part it's always forex so.
I I haven't broken bedrock.
Got it no worries and then maybe one for Paul I guess the expenses came in a little better this quarter I just any commentary on on the run rate of expense growth that you're that you're looking at as you kind of look out over the next year.
Well the direct expenses always expense and contract with the volume. So they were in line as I mentioned that you know ex that a $3 million rebate from last year.
The ER employee comp and benefits, you'll see it was down somewhat but of course, you have to compare as we disclosed last quarter that it's when our stock incentive plan shares or.
<unk> best in grants so there's a additional expense in the second quarter. So you know as a run rate, we're probably more in line this quarter.
And you know not much special in the others other than generally speaking you know compliance is an area that are simply takes up more and more expense both in.
In the top and benefits as we increased staff in our resources there.
And also when you know responding to regulators and so forth.
Got it that's helpful. I appreciate you taking my questions today.
Thank you and our next question comes from Kyle.
Your line is open.
Hi, Good evening I, just on the IDR light offering when you announced the offering obviously it was very differentiated because of that zero commission rate and the others in the industry obviously moved.
Cut rates here. Since then just wondering if there's anything that you are willing to do or getting clients rose from a promotional standpoint to help differentiate that IDR light offering versus all the others. Your commission offerings that now just in the industry.
Well you know our platform is still differentiate because in the sense that you know the subsidiaries it's Ah.
Most suitable for poor more sophisticated clients and old, though we'll do the allied.
Delight.
He's traveling simplified but never done that's.
More sophisticated clients Luca reams of benefits from.
From a.
Our platform because of either come cookie cutter.
Oh Sobi have obviously, we have the.
Yeah ability to Threed.
Hey, maybe.
The markets that are on the though.
And also.
Great futures, the along with that along with dogs and options.
You can also grade you also add.
Hmm Bonk Bonk online bond trading.
Capability.
And.
<unk>.
And that the that's basically yeah.
Yeah and of course.
People, who for example, we're going to.
Considering going short.
It's very unique that the that reduce play or.
Huh.
Sure thing Bend, Dorian and and very rich you can borrow or Len struck.
Right honestly got anybody else, though right.
Although again there could be go lives.
Probably not not be interested in that.
We'll go this suprise is that.
Okay.
The 35 customers.
Coupon today.
Yesterday.
Some of them as short for sure.
[laughter].
Has there been an increase in inbound client call volume regarding or since the move to use your commissioned by the industry I'm. Just wondering if you've noticed any change in kind of client your client behavior. Since the last round condition can concept has gone through.
So I want to school access to that.
Why don't you got keep up to date gun Glier, because I'm sorry [laughter].
Okay.
And then that's just on the the increase in the net interest income related to the high demand for its hard to borrow names.
It was there something specific that happened in the quarter that you can note. It was just a a very large increase sequentially there.
Yeah, well, that's we generally say you know the the earnings coming from a securities lending in general are driven by not only the breadth of our coverage, but very much by the specials that show up in any given time and you know how how hard to borrow are they.
As much as the market willing to pay in terms of a interest rate and how long does that last for somebody was certainly a couple of drivers recently probably names that you.
Hurt in the news and you know we position ourselves to take advantage of that because we've developed all of our securities lending and inventory management systems in house and so they're they're quite specialized that you know doing an efficient job that captures as much of that lending as possible.
Okay. Thank you and then just just lastly from me Thomas just given the CEO transition.
Could you just go into I guess like what has changed in terms of the day to day or strategic.
Direction that of the company in terms of decision, making there's a like well what Milan. It is doing how involved you'll be from a strategy standpoint, and also if we could expect.
To hear Milan on these and join you on the on these calls on a go forward basis. If that's a that's in the cards. Thank you well you know somebody has to do that are going to bid on doug's. The 33 cleave out so I will take or pay too.
Got it need to this stuff because you know it [laughter] I mean I understand that you guys.
I would like it but you know you cannot come through or annual shot or would there be thing.
All these data and you have freed could go to even though it's getting book of the you on.
Other than that I'm, working very hard done restraining myself.
Through either up Big game every hour the over [laughter], but yes, that's true and.
I hope that I'm I'd be successful then I will.
In therapy, less and less it so I'm good bye.
I'm sorry.
Thank you Doug.
Thank you and our next question comes from Chris Harris with Wells Fargo. Your line is open.
[noise] a great. So you know obviously, there's been a lot of changes and offerings across the industry on commissions and everything else.
I'm sure you guys are are keeping track of that one thing that's interesting to US is if you look at fidelity is revised offering.
They're offering zero commissions and they do not accept payment for order flow. So I think there the only broker that has that combination. So I guess my question is from an execution perspective is what fidelity offering superior to I'd be light and other competitors.
So they do not accept payments from order through but day.
The same.
If you look at this week, so could create boards in other words, there ought to seek odell and they are out Subaru true.
And so do we and so that everybody else we know.
And.
So all that that means is that about Aberdare fey bad each.
They pass it onto their customer.
That says that they are.
The.
They are the these are high frequency traders sue.
To.
Who better that rise.
By the same and by the entire payments or is this other folks who break it up and they say, okay give very very sensitive to that customer and 70% to me or something like right.
That's how it works so that they put it I see.
A few they'd be me.
Hi.
Conceivably give that better right.
On on on the average than other people do but you know that that it's hard to confirm and ours too.
They certain that through.
And some numbers that have come out.
Grown pre deli three.
So there are certainly very weird.
He goes.
They set for example that day.
Uh huh.
Uhhuh.
The deprives by $17.
The average aren't dog and cat grade.
$17.
Hi.
It would be.
30, 453.4 cents on.
Hi, guys any share quote on both sides people imports and ride and the the.
The I frequency grader Mohawk.
I mean, they have some expenses and they would those who likes to make some profit so I do not understand how that works or less.
On less in the case of freedom they'd be these conceivable that they do all kinds of other business with.
We do same terms and then maybe Dave.
Compensate them in some other way and.
That.
That's a possibility but.
I'm into our too many on those so so the house gray.
[laughter] Okay. No. Thank you for that explanation yeah I appreciate the a earlier comments about no no no plans to the the pricing scheme at I'd be I'd be pro.
But I'm curious what was the last time, if you guys had never changed the commission rates are on the I'd be pro platform.
Mm Hmm B, we never we never had in it and gays. So I mean, you know that our commission rates are feared theater to be able to you.
And.
So.
You know in a very few cases, some some large volume books and show customers. That's do US a would you do a babies, you're very tough theater and a very tough do it is for the very small very small volume.
And they say it would be easier for us to keep track of everything if we didnt have the believed that the and then then be Oh, yeah I'm on certain cases, we may agreed to that but.
That's that's basically the I remember option going to be shown to be they use a maybe a couple of god not by much.
And.
That's basically.
Okay. It just Oh, you know one last one here for me I you know with with all he is a lost revenues across the industry not not for you guys, but for obviously some of your competitors.
There's there's renewed chatter about a the potential for some industry consolidation.
And so just wanted to get your perspective, you know what would I be.
You know consider or take a look at a potential transaction or do you guys feel like Hey look you know what you've got enough organic growth in front of <unk>, maybe you would need to entertain.
Any any kind of an acquisition or merger.
Well, you know I mean, <unk> called surely be used to growing go or old business and I think better.
You bet that are out.
I do digest and other operation and.
And right now I would be especially complicated because.
You know.
It's very hard to tell about.
But these different operations would look like so.
I don't think that neighborhood.
It would be actively looking good.
Are you create that's probably like you had in mind, so no we would not.
Thanks for taking the questions.
Thank you as a reminder to ask a question you'll need to press star one on your telephone.
Our next question comes from Mac Sykes Gabelli Your line is open.
Well how people is birthday.
Thank you [laughter].
I did have a chance to look at the the new platform.
And I thought it was pretty interesting, but given some of the interests in the politics, especially as the presidential I thought maybe kind of active odds on.
Some of that.
With all the candidates.
So I might be interesting.
Oh My question is just kind of a follow up on.
Sure Harris is in terms of consolidation for some of these smaller players.
And the potential for them getting pushed more it seems you're introducing broker platform.
In the consolidation, where they look to just adopt to take advantage of you're scaling back office.
[laughter].
I I don't I I don't think we would do that I I think there are other folks who are better off that sort of thing.
We viewed Luke you do too too.
Focus on our platform to do to extend the capabilities and and to grow organically. That's what we want to do.
I guess I was more in terms of evolving their models for their back offices to becoming introducing brokers just adopting your model.
Oh Wow, there that we're always open to that it's up to them.
And just could you also talk about sort of the back office aspects to it.
How does the zero commission trading impact clearing and.
The economics, there if any.
I I do not.
The oh that would be related.
Oh.
Yeah, that'd be Fred you know I agree with that that's all that's all the front end pricing in the Bakken were extremely efficient that and we do it in a low cost way that wouldn't change.
Thank you for taking my question.
Thank you and I'm showing no further questions at this time I'd like to turn the call back to.
Nancy Stuebe for any closing remarks.
Thank you everyone for participating today and as a reminder, this call will be available for replay on our website. We will also be posting a clean version of our transcript on our site tomorrow. Thank you again, we will talk to your next quarter.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
Everyone have a great day.