Q3 2021 Interactive Brokers Group Inc Earnings Call

After the speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Please be advised that today's conference is being recorded.

If you require assistance during the conference. Please press Star Zero I would now like to hand, the conference over to Nancy Stuebe director.

<unk> Investor Relations. Please go ahead.

Thank you.

Good afternoon, and thank you for joining us for our third quarter 2021 earnings call once.

Once again Thomas is on the call, but asked me to present his comments on the business he will handle the Q&A.

As a reminder, today's call may include forward looking statements.

Urban which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control.

Our actual results and financial condition may differ possibly materially from what is indicated in these forward looking statements.

We ask that you refer to the disclaimers in our press release, you should also review a description of risk factors contained.

<unk> financial reports filed with the SEC.

In the third quarter, we once again reached a record number of accounts 1.536 million.

Our year over year account growth of 57% was nearly equal in all three of our geographic regions.

The markets continue to be constructive.

Find enough for us so more normalized than they were last year driving commissions to $311 million. The second highest we've ever reported only exceeded by this year's hyperactive first quarter.

While our GAAP reported net revenues were 464 million our adjusted net revenues of $650 million. We're also our second highest.

Truck from record again surpassed only by the first quarter.

The $186 million adjustment to net revenues virtually all due to the depreciation of Tiger brokers stock price.

We invested in Tiger at a blended price of less than $3 a share in 2018 in 2019 to help them gather enough capital to enter into the.

<unk> business on the large scale they wanted.

Using our platform as an introducing broker.

Since that time, the stock has traded as high as $38 and as low as three in a corner and our gain on this investment was about $80 million.

Even though they started out as a relatively minor investment. It's certainly has provided provided a lot.

Brooklyn intended distraction to our investors, who look at our financials.

With the new focus on the part of the Chinese government on data security, we now expect the stock to keep swinging for a while until they come to a clear understanding with the regulator of what is required and how to get there.

Our financial performance underscores the strength of our platform.

Lot of our focus on automating as much of the brokerage business as possible.

This gives us the ability to maximize our product offer product and service offering while minimizing our cost.

Automation to us.

It means that a million and a half customers from all over the world can interact and trade securities commodities and currencies.

These with each other across 141 trading venues in many jurisdictions under different rules seemingly from one account.

This is not easy.

And it is the reason that not all products on our platform are available for all users.

Such as crypto, which is not yet available to many of our non U S.

And november's, but we are working hard on that.

We just yesterday enabled registered investment advisors to add small crypto positions to the investment portfolios of clients, who request it and which we are told happens ever more often.

Automation can also enables us to generate upon request a single.

Cause nicely compiled investment report that not only summarizes your holdings on returns and the risk you have been taking but does so across continents and products and currencies.

And you can even custom tailored for yourself or for your customers column by column.

We've even added the capability to include assets that.

They need elsewhere and incorporate them into this report no matter what country or major currency they are in.

We continue to see active trading among our client base.

Give a sense of this in the third quarter of 2019, our equity volume was 41 billion shares in.

In the third quarter of 2000.

20, It was 86 billion shares.

This quarter reached 172 billion shares.

Third quarter total darts of $2 3 million were the third highest in company history. Following the first two quarters of this year as existing clients continue their activity and new clients begin to participate.

Clients investing confidence can also be seen in our customer margin loans, which reached a record $52 billion of 67% from last year.

We continue to see our clients putting their available funds to work.

$50 billion of margin loans represents about 6% of all outstanding industry margin loans.

Loans, even though we only hold less at a fraction of 1% of all investable assets.

This is also remarkable because our margin lending policies are comparatively conservative and we automatically liquidate positions in accounts that come into violation of these policies.

The reason for our high margin balances that we only charge zero point 75.

Point to 1.56% to <unk>, our pro customers for margin loans.

This policy is a major draw for sophisticated traders, who trade often use leverage.

The more our clients participate the stronger we become.

Our reported pre tax profit margin was 50% and adjusted for.

5% of items was 65%.

We know of no other broker who can claim profit margins close to this.

Our new account growth remains quite positive.

Both prior year and prior quarter ads.

Investor confidence and activity are strong across the globe in all regions as we emerge from the pandemic.

Non Chris activity continues to be led more by individual investors, who tend to stay with us, especially internationally, because we offer a broad product range and the lowest cost to those investors and there are many who wish to invest globally.

This breath as one of our strategic advantages one that is extremely difficult to offer.

For any broker providing market access can be expensive and complex to.

To do so globally with compliance legal currency and tax reporting requirements that vary by market is even more so.

Having all this automated is our competitive advantage.

Three.

Some of our accounts are international and rapidly growing markets.

Even as we come through this period of Covid global interest in the markets that began early last year continues.

People have grown comfortable doing more and more of the financial business electronically.

They have grown more connected to financial markets institutions and each other online.

Quarters, which in turn drives even more people to participate.

This along with our continuing dedication to add more products and services to our platform is why we believe year over year growth of total accounts can be at least 30% going forward indefinitely.

Once again offline.

Online and segments and geographies showed strong account ads with all regions showing greater than 55% year on year account growth.

Now I will go over our five client segments.

Individual customers, who made up 64% of our accounts, 37% of our client equity and 54%.

All questions.

The remarkable run of growth with 12 month account growth of 79%.

Equity growth of 57% and commissions up 35%.

All geographic regions, we serve saw growth in individual accounts of over 70%.

With European accounts topping.

Our commissions with over 90% growth.

This underscores what we always say it is important to provide a reliable platform that is global because people around the world want to maximize their opportunities to invest in the variety of ways. They prefer.

Hedge fund customers also continue to grow.

For the 12 months ended September 30th you saw 4% hedge fund account growth, 41% customer equity growth and 4% Commission growth.

We continue to add growing in larger hedge funds, which can be seen in the particularly robust growth in client equity in this segment.

Hedge funds represent 1% of our accounts.

All of <unk>, 7% of our client equity and 6% of our commissions.

According to Preqin, we moved from eight to seventh place as the prime broker servicing the most single manager hedge funds we.

We are in first place as the prime broker servicing the most hedge funds with under $50 million in AUM.

And for the second year in a row.

The fastest growing prime broker.

Proprietary trading firms are 2% of our accounts, 9% of our client equity and 12% of commissions for.

For the quarter. This group grew by 36% and accounts for the 12 month period, 44% in client equity and 19.

We arent in commissions.

All regions saw strong growth we.

We are seeing particular success in this segment in Europe as more prop trading firms open and new and existing firms moved to us due to our unusually diverse international product based to capitalize on our reputation for seamless efficient and favorable trade.

<unk> and as investors seek to counterbalance negative interest rates in the EU.

Financial advisors are 9% of our accounts, 17% of our customer equity and 10% of our commissions.

This group grew accounts by 19% for the 12 month period customer equity by 41%.

Percent commissions by 7%.

Accounting client equity growth in this segment tends to be higher than commission growth as advisers typically tend to trade more conservatively.

More larger advisor firms are beginning to try interactive brokers for our adaptable account structures, where you can manage hedge funds SMA and.

Their client accounts under one master and invest across the world.

Wide variety of products that now includes crypto.

And <unk> can use a rich set of tools and capabilities and with our dedicated client service desk for advisors, we continue to get better and capture more business globally.

Reagan our final segment is introducing brokers.

These represent 25% of our accounts, 30% of our client equity and 17% of our commissions.

I broker segment account growth was 31% for the latest 12 months with client equity up 59% and commissions of 97%.

Offering the ticket of global access to their customers is critical for brokers looking to grow their business.

Wide, new brokers, starting up an existing brokers looking to extend the breadth and depth of their offerings turned to our platform for its global trading and seamless back office functionality.

With the worldwide growth and investors who want global.

Introducing brokers know that their best opportunity to succeed is to partner with us to provide it.

Much was done to enhance and improve our platform this quarter.

We eliminated monthly inactivity fees part of our ongoing commitment to provide low cost training solutions.

We introduce bitcoin early last month in response to client demand.

Over the next few months, we will be broadening both the regions and types of customers and coins available on our platform.

We are very proud of the great advances we have made in building out our compliance systems and staff and a group that now numbers 350.

Access to many regional brokerage subsidiaries, we have around the world each with its own unique rules and regulations.

We've increased the yield on our advertising dollars to a point at which it is becoming profitable to spend more.

We have grown our sales force and they are gaining stride as.

As interactive brokers becomes better known.

A qualification and diverse capabilities of our platform along with our industry low pricing it is easier and easier for them to attract new and larger customers.

The growing controversy and focus on payment for order flow is to our advantage due.

Due to our unique position in the <unk> space.

We provide either.

For the submissions or executions at a small commission at crossing it usually better prices in our Etfs.

We have a great opportunity to attract more institutional flow.

They love to trade against our often overseas retail flow in between the N V B O.

Both sides benefit.

All.

Zero is a thrill for us to keep building, new things and adding more and more products and capabilities and to offer it to an ever growing audience at the same time.

It feels like our opportunities are for the moment unlimited, but we must hurry because the empty unserved product space is filling and quickly.

With that I will turn the call over to our CFO, Paul Brody, who will go through the numbers for the quarter Paul.

Thank you Nancy thanks, everyone for joining the call.

I'll review the third quarter results and then we'll open it up for questions.

Please first note we have preordered, our earnings release, a bit to more closely align.

Hey readers expectations.

So I'll start with our revenue items on page three of the release.

Commissions continue to be strong.

Returning our second highest ever quarterly revenues of $311 million.

This reflects higher trading volumes, especially in stocks and options from active customers and a groundswell.

New customers on our platform.

Net interest income generated $274 million in revenues.

Margin lending with particularly strong this quarter with customers producing $141 million in margin interest, reflecting their confidence in the market.

Securities lending also continued its strong run.

Investor demand for a broad range of Securities Tomorrow was met with a growing supply of inventory held by our customers.

We generated $49 million in revenues from other fees and services.

Even while discontinuing account inactivity fees.

Strong client activity.

Drove revenues higher.

Data fees and risk exposure fees.

And income from options exchange liquidity payments was driven higher by options volume.

Market data fees were $22 million up 21%.

Risk exposure fees more than doubled to $8 million.

In exchange liquidity payments were $10 million up 51%.

We eliminated.

The account inactivity fees on July 1st.

Further improve account retention.

Believe the trade off will be worth it for long term growth of the business.

Other income includes the gains.

On our investments.

Our currency diversification strategy and principal transactions.

Many of these are excluded in our adjusted earnings outside of the other income was up to $16 million.

Turning to expenses.

Execution clearing and distribution costs were down.

And 1% despite the higher trading volume.

Capturing exchange liquidity rebates through our state of the art order routing system drove this performance.

And regulatory transaction fees were substantially lower on reduced rate.

We have gotten better and better at.

These costs for our clients as a percent of commission.

<unk>.

Execution and clearing costs declined from 36% in the third quarter of 2019.

To 27% in the third quarter of 'twenty and now to 20%.

In the third quarter of this year.

With client trading volumes rising, while we continuously improve our.

Commission routing technology more commission revenue goes to the bottom line.

Our ratio of compensation and benefits expense to adjusted net revenues.

15% unchanged from last year, despite a 28% increase in head count.

Reflects our expense discipline and our strong topline.

Order.

Our quarter end head count was 2471.

G&A expenses were up 19% on the prior year.

Reflecting legal expenses on litigation and prior period bank fees, neither of which we would expect to continue at this pace.

Our adjusted.

<unk> margin was a robust 65%.

<unk> expense control, while also hiring and investing in the business for accelerated growth.

We are maintaining the operating leverage in our business.

Finally on the income tax.

The income taxes line.

Of the $28 million shown.

Adjusted free operating companies portion with $19 million and the public company's portion was $9 million.

Moving to our balance sheet on page five of the release.

Total assets ended the quarter.

At $106 billion with growth driven by margin lending to customers.

Arkansas.

Equity capital reached $10 billion for the first time, and we have no long term debt.

We continue to deploy our balance sheet to support our growing client business in particular.

More and larger customers want access to margin lending, which our capital base gives us the ability to provide.

We.

Consolidate offices in Ireland, and Hungary in response to Brexit.

For those in our other rapidly growing international locations our capital base.

The foundation needed for todays operations and for future growth.

Our capital is also used for numerous other growth and investment opportunities we see worldwide.

We opened up finally, an ample capital base helps us win business.

Knowing the strength and depth of our balance sheet to current and prospective clients and partners.

Let's look briefly at our operating data on pages, six and seven of the release.

Page six shows contract and share volumes for all customers.

Rose, 34% in options and 100% in stocks well above industry growth.

Activity is strong across client types and geographies.

And most securities product.

Our volumes are still above the very high activity levels of 2020.

Turning to page seven account.

<unk>, which remains robust with 555000 account adds for the year and 122000 for the latest quarter on top of record performance in the first half of this year.

Total accounts reached $1 5 million, 57% over the prior year and 9% over the prior quarter.

Count growth tumor equity growth reflected strength in new accounts solid additions to existing accounts.

Kind of generally supportive market environment.

Total customer darts reached their third highest quarterly level ever at $2 3 million trades per day.

This reflected investor confidence in rising markets beyond.

Going global search for yield in <unk>.

Zero and negative interest rate environment.

And more customers on our trading platform.

Commission for cleared conditional order shows our success in capturing capturing rebates.

By exchanges.

We route <unk> pro orders directly to exchanges.

Realizing these exchange rebates and passing the savings onto our clients by lowering their commission.

Our cleared IV care pro customers paid an average of $2 46 per order, 9% less than they did last year.

As our order routing system found opportunities to maximize rebates.

So achieving best price execution.

Our clients benefit with lower commission costs, as we pass our lower execution and clearing costs onto them.

Profitability per order to us remains the same.

Next we break down our net interest margin.

On page eight of release.

Total GAAP net interest income was.

$274 million significantly higher than a year ago.

Reflecting increases in margin lending and securities lending.

Average margin loan balances and margin interest income.

We're up 64% and 70% respectively from last year.

Investors are comfortable with this quarter, taking on leverage and a fairly benign market environment.

Securities lending net interest was up 43% from last year, driven by strong client participation in the market.

As we grow our client customer base, our opportunities to lend customers shares.

Customers, who short these stock also grants.

Together with increasing our profitable securities lending to other broker dealers the model generates expanding revenues. We believe our proprietary system developed in house for securities lending and operated by our team of specialists.

As proficient and identify.

As to <unk> Securities and high demand, which drives our revenue from this activity.

Moving to net interest from segregated cash and from customer credit balances. This shows the impact of negative benchmark rates in certain countries.

And benchmark rates are very low as they are in the U S.

And let me know interested customers on their cash.

But in currencies where rates are negative.

We earn interest by passing through these negative rates to customers.

We earned $8 million on that.

When benchmark rates are positive we earn interest on deposits and investing our segregated cash balance.

Balanced, but because of negative rates in some currencies, we had a net cost of $4 million on these balances taken.

Taken together.

The net interest income from these balances was $4 million for the quarter.

Now our estimated the impact of the next 25 basis point increase in U S benchmark.

We expect the next 25 basis point rise in rates to produce an additional $107 million annually.

This does not take into account any change in how we may adjust our strategy to take advantage of newly higher rate.

About 24% of our customer cash balances are not in U S dollars.

Great.

So estimates of the impact of U S rate changes exclude those currencies.

In conclusion. This was a strong quarter that reflects our ability to grow our customer base and that shows the attractiveness of our strategy to automate for growth expands.

Expanding what we offer while minimizing what we charge.

<unk> progress and performance, we're confident in our ability to grow accounts Thomas as indicated.

Maintain our expense discipline and to capture future opportunities as they arise.

And with that we'll now open up the line for questions.

As a reminder to ask a question you will need to press star one.

Given our phone to withdraw your question. Please press the pound key standby, while we compile the Q&A roster.

Our first question comes from the line of Rich Repetto with Piper Sandler Your line is now open.

Yeah, Good evening, Thomas and Paul.

Anthony.

Tell us the follow up question on the China situation I know the accounts have been drawn down at <unk> and Tiger I guess.

Thomas can you explain just about other operations.

Stan your servers aren't in China, but are there any other impacts.

Impacts on.

Client growth.

Again.

Clear, what's going on with proved to Tiger, but just that region is that going to have any other follow on impacts.

I'm glad they show clear to you.

So please go everybody out.

But anyway.

I just.

So so.

While <unk> does not process client data in China.

Okay.

Do they extend the key date.

Those.

Who reside in China remarks, Keith that data on their procedures.

That satisfy.

Though the guide theory.

Hey, Bob.

<unk>.

This guy.

Find is very similar to the Avalon imposed by the European Union.

The so called <unk>.

So we have build those procedures at that time, the GBP rules came into effect.

We will modify and they use them for Chinese customers.

These are due that goes from there.

Uh huh.

As you know we have to do.

Who.

And good using brokers.

Di di brokers you mentioned.

These two firms will have to work with the regulator to make sure that they are compliant with the new rules.

While we do not think that visa cards.

That their Cogs data colleagues with us.

Danger of having to close.

It is well known that who has been but I think to go on day, one in the U S.

We think if anything then you lose may slow down that process.

Okay.

Yeah.

Who wants to know our exposure to these two brokers.

Our expect that net revenue.

The gross revenue sorry, our expected gross revenue.

From servicing.

And died there by the end of the year, we expect it to be $75 million.

Most of these that guns operates and then omnibus basis.

But they still have about 64.

Individually.

Which we have indications that they will convert to omni bus.

So in that case it.

<unk> resolved.

In Ah 64.

<unk>.

That combination.

The notion in our number of customer accounts.

So that's the idea.

You say above that.

Yeah.

It was a little bit more complicated.

And what I thought.

Help helpful. Thomas.

Thank you.

Okay. Another question, just trying to understand a little bit about the crypto offering I know, it's the the pricing of it is.

Interactive brokers style highly highly competitive I.

What youre seeing.

Early on because.

Your customers don't go for <unk>.

<unk> gone.

A lot for the Zero Commission so.

I'm, just trying to see whether the destiny.

Whether they are real crypto traders as well.

Alright.

So so we have a bias that so far as you know.

We cannot make this available every there right at the start.

Bose.

We haven't done the licensing situation, so it'd be small and this is only available in the United.

At this stage, we have so far in <unk>.

I think around 350000 accounts of which.

Seven being dogs and requests that permission to trade it in.

That's what we have so far.

As of yesterday, we have enabled.

Registered investment advisors because.

We are often.

Depots accounts are managed by registered investment advisors.

<unk> do have some crypto and so that creates a situation where we are the only broker.

At this time, we're an investment manager now that you can trade.

Along with stocks and bonds for her clients manage all positions or positions on one screen.

Sure I mean by that.

Uh huh.

Yeah.

Got it very helpful last laugh.

And is the main stock report or Gamestop SEC report came out.

Yesterday I just was wondering whether you had any big takeaways from the information that was provided or the conclusions that kind of thing.

Reached.

Anyway.

Hi.

I didn't quite see all the connections, but maybe maybe you did comp I was extremely surprised to find that they did not mention.

Pre opening activity.

On those two days when the stock.

Doubled or tripled.

Pre opening.

Pre opening trading usually.

Right.

They're very very strong and growing up as usually indicating that the broker has to cover fails.

Because the broker.

They have to cover the Fas.

<unk>.

Prior to the OPEC.

No matter what.

Fries.

<unk>.

I think thats the MX have do then the prize.

And those two days.

Prior to the deal.

Got it.

Thank you, Tom and I will get back in the.

Curious a priority to us.

Three question, but anyway. Thanks, Tom.

Thank you. Our next question comes from the line of will Nance with Goldman Sachs. Your line is open.

Overall and good afternoon.

Hi.

Maybe I can start on some of the.

Our comments in the prepared remarks around growth if I think back a couple of years ago I think you <unk> you.

Talked about 20% growth now we're talking about 30% growth on a larger account size. So I think it seems like you guys have gotten more confident in the growth outlook and I'm. Just curious if there's anything in particular you'd point to or.

You know what youre kind of seeing in the market that you think is helping the brand resonate a little bit more with what customers.

Yeah. So number one we are experiencing that stronger growth.

And number two we have.

Clear.

<unk> of how to go forward nurturing that growth.

So.

Neither.

Come to them about.

Being above 30% going forward for indefinitely.

Got it that's helpful. Maybe just a tick tack one for Paul on the expenses I think you mentioned there was some elevated legal expenses and I think a handful of other things.

And this quarter any sense of the magnitude there.

So, it's probably relatively safe to say that the.

Run rate that we had been running previously.

Uh huh.

It is a bit more realistic to return to.

Janet to put it.

Maybe an overall number on it that's probably a three three to 4 million extra in the quarter something like that.

Got it.

So appreciate it and then just lastly, I was wondering if you could maybe address some of the news flow in the quarter around like BSA AML issues I realized there may not be much.

You can say, but just curious if there's any light you can shed on that.

But it ends up the name.

I think around the articles I had I think around around you guys on Morgan Stanley around it around some oh.

Yeah, Yeah, Yeah, yeah, yeah well.

I tell you honestly.

What was the first time I heard those that customer and.

But you are right.

I moved into.

The situation I mean, I'm sure our compliance people are handling it but.

I would think that if it were.

Failures issue they would have brought to my attention behind her.

Got it I appreciate the color I appreciate you taking my question. This afternoon.

Sure.

Our next question comes from Dan Dan Fannon with Jefferies. Your line is open.

Thanks.

I wanted to follow up just on the account growth and <unk>.

Obviously very positive across all regions channels can you talk about the profile of the new customers coming on board how that compares to your existing kind of customer.

Is there anything specific or regions I know you.

Broadly very strong everywhere, but any any specific areas to call out where you are having outsized success.

I know it's.

It's just it's just straight across the board.

Similar growth that would be there.

And the profile.

Customer is similar or.

It's smaller.

It is in other areas.

I mean look I mean.

Let's face it at the very beginning when we started the brokers we work.

They're of course going after the people.

Traders the floor traders that had to leave the floor. So if you look back to our early years, we had very few customers at very high rates of trading.

So that is gradually coming down as we go forward so.

Every year basically the.

The number of trades per account you slowly dropping.

But it's still out there on block 400 trades, a year or something like that per account.

Okay.

And then just you mentioned.

An increased yield on your advertising.

Which is something that I think you said or alluded to allow you to spend more can you can you talk about that in terms of.

Obviously that I assume that ties to the account growth but.

How we should think about that in terms of spending and are.

Are there certain channels or regions that you think your advertising.

Dollar going further.

Yes, because.

You know our advertising dogs are certainly tied to who.

Due to certain aspects of our platform.

When we introduce something new we do that now.

With a lot of advertising so when we introduced.

We had.

Great.

Rising campaign that is going to continue for quite some time now.

Very very shortly on November 1st we are going to do.

Using the new capability that we are going to start with that you get campaign. So.

Good.

[laughter] ease.

Isn't that feel so confident about account growth.

Understood. Thank you.

Our next question comes from the line of Kyle Voigt with <unk>. Your line is open.

Hey, good evening.

If I can just follow up actually on the question Dan's question on advertising.

Yeah, Thomas I know you just mentioned new product Rollouts, and maybe thats different but I know historically, there's been some frustration about not getting that adequate return on marketing investment investments.

And clearly that change I'm, just wondering if you could speak to like has there been a strategy shift in terms of like where which channels. Those marketing dollars are being spent in or yes, yes, yes, yes, but this is a very sensitive competitive issue you know because you know.

Trying to advertise and.

Gameboy con so.

Yes.

<unk> gotten into it very deeply and understand better.

Where you get your money to work in there you would do or not.

Got it.

And so as we're looking out to.

<unk> 22, and beyond do you think that's going to be.

Kind of over the medium term not just near term, but over the medium term do you think advertising is going to be a bit bigger.

The bigger part of that medium term kind of growth story ticket to continuously drive the account growth is that what you're saying.

I certainly hope so.

2012, I do not have.

That we need proof that the four hour plans, but but we have the plans and we are going to go forward or read them and I think that.

We have every indication that they are going to work.

Got it fair enough. Thank you and then.

I guess another question in terms of the <unk> relationships.

Relationship just wondering can you help us better understand the kind of the contract structure is there just a set revenue share.

On the trading revenue, that's generated and so thats sure to apparel.

Sylvia.

The customer to <unk>, so that customers or so.

And.

Excellent charged a commission and then.

Yes.

Surely not the shadow it gives us a fee.

Yeah.

So.

Understood. Thanks.

And then.

Just my last one is <unk>.

Just in terms of.

So I look at the individual account size, if I'm doing my math correctly from the prepared remarks, it looks like the average.

<unk> is getting smaller.

The increase in.

Gray markets.

So I think you commented earlier that the.

The average client that's being acquired looks relatively similar but is it fair to say that they're generally smaller sized accounts.

Is that fair to say Tom's well.

Well, you know introducing broker at con.

Our smaller.

And yet.

And.

Yeah individual icons on the average.

Smaller yet.

Okay, Alright, thank you for taking my questions.

Yes sure.

Our next question comes from the line of Chris Allen with Compass point your line.

Okay.

Evening, everyone just wanted to follow up on a couple of things.

Well Thomas on the.

The crypto.

Launch I think you said, you're going to broaden the number of coins.

Any color just in terms of where do you think you may get to on that and what's the timing around that.

Is open I think well, it's not up to us its up to <unk> and <unk>.

I understand that they are.

Working on adding five more coins in the near future.

Understood.

And then I just wanted to follow up on Richard's question.

On an on.

And your responses to fit your entire you just want to make sure I understood. It correctly you expect the gross revenues from those chosen it'd be rushed ships to get to $75 million at yearend.

We expect that to be maintained even if they continue to migrate some of the U S customers to self clearing or.

Question on <unk> is that going to decline over time, just wanted to be clear on that.

So no there.

The 75 million is just simple.

Doug.

Year to date girls and I expanded it to the end of the year, so that I mean.

Not expecting it to go up or down.

Yeah.

I just wanted to to quantify so that it's easily understandable right.

$75 million a year is understandable right now some of our I mean, everybody has no one of them. They have been talking about that for some time that food to loans to become separately.

Thanks.

In the United States and they they put up a comp.

Funny and.

Slide.

I think that they apply for registration.

FINRA and OCC et cetera. So.

So we are expecting.

To eventually leave us.

And.

So as I think.

This.

New rule.

If anything maybe slowed that down a little bit.

Otherwise.

As I mentioned.

Dan we have 64000, and indeed, if you like on steel that that could come from mostly from Tiger.

I think that those accounts you go into an omnibus account.

As a result, they lose those at Collins as our number of icon.

DSO and Unbilled accounts.

Seemingly shrink.

But simultaneously the the.

Average account size of studies.

Please.

Yeah.

Got it that was it for me thank you.

Our next question comes from the line of Matt Great. Thanks.

So much belly your line is open.

Good evening and congratulations on the quarter.

Hi, Matt.

How are you I haven't spoken to you in years [laughter].

Hi, Ben.

I'm just going back to this crypto currency I think of interactive as being a pretty competitive platform.

Obviously this is a huge business for client base in some of the other competitors, but it sounds like.

Given how youre rolling out things that you're viewing it more as a complementary product to your.

Accounts I mean is this something that you could think could be a significant growth driver in the future. Once you get settled on the operations.

And ship et cetera.

Or should we always kind of think of this as not being a major focus for you.

Well no I wouldn't think that because I believe that that you know there are tens of millions of investors in the United States and they will think of crypto.

Zero is just the.

I'm proud that among them any day investing right. So I think it's a band in the neck for them to do have to have a different tack ons when they run out.

Bye.

Good though versus then do I buy a stock works out on option or buy.

Right I mean, it's so much nicer for for a person like that to have all data assets.

In Barnett con and see them on the screen enter aided from lung screen right.

That's the that's what has always been our competitive strength and.

And they blame people.

To create product all over the world from from bonds screen in any currency.

Right.

Okay.

I appreciate that and I just wanted to just switching topics a little bit I wanted to get your thoughts on on gamification.

And.

And two obviously, providing education to clients too.

Get them to understand the markets better, but I wanted to get your views on sort of where the gray areas between some of these gimmicks that some of these other platforms are doing in terms of increased engagement, but perhaps crossing the yeah.

The rules or sort.

Optics around engaging the customer.

So as I have indicated previously we are full.

Focusing on providing more education to our clients and.

So we will we will.

Good it really does her.

<unk>.

Graphics that debt.

That may be helpful.

In the fourth.

And.

I myself do not no amplification, because the value frankly, I never been done another broker right.

And.

Yeah.

And I also have never paid any computer games, so I don't know the similarity.

Yeah.

On their own to ask about that.

Well. Thank you I appreciate it.

Yeah.

[noise].

As a reminder to ask a question. Please press star one on your telephone.

Question comes from much Repetto with Piper Sandler Your line is open.

Yeah I just wanted to follow up on one question with Paul and you mentioned that 24% of your cash balances are non U S.

And I assume that's 24% of the $23 billion of segregated cash.

And could you also tell US you know.

Is there a way to quantify.

No.

Customers that don't have the 100000.

Fully get any increase in.

S rates.

If short term rates went up.

To quantify that other part we don't pay interest to your clients.

Incremental interest.

Right. So a couple of things I can give you a minor correction the 24% of customer credits.

Hum segregated cash that cash is a little bit different because.

And in certain areas under SEC rules, we have to bring foreign currencies back into U S dollars in order to protect them from the customers.

That's about 26%.

It makes the foreign currency about 26% so.

To your I'm sorry. Your second question was about the interest rate changes.

On where we're currently paying no interest on credit.

It boils down to what is our spread so.

In U S dollars R. R.

<unk> advertised right there on our website the spread as a benchmark minus 50 basis.

At this point.

So when fed funds goes over 50 basis points, we will start paying interest again.

And similarly in other currencies.

And I think you asked about on negative rate currencies.

Or.

Maybe I'll just.

Give you a little more information that on negative rates currencies as those rates go up something similar will happen, except that we do pass through.

On the majority of balances we passed we now pass through.

Right to at least the larger customers customers with less than $50000 equivalent.

Great currencies kind of get a free pass.

Get zero interest.

Because we want to treat them well and keep those customers around.

It doesn't cost us a lot.

Yeah.

So to respond to the hundred thousand Dart question. So if you remember.

Negative say interest rates go to 1% that we are going to pay half the person who had gone to the hundred thousand that.

Bob and.

And Greg you relaxed.

The amount of funds.

Funds in the account.

The amount of data.

While you are there.

On the call.

So for example, somebody has gone through at $50000, he's going to get 25% on the cash part of it.

Yes.

Asset in the account.

Huh.

Understood got it.

<unk>.

Last question is Thomas.

Kris.

We've had a quarter announcements.

Since I last asked you about this but any views or thoughts on.

Regulation regards to payment for order flow.

Come on after reading either the reporter or.

Any interactions you might have had during the quarter, but your thoughts.

Whether they'll actually be any regular regulatory changes to payment for them.

Well I I think that the.

Guidance, there very very much like to do something.

And is that to us as much.

<unk>.

We would really love to do something gummies.

Looking for.

Ways to do it I don't believe you'll find on because.

You know that is going to be we spoke about.

You know whether the people.

On that I spoke about.

And and he is very smart and it comes out in.

Information flow because.

Indeed, I mean, it's hard to put a dollar figure on about.

And in turn their lives a good.

People get information flow.

Sure.

Who is being damaged by.

Them, having the information flow. It's it's it's certainly not the not the person that says they are there, but those can be the next door to the right.

There are some maybe through a deeper and.

Good thing or to a deeper in.

Hum.

High frequency trader right.

Yeah.

Okay. That's helpful. Just wanted to hear your latest thoughts on <unk>.

Right.

I am showing no further questions at this.

I would now like to turn the conference back to Nancy Stuebe.

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

This concludes today's conference call. Thank.

Time for participating you may now disconnect.

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