Q3 2020 Interactive Brokers Group Inc Earnings Call
For Affiliates interactive brokers, Ireland and interactive brokers Central Europe while we have been at this effort for some time our license applications. Am I spending for both affiliate? And we think it's quite possible that one or both will still be in progress on December 31st with some depends on many factors including regulatory flexibility and interpretations. It is possible that we will be facing a temporary Gap you were in which we could be unable to prove you to put the service some new customers for a short period of time subsequent into the wage which could negatively impact our business in Europe. We think that any delay in our ability to service affect the new client or open, New Jersey.
The Limited
And temporary the third item is margins much has much has been made of our recently announced policy to slowly increase certain requirements in the run-up to the election given the uncertainty over the market during this time. We believe this is the correct prudent step to take them back to our customers and ourselves. We have given more than sufficient notice of Our intention and we are implementing the increase very good job and do not see any major issues and now back to you Nancy. Thanks in the third quarter. We continue to see strength of business as more and more people in countries around the world chose to invest in the market.
Accounts Rose 47% year-on-year to 981000 as we added a hundred and $5,500 net new accounts and the quarter.
Klein Equity grew by 49% to 233 billion as new and existing clients worldwide thought to take advantage of the market opportunities they saw
Gross came and all client segments and all geographic regions with areas outside the US particularly strong. Once again, this International growth continues to result in a more even customer distribution among the countries and regions that we serve over the course of the quarter clients grew more comfortable with putting money into the market and taking on Leverage with margin loans going from twenty four point nine billion at June thirtieth, two thirty billion at this quarter end.
As clients traded more actively during this period of high Market volatility our total darts reached over one point eight million more than doubling from last year, June Rose 49% to 442.
Because our platform is highly automated the marginal cost of adding an additional client diminishes as we reach higher account numbers the limit to this diminishment and marginal cost is the expense of Ky Thursday and other compliance obligations we have which are especially high with respect to customers and foreign jurisdictions.
The suspense we can regard as a fixed cost to add a new account.
To the extent The Profit derived from such a new account exceeds these fixed costs. We continue to focus on growing our new accounts.
Automation also enables us to offer worldwide access to financial instruments ranging from equities fixed income funds derivatives and among others giving us the diversity of products to attract customers from all geographies.
Since the Federal Reserve lowered interest rates to near zero and March our net interest income has been affected.
Higher-margin loans an influx of cash into new and existing customer accounts and a strong Securities Finance performance led to $195 million of net interest income for the quarter despite are segregated life and securities yielding. Only thirteen basis points. We continue to invest are segregated cash in the safest short-term Securities as a flat yield curve with near-zero interest rates wage means there is no advantage to buying long-term Securities or taking on the risks that non US Treasury Investments bring
Finally our total Equity surpassed eight point five billion dollars in the third quarter our highest to date with no debt our balance sheet remains solid as we continue to grow or strong Equity Capital helps us attract larger International and institutional clients.
Once again, we saw growth and all five of the client types that we serviced. I will now go over our five client segments individual customers which made up 56% of our accounts down 6% of our client equity and 54% of our commissions continue to be our fastest-growing segment with 12-month account growth of 65% fine Equity growth of 54% off 42% growth and latest 12 months commissioned all geographic regions. We serve so account by an equity and commissions grow over 30% with International growth from Europe and Asia outpacing the emissions test for now global investor demand for a reliable platform with a wide choice of products and international markets continues as investors seek to maximize their investment opportunities.
Proprietary trading firms are 2% of our accounts 10% of a client equity and 14% of commissions for the quarter this group grew 22% in accounts for the 12-month period percent incline equity and 29% and commissions.
Prop trading firms are sensitive to the direction of volatility and the quarters High volatility offered them numerous opportunities Traders also tend to have more active trading strategies which benefit from our low-cost platform that provides access to Securities around the globe.
But most importantly proprietary Traders depend on trading profits and execution quality is a major determinant of trading profits. This is what attracts most traders to our platform.
Hedge fund accounts for the 12 months ended September 30th grew 2% and accounts 27% and customer equity and 8% in commissions hedge funds represent 1% of our accounts down 7% of our client equity and 8% of our commissions. We are pleased to see 27% growth and customer Equity as a hedge fund industry's assets under management have been flat for about two years now. I'm here indicates strong results in a flat industry.
Growing word-of-mouth a reputation for best price execution and low margin rates and the quality of our platform are behind this growth.
Financial advisors or 12% of our accounts 18% of our customer equity and 13% of our commissions this group grew accounts by 14% for the 12-month period or customer 17% and commissions 7% as advisers tend to be more conservative in their activity their commission growth tends to grow more slowly and periods of high volatility.
After quarter-end the back-to-back closings of two industry transactions and fewer competitors in the space. We continue to see opportunity in this area with fewer competitors. It is easy to get visibility when both new and existing FAS research their platform options, especially when they hear about new fees learn about hidden fees and potentially find themselves competing against their birth.
Our final segment is introducing Brokers these represent 30% of our accounts 29% of our client equity and 12% of our 12-month commissions. I broker segment account growth was 38% for the latest 12 months with 86% client Equity growth and 71% in commissions. We saw growth in this segment in all regions with Asia showing particular strength because we offer Global markets and products along with seamless back office functionality. We can grow and regions where customers may not be large enough to draw the attention of both bracket Banks or even if they did would be charged extremely high prices for international access.
In 2020 as more people worldwide stock to invest or to diversify their assets. They wanted the ability to access many markets and products in their search for returns and asset safety.
Turning two new products offerings is included with our own investing grows in importance and in assets allocated impact dashboard allows our clients to select the principles and practices most important to them and then see how each individual investment in their portfolio moved in closer to or farther from their goals.
Our mutual fund Marketplace has grown to over 34,000. No load mutual funds from over two hundred eighty five hundred families making interactive brokers one of the largest if not the largest fund agnostic supermarkets off as always. We do not charge a custody fee and the funds can be accessed by our clients that over 200 countries and territories.
We have been spending more on advertising and continue to see good response to our digital marketing efforts. In fact, Google AdWords is using interactive brokers as a case study in successful digital marketing efforts wage.
For years ever since we started our electronic broker in 1993. Our dream was 1 million account and sometime within the next week. We will welcome our one millionth client off. Our goal now is to achieve eighty million accounts or 1% of the global population to do this in twenty years would be a 25% annual growth rate to do this in ten years is the 50% growth rate in my comments will follow the format of the earnings release after which will open up his call for questions as a reminder starting this year.
We began reporting without separate business segments as our remaining market-making activity is no longer material to our overall results. We also separated other fees and services from other income other fees and services contains recurring items such as Market data fees account activity fees and FDIC Bank sweet program income and other income that consists of items that are less predictable in nature like currency impact US Treasury marks the market principle trading activities and other investment gains or losses. I'm looking at the operating data. Hi trading volumes and customer account openings continued as volatility still at elevated levels moderated from the second quarter wage. We continue Global impact of the coronavirus as well as uncertainty over the upcoming election and brexit more likely contributors to highly active Market worldwide volatility is measured wage.
62% to 25.9 in the current quarter from 15.9 in the same quarter last year. However, while the vehicle peaked at 34,000 current quarter was less volatile than the first and second quarters of 2020 when the vix spiked the eighty-two for a short time in March and 257 in April.
Quarterly total darts increased 113% to a record 1.8 million compared to the third quarter of 2019 and our customer trade volumes continue to rise dramatically in every project led by increases of 65% 9% and 109% in options Futures and stock suspected.
FX dollar volumes were strong as well increasing over 30% total accounts reached $981,000 up 47% over the prior-year with Courtney net new accounts adding and adding added at a pace once again about five times higher than last year's quarter.
Just contributed to client Equity growth of 49% 232.7 billion dollars at quarter-end.
Our overall average cleared conditions are commissionable order. So 27% versus last year to $2.69 due to a product mix that featured smaller average size is across all product classes.
Smaller trade sizes are often seen in high volatility. As Traders choose to risk less portrayed and fast-moving markets.
We also saw higher exchange rebates which we pass through to our clients in the form of lower commissions as our strong order volume led to are capturing incentives offered by exchanges liquidity providing orders.
Overall higher commission Revenue show that the strong increase in trade volumes more than made up for the drop in commission for commissionable order.
Moving to our net interest margin table that interest margin narrowed from 1.77% in last year's quarter to 0.94% the Federal Reserve Benchmark Target rate down to near zero in March and has kept it there the average effective fed funds rate, which we use to price both margin loans and interest paid on customer cash fell from 2.19% in the third quarter of nineteen to 0.09% in the third quarter of 20.
While significantly lower rates reduced what we pay on our customer credit balances. They also reduce what we earn on segregated cash and margin loans nevertheless our net interest margin narrowed just 83 basis points over this. Supported by margin loans and strong Securities Lending.
Despite the FED despite the FED lowering the overnight interest rate the yield curve remains fairly flat as it has for several quarters.
We have kept the duration of our portfolio relatively short and recorded a mark-to-market loss of two million dollars on our Holdings of us treasuries similar to last year's third quarter.
As always we plan to hold these Securities prematurity. So any gains and losses on our marks the market each quarter should Trend toward zero over time, but as Brokers unlike Bank wage Gap rules require that we Mark our portfolio to Market in our financial reporting.
Outside the US Benchmark interest rates remained near or below zero for many currencies at central banks continue to attempt to soften the impact from COVID-19 on their economy.
Despite a $28 increase over the year-ago quarter in average customer credit balances.
The reduction in interest expense paid on these balances was the largest contributor preventing our net interest margin from falling further not only are most credit balance is paid to zero interest some balance is negative rate currencies produce revenue on the past through to some customers. We continue to have success and asset Gathering and our FDIC insured Bank deposits. We program held an average of three billion dollars a year update hundred million from last year.
Margin lending and securities lending. We're the largest contributors to our net interest margin.
Average margin loan balances Rose 9% from last year. However, due to significantly lower Benchmark interest rate. Margin loan interest income felt 53,000 margin loans have shown a steady climb back ending the quarter at thirty point three billion dollars up 17% versus last year and 18% from the second quarter home Securities lending interested in, was up 12% this year this quarter versus a strong year ago quarter as we continue to execute on hard to borrow names that investors were looking to age
On segregated cash despite a 48% increase in segregated cash balances lower investment rates led to a 91% decline in interest income several factors caused the yields on our segregated cash to differ from the change in the FED funds rate. First. The portion is held in other currencies and second given an average duration of investment in treasuries of about 44 days.
reinvestments take place over time
To some of our investments that segregated cash would not be expected to follow Fed rate declined immediately.
We are approaching the tail end of our investments at higher rate and maturity is a small amount remaining will not have a material impact on our overall investment rate.
Increase in segregated who didn't are segregated cash balances from our balance sheet for accounting firm now for our estimate.
the impact of the next twenty-five basis point increase in rates
when calculating the impact of rate changes, we understand that as the possibility of a future rate increase becomes more certain this expectation typically all is already reflected in the yields off the instruments in which we invest therefore we attempt to isolate the impact of an unexpected rise of Fallen rate separate from the impact of rate hikes or cuts that have already been baked into the price of these.
With that assumption, we would expect the next 25 basis-point unanticipated Rising rates to produce an additional ninety four million dollars in net interest income over the next four quarters down and 103 million dollars as the yearly run rate based on our current balance sheet.
These numbers are highly sensitive to Benchmark rate changes due to the impact of low rates on the spread between what we earn on our segregated cash and what we pay our customers as us rates fell below fifty basis point power spread compressed as we are unless one investing are segregated catch. However, the converse is also true that has rates moved back up towards Iraq at this point our spread expand significantly.
It run rate includes the reinvestment of all of our present Holdings at the new assumed rate, but does not take into account any change in how we manage our segregated cash.
If we are successful in continuing to grow our customer assets higher cash and marginal ending balances will provide some offset to the loss of net interest income from low Benchmark rates. Should they persist off?
Turning to our income statement as I mentioned earlier in 2020. We began reporting our Consolidated numbers only and no longer report segment.
We Define non-core items as those not part of our fundamental operating sold non-core items including included three items this quarter first, our currency diversification produced a gain of $27 versus a $47 loss last year.
Second mark-to-market loss on US government securities of two million dollars the same as the prior-year and third again on our investments 5 million dollars versus a loss of like a million last year.
The net effect of these adjustments raised pre-tax income by $30 this quarter versus reducing it by fifty fifty nine million last year.
Net revenues were a reported $548 for the quarter of 18% versus last year's third quarter.
Excluding non-core items that Revenue was $518 down 1% versus last year commission Revenue rose 49% on significantly higher trade volume that category that interest income fell 33% to $195 million dollars. So it was about even with the second quarter. The decline was largely due to the drop in the average effective fed funds rate versus the year-ago quarter other fees and services revenues Rose 29% to $45 million dollars these include Mark data exposure account activity and FDIC Bank sweet program fees.
As well as these.
Generated from facilitating customers participation in IPO.
Other income which includes gains and losses on our investments and currency strategy as well as principal transactions the $29 versus the $47 loss last year was primarily due to currency effects on a global X non-core items other income decreased decreased from a gain of $12 to a loss of 1 million this callback.
Just includes the $13 loss on our investment in the one Chicago Exchange, which ceased operations in September.
Not interest expenses. We're at $214 for the quarter of 16% from last year due primarily to hire execution and clearing costs in line with higher trade-off.
Also higher employee compensation and benefits costs and $3000000 in customer bad debt versus a two-million-dollar recovery last year at quarter-end our total headcount 1923 a 22% increase over last year due to the COVID-19 pandemic. Most of our employees worldwide have been working remotely month after a brief pause in the first quarter and we have been hiring again to keep up with the influx of new account and to strengthen Client Services compliance and systems development for the future months.
expenses $137 15% driven by higher compensation and benefits as well as some increase in
G&A expenses for up 23% a substantial portion of which were expenses associated with the development of and consultants for our compliance program while increasing compliance staff has raised our compensation and benefits expenses. We believe that most of the costs of outside Consultants has been recognized and will not be recurring
Customer bad debt expense was three million dollars. Well within the zero to five million we expect in any given quarter and well contained despite the increase in activity in volatility.
Reported pre-tax income was $334 of 19% Despite a $96 drop in net interest income for a 61% margin.
Excluding non-core items pre-tax income was $304 down 11% for a 59% pretax margin.
I loaded earnings-per-share for $0.58 for the quarter versus $0.45 for the same period in 2019 and non-core item diluted earnings per share were $50.57 last year at the justice.
To help investors better understand our earnings taxes and the split between the public shareholders and the noncontrolling interests third-quarter numbers are as follows.
Starting with our own adjusted pre-tax income of 334 million. We did a $18 million for income taxes paid by our operating companies which are mostly foreign tax.
Just least $316 of which eighty 1.2% or that $256 million reported on our income statement is attributable to non-controlling interest.
The remaining 18.8% or sixty million dollars is available for public company shareholders as this is the non-gaap measure it is not reported on our income statement.
After we expense remaining taxes of $14 owed on that 60 million. The public companies net income available for common stockholders is the $46 reported on our income statement.
The income tax expense line was $32 consists of this $14 million plus the $18 million of taxes paid by the operating company.
Two additional notes on operating company's income tax. The current quarter tax includes about 5 million dollars in prior. Adjustments that are not expected to be removed.
And second the current rate is running about 1 million dollars per quarter higher than previously due to increased tax cost outside the US.
Turning to the balance sheet with eight point five billion dollars in Consolidated Equity. We're well capitalized from a regulatory standpoint. We deploy our strong Capital base to wear off Unity through our brokerage business worldwide as well as to emphasize the strength and depth of our balance sheet to current and prospective clients and partners.
We continue to carry no long-term debt and at September 30th margin loans 30.3 billion dollars up 4.4 billion versus last year. We continue to expect flame in marginal ending balances reflecting both economic conditions and our success in attracting institutional customers who are more opportunistic and taking on Leverage.
We offer the lowest margin lending rate of our competitors. And as we expand our customer base, we remain well-positioned to satisfy our customers risk appetite now, I'll turn it over to the moderator and we will take questions.
Certainly, ladies and gentlemen. If you do have a question at this time, please press star and and washing our first question comes in the line of Rich repetto from Piper Sandler your question, please yeah. Yep, is good evening Paul. So first question Thomas is trying to put a sort of a quantity around or quantify the risk of the EU and not getting approval. Is there any way you can talk about you know, potentially how we can impact either revenue or darts if you didn't get service Brokers approved?
I
Don't think that the the impact would be noticeable. It would only I think it would be only noticeable to the extent of opening new account.
And and they you're trading so I don't expect that. It will make much of a noticeable impact off cuz I'm assuming cuz the other existing accounts could still continue to trade that that's right. Okay. Okay. Okay, another question, you know, the the margin loans have dramatically increased since they bottomed in March, you know a little bit over 30,000 and sort of roughly flat with you know, sort of the higher quarters of last year, but I guess my question, you know, can you see the margin loan balance is you know how long that accounts grown by fifty percent and the the best of our ability of the account quality when it looks like client when you look at average client Equity or average trading it's yep.
The same. So are you could you expect to see a Improvement in you know, people starting to lever up more? I I I do expect that life. You must consider the the fact that number one many of the the new accounts are less of the professional Trader type that we originally had and more of the investor type. So they tend to use less margin and second month and we have tightened up many of our requirements because of understandable reasons, right?
Yes, yes expected volatility here. I guess. My last question is Thomas if I got the map right selling it $20,000 per day is Ron five little bit over five million shares a year. I think over the you know, the 60-year. You'd be a young age and thirty. So if you want to do it in this the manage of state and the other reason to you you noted at the beginning of the call. Would you ever at some point in life? And you know, I have to sell it enough to pay the tax right then I died right between now and then I'd I I have to sign up to pay the taxes that stock, right? Okay. Okay that that's the goal of this selling. That's right.
Got it.
Okay. Okay. Thank you very much.
Thank you. Thank you. Our next question comes from the line of Craig speaking dollar from Credit Suisse your question, please.
A good evening everyone. Thank you for taking the question. Could you provide us an update on your initiative to obtain a bank Charter in the US and also just remind us what day products could come out of a bank Charter besides cash sweet.
So so the effort to get the bank Charter but sidetracked the time when we had the SEC finger cftc findings against us and so we we have to digest that and and that's really proved that that we have taken all the necessary steps and the regulator should be very happy with everything we have done. And so, that's probably going to take maybe two or three more quarters.
Got it and Thomas. I'm sorry if I missed it, but did you give us a start date for the 10 be five?
I think it's November 2nd.
Got it. That's it for me. Thank you for taking my questions.
Thank you. Next question comes in the line. Will Nancy Goldman Sachs your question, please.
Hi, good afternoon.
So you're on track, I guess to increase the account Base by about 50% And you know, I know you aren't encouraging us to assume that this kind of continues at this rate, but just take this massive acceleration of growth of the franchise at face value. Is this led to any Evolution? I don't actually think that I need to continue at 50% but it will continue at home. Right? Right, right. So so even conservatively though that you know, the franchise is already expanded pretty you know, pretty, you know considerably so I guess when you think about the growth that you've already seen, you know has this changed any of your thoughts in terms of what you know types of products customer-facing features geographies. You need to be investing in or is it still is it still kind of more wage?
So it's more of the same in the sense that we are investing heavily in in automation more and more mature in in automated in customer engagement watching having automated facilities that virtually customers and and and interact with them as much what they are doing and interact with them and I'm telling them about the various options. We have faith that that they could find useful of the moment and they do whatever they are doing that sort of automation. We would certainly going to continue to increase or Market in digital marketing expenditure around the world and so the dog
we we do hope that
We can continue to grow up a very happy rate and we're going to be less whatever we can use useful in spend in our view in in the growth.
Got it, that's helpful. And then just at a high level activity race or extremely high right now and I guess your customer base is more engaged than they have been, you know in in recent years wage. So, you know, I guess is there anything that's on your mind? I guess other than the election that that, you know would you know make you think that maybe this comes to an end sooner than later or maybe conversely what could walk along these levels of activity is is it really just come down to volatility or is there or are you seeing like kind of you know different types of behavior for a couple of days in their life couple of weeks? We do not do notice some moderation inactivity and which which would be expected in in life and as they come up to the election and then of course, I think it will pick up and the results come out especially dead.
If it goes Democratic, I expect the people will start taking the long term gains because of the month expected 43% long-term capital gains tax rate. And then of course, we will have, you know, looking further down the road, you know, more and more spending and that will result in asset inflation include a higher and higher stock prices.
It's not unique to interactive bro based. It's going to be just generally the Financial Services Industries. You have a good time.
Got it. That makes sense. And then just last question. I mean you have seventy billion of client cash with a negative yield and I think there are a lot of financial institutions out there that would that would salivate it and having you know, if something that looks like that, you know, when I look at how it's being monetized today it only only you know roughly half of it is being monetized kind of funding margin loans and you know, there's still a fair amount that's you know, earning fifteen recognizing. It's very difficult to monetize anything in this kind of interest rate environment. Do you spend a lot of time thinking about how to kind of improve the economics on some of the client cash overtime? And how long did you do you ever reach a point where you where you feel like, there's some you know, you need to kind of optimize that that that equation.
you know, we be open keep trying to
Expand or margin Landing but without without being careful because if you don't want to take on new risks, but so that's that's basically certainly a full cuz we we do not offer the I mean as you know, very restricted in in Arabic and invest invest your money and and we are certainly not looking at lower grade birth infrequent illiquid governments or or long-term governments, that's not for us.
So let me just add to that if I could Thomas it will you have to understand also that outside the US it's not permitted regulatory lie to use client credits to fund marginalizing. You have to be kept separate you segregate all of the credits and you finance the marginal ending and you know about 24% of our customers are outside the US so what may appear to be a lesser use of our client balances you have to take that into account.
Got it. That's helpful color. Thank you both and good luck with continuing the 50% account growth. Our next question comes home. I know Kyle void from KBW your question. Please good evening. I believe several years ago interactive brokers paid a special dividend ahead of potential changes to the capital gains tax rate. I'm just wondering if the special dividend would be on the table again the presidency in the Senate to the Democrats as you mentioned earlier.
Haven't thought of special dividend.
Okay, just in terms of maybe follow up on the question. You still have access regulatory capital and I know not all of them in the past that much of that is there to support your credit rating and the prime brokerage business as well and both they're just wondering if you could tell me how much of that is really access from the balance sheet. In other words. You know, how much do you need to maintain the current credit rating and South Dakota Prime brokerage business temperature at these rates?
All this is a question for you. I can respond so maintaining the billion or so in excess regulatory capital is dead. It's good prudent management that really allows us to be flexible when the market gets extremely active or when institutional clients come to us for financing opportunities. It allows us to use that without bumping into regulatory constraints. Also though understand that a lot of our capital is in fact already devoted to supporting the client activity.
You know.
Spread out across many different countries doctors, it's some of it helps Finance marginal ending that take place outside of just life before so our access at any one time is really more like between two and three billion. Let's say to then take on New Opportunities and job opportunities do come. You know, they they they come with regularity enough that we don't want to cut down that number. We actually make use of that capital.
That's helpful. Thank you for another question on just the transaction. That's that's happened in the space and closing the space recently, I guess off and I'm curious to hear more about a potential opportunities that that this presents you both in the are a segment and active Traders segment. And if I'm wondering if you can comment on whether or not any kind of over the past year since the announcement to the deal closed if you've seen any influx in the inbound calls or account openings, you know potentially type to you that that transaction.
I'm sorry, you were breaking up. I couldn't hear but but the question for you here. Sorry, I'm asking about whether or not dead Ameritrade slob, you know juror is creating opportunity to figure out a segment you getting more in Balance customer calls. That's the way we definitely have lots of that. Come to kick the tires. They basically want to know that if they want to leave will this be a good place to come to so for now? It's a lot of work for us with not much else, but maybe maybe three materialized you never know. So we spend a lot of time with this and then they go away and they say yep.
You're very very good to know. Thank you very much. Maybe we'll come back and then just philosophy them real ah.
Are you seeing any of that on the active Trader side, Thomas?
I would not we would know that we wouldn't know. I don't think so. No, I think most most I mean most sophisticated active life, I would think.
Okay. All right. Thanks Thomas. I appreciate it. Thank you. Our next question comes in the line of Chris Harris from Wells Fargo your question. Please be great. So first question relates to trading activity we speak to investors about the space about your business is really I guess to narrative that have kind of developed one is that the trading activity you're seeing today is unsustainable and that volumes have to go down and the other argument says that no. No, we're in a new paradigm was $0 with zero commissions and and kind of a work from home environment and that this trading is sustainable. Do you have a thought on that Thomas one way or the other whether maybe I agree with both those things? I think it is not sustainable these levels, but it will certainly not go back to the Dead.
to the levels of
Early in the year. So I I think it really probably end up talking about some we're about halfway in between that's along with expect.
Okay, great. And I noticed that is the AML issue resolved. I didn't see a call out in the press release. So I'm assuming that means yes, but just wondering how long the email issue is resolved. We have undertaken a lot of Berk that we currently have to get down and that we will get done by by the end of the year, which is much earlier than what what we agreed to do about Iraq. And so he said
The issue is resolved. The work is not finished yet, but it will be by early next year.
Okay, and what what additional work still needs to be done? Is it just the related to the infrastructure?
Yeah, it's it's it's basically software and and you know, the Consultants we are we are number of Consultants who hath of you both oldest various would be nice to have ideas and some of which we had accepted and we working on getting them done.
Okay. Got it. Thank you.
The QR next question comes in the line of Chris Allen from compass point your question, please evening cuz I wanted to Circle back on marginal ending wage earlier that you were gradually increasing requirements as we headed to the election and also the marginal ending balances can fluctuate. So we're maybe you could give us an update in terms of where the extent, versus the quarter at number which I think was 30.3 billion.
Oh, so we are currently in the process of increasing margin rates and I think that will and I think off by the end of this week or is that correct? Do I yes, I believe that is correct. But let's remember that that by and large these increases do not impact stock margin rates. They they are focused on derivative where the margin rates were lowered to begin with. So as a result, then I'm going takes place against stocks. I would see a Major Impact there at all. So our margin,
Our margin loans are gradually increasing that we speak in spite of the increase in the in the the margin requirements.
Got it does got it. And then just just a quick going on. So the outlook for reinvestment pressures seems like it's over on the side cash side and rates of mostly stabilized. So obviously just talked about marginal ending cycle ending. How do you feel about that moving forward has the the box like binding life cycle ending box continue to increase you still feel good about the Outlook there.
Oh sure. I mean mainly and as I always say it's it's opportunity driven, you know our our base expands as our customer Holdings in Schaumburg stand, but you know the bigger your base the more we can take advantage of special meaning stock that get hot and in short supply and all of that may happen and we've developed a lot of software to recognize and try to optimize the rate that which we can capture those opportunities, So you will see it go up and down perhaps because we're not in control of which stocks become special but we do make the most of it when they when they exhibit that behaved.
Got that's it from you guys. Thank you.
Thank you, and we have any follow-up from the line of Kyle from your question, please.
Sorry, just a just a follow-up for Paul. I could on the other fees and Services. I think that's increased five million sequentially and ten million year-over-year. I'm just wondering if there's anything going off to call out in there or is that just a result of just overall rapid growth in accounts? And is that sustainable I guess is the the core of the question it comes from a number of factors. One of the larger ones is Market data, which is you know very much in line with the expansion of the customer base because we bought a contract for a lot of Market data and pass it on at you know at a relatively small markup. That number does expand and really took other mentionable factor is as I talked about before we facilitate participation by our customers and that has been on birth.
Lately, so it has generated more peace than before.
Got it. Okay. Thank you.
Q and this does conclude the question-and-answer session of today's program. I'd like to hand the program back to you and it seems to be for any further remarks. Thank you everyone for participating today as a reminder this month will be available for replay on our website and we'll be putting up a clean version of our transcript on the site tomorrow. Thank you again, and we'll talk to you next quarter end.
Thank you. Ladies and gentlemen for your participation in today's conference. This does include the program. You may now disconnect good day.
Dead dead dead dead.