Q4 2024 Interactive Brokers Group Inc Earnings Call
Good day, and thank you for standing by. Welcome to the Interactive Brokers Group 4th Quarter 2024 Earnings Conference Call.
At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Nancy Stuebe. Please go ahead.
Thank you.
Nancy Stuebe: Good afternoon and thank you for joining us for our fourth quarter 2024 earnings call.
Speaker Change: Joining us today are Thomas Petterfi, our founder and chairman, Milan Galic, our president and CEO, and Paul Brody, our CFO.
Speaker Change: I will be presenting Milan's comments on the business and all three will be available at our Q&A.
Speaker Change: which by their nature are not certain and are outside of the company's control.
Speaker Change: Our actual results and financial condition may differ, possibly materially, from what is indicated in these forward-looking statements.
Speaker Change: We ask that you refer to the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC.
Speaker Change: In the fourth quarter, Interactive Brokers clearly demonstrated the power and leverage of a diversified, fully automated global platform.
The international interest in securities markets continues.
Speaker Change: We added 775,000 accounts in 2024, a record number of annual ads.
217,000 came on board in the fourth quarter alone.
Speaker Change: Our client equity was up 33% to $568 billion, an increase of $142 billion from last year and the first time we finished a year with over half a trillion dollars.
Speaker Change: In addition to increasing their exposure to various markets, they chose to take on more leverage using margin loans and to take on more assertive positions, which increased our exposure-free revenue.
Speaker Change: For the full year, we earned over $5 billion in net revenues for the first time and achieved a 71% pre-tax margin.
By far, the highest in the brokerage industry.
Speaker Change: Over the past several quarters, we have added multiple new products and enhancements worldwide.
Speaker Change: We have spent a great deal of time to understand the needs of our various client types.
Speaker Change: For financial advisor clients, we enhanced our advisor portal with features that improve portfolio management and client communication.
Speaker Change: We added models and modeled rebalance tools that simplify applying consistent strategies across multiple accounts.
Speaker Change: We integrated a generative AI-powered portfolio analyst tool, allowing FAs to generate reports showing clear, detailed portfolio data and commentary.
To date, thousands of our users have generated commentaries.
There will be more to come here in 2025.
Speaker Change: For our clients who trade options, we have added four new liquidity providers to our options ATS, increasing its depth and capability to achieve better pricing.
Speaker Change: For after-hours traders, our stock scanners now support price movement in the overnight trading session, so our clients can see top gainers and losers and other groupings during the session.
Speaker Change: For international individual accounts we have previously introduced an alphabet soup of popular savings products like ISA accounts in the UK and TPSC accounts in Hungary.
Speaker Change: And this year we added PEA accounts in France, and we are the first non-French brokers to do so. More will be coming.
Speaker Change: Broken down by geography, the majority of our accounts are based outside of the United States.
Speaker Change: To make it easier for prospective clients to come on board, we have translated our account application into more languages, including French, Italian, Arabic, Hebrew, and Hungarian, opening doors for investors who may not be as comfortable with English.
Our application is now available in 13 languages.
Facilitating Global Outreach for Potential Customers.
Speaker Change: By client geography, in the fourth quarter, our accounts and client equity once again grew fastest in Asia, followed by Europe, as growing numbers of investors worldwide want access to international, and in particular U.S., markets.
Speaker Change: Of our five client segments, the fastest account growth was again seen with individuals, with introducing brokers a close second.
Speaker Change: On the client equity side, individuals again grew the fastest, followed by financial advisors and iBrokers.
Speaker Change: Commission growth was fastest for a proprietary traders while net interest income growth was led by individuals followed by financial advisors.
Overall, we experienced another productive quarter.
Speaker Change: We launched trading on the Saudi exchange, which follows our launch in Malaysia last quarter.
Speaker Change: We added IB algorithms for Hong Kong exchange options. As a note, we began offering cryptocurrencies in Hong Kong also this year, back in May.
Speaker Change: We have focused on making it easier for clients to fund accounts, and this quarter began to offer EDDA for Hong Kong dollars and offshore Chinese Yuan deposits, Open Banking for Euro deposits, and Plaid for Euro and British Pound account funding.
Speaker Change: Our clients around the world, particularly younger ones, are used to the convenience of trading crypto 24-7 and will expect the same from other asset classes.
We consider meeting these expectations vital.
Speaker Change: We already offer over 10,000 U.S. stocks and ETFs during overnight hours, and in 2024, we expanded ours to 24.5 for corporate and government bonds in U.S. dollar, euro, British pound, and Swiss franc denominations, and expanded them for U.S. stock contracts for difference.
Speaker Change: This quarter, we also expanded our order types and introduced a new one called Overnight Plus Smart to specifically cover overnight trading hours.
Speaker Change: For other products, like options and futures, which trade only on exchanges, we await only the willingness of the exchanges to extend trading hours.
We will be ready when they are.
Speaker Change: There are at least eight different regulatory projects we are programming for around the world, as the many numerous jurisdictions we operate in create, add to, and update the regulations.
Speaker Change: We are on time, or more often, well ahead of schedule on all of them.
Speaker Change: Our close ties to over 20 very different regulatory regimes in multiple languages and our ability to react to and program or reprogram our systems to comply on a continuous basis.
Speaker Change: is one of our advantages that we take extremely seriously, with employees on the ground and programmers dedicated to these tasks.
And finally, a special note on Forecast X.
Speaker Change: We created this exchange, which is regulated by the CFTC and allows trading on predictions that have measurable, third-party verified outcomes.
Speaker Change: This is an entirely new asset class, one that provides a market-driven way to quantify real-world expectations on measures like economic, political, and climate outcomes.
another significant broker, now offers access to our exchange.
Speaker Change: We were ready with election trading when it became permissible. We believe the greater ambition, forecast X becoming the most accurate marketplace for predicting significant events, will occur over time.
Speaker Change: Our pipeline of new business and new initiatives remains as strong as ever, and our product set clearly has resonated with people around the globe.
Speaker Change: We are not stopping here to rest on our achievements. We have many projects to work on, goals to achieve, and, together with the Interactive Brokers team, we look forward to executing on them in 2025. We are eager to share our new products and enhancements as we introduce them.
Speaker Change: With that I will turn the call over to our CFO Paul Brody. Paul?
Paul Brody: Thanks very much, Nancy. Thank you, everybody, for joining the call.
Speaker Change: We're going to start with our revenue items on page 3 of the release.
Speaker Change: We're pleased with our financial results this quarter as we again produced record net revenues and pre-taxed income for the quarter and also for the year.
Speaker Change: Commission revenues rose to a record 477 million dollars this quarter. For the full year commissions were 1.7 billion up 25% from last year.
Speaker Change: In 2024, we saw higher trading volumes across the major product categories, as well as 24% higher darts per account.
Speaker Change: Net interest income also reached a quarterly record of $807 million and a yearly record of $3.1 billion, despite multiple rate cuts in nearly all the major currencies.
Speaker Change: A continued risk on environment in the quarter led to a significant increase in margin borrowing and strong net customer deposits led to higher segregated funds balances.
Speaker Change: These revenues were partially offset by the interest paid to our customers on their cash balances.
Speaker Change: Other fees and services generated $81 million for the quarter and $280 million for the year.
up 47% and 42% respectively.
Speaker Change: This was primarily driven by the continued risk on positioning of customers, which has been reflected in rising risk exposure fees over the course of 2024.
and to a lesser extent
Speaker Change: by both higher FDIC suite fees and by higher payments for order flow from options exchange-mandated programs.
Speaker Change: Other income includes gains and losses on our investments, our currency diversification strategy, and principal transactions.
Speaker Change: The primary factor here was our previously reported October sale of a portion of our interest in Tiger Brokers, which led to a one-time realized gain of $34 million.
Speaker Change: Together with a $10 million mark-to-market unrealized loss for the quarter, the Tiger investment contributed a net gain of $24 million to other income.
Speaker Change: Several of the items in this line are considered non-core and therefore excluded in our adjusted earnings. Without these excluded items, other income was a $59 million gain for the quarter and $132 million for the year.
Speaker Change: Turning to expenses, execution, clearing, and distribution costs were $115 million in the quarter and $447 million for the year up versus last year due to higher trade volumes in stocks and options.
Speaker Change: Overall, commissions rose faster than execution costs, however, thanks to higher rebates earned from the exchanges that pay for liquidity-enhancing orders.
Speaker Change: We calculate this by excluding from execution, clearing and distribution $21 million of non-transaction-based costs.
Speaker Change: mainly market data fees, which do not have a direct commission revenue component.
Speaker Change: Compensation and benefits expense was 138 million for the quarter, up slightly from the year ago quarter.
Speaker Change: Due to the capitalization, rather than expensing under GAAP, of some software development this quarter,
Compensation expense is about five million dollars lower than usual.
Adjustments of this nature may be made periodically.
Speaker Change: For the quarter, the ratio of compensation expense to net revenues was 10%.
Speaker Change: And would have been 10.3% had that $5 million of capitalized software been included as comp expense.
Speaker Change: For the year, this ratio was 11% down from 12% in 2023.
Speaker Change: Our headcount at December 31st was 2,998, up 2% for the year.
G&A expenses were $59 million up from the year-ago quarter.
Speaker Change: Excluding this, G&A for the year was $236 million, up 12%, primarily on higher advertising expense.
Speaker Change: Our pre-tax margin was a record 75% for the quarter, as reported, and 76% as adjusted.
Speaker Change: Income taxes of 71 million reflects the sum of the public companies 34 million and the operating companies 37 million.
Speaker Change: The public company's effective tax rate was 14 percent, below its typical range, primarily due to a benefit from the annual revaluation of our deferred tax asset.
Speaker Change: Moving to our balance sheet on page 5 of the release.
Speaker Change: Our total assets end of the year 17% higher than last year at $150 billion, driven by strong growth in margin lending.
Speaker Change: New account growth also helped propel our customer credit balances by 14% to a new record level.
Speaker Change: We believe that our strong financial standing and competitive interest rates provide customers with an attractive place to hold their uninvested cash.
We continue to have no long-term debt.
Speaker Change: And healthy profitability drove our firm equity up 18% to $16.6 billion.
Speaker Change: In recognition of this growth, we allocated capital to a dividend increase in the second quarter of 2024. We maintain a balance sheet geared towards supporting growth in our existing business and helping us win new business by demonstrating our strength to prospective clients and partners.
Thank you. We appreciate it.
in our operating data on pages 6 and 7.
Speaker Change: We had record customer volume in options, with our contract volumes up 32% over the prior year and also up 32% for the full year, well ahead of industry volumes.
Speaker Change: Futures contract volumes declined 3% for the quarter, but rose 4% for the full year.
Speaker Change: while stock share volumes rose 65% for the quarter and 22% for the full year.
Speaker Change: stock share volume generally increased versus last year as clients gravitated to larger higher quality names and traded relatively less in pink sheet and some other very low priced stocks
Speaker Change: Growth in the notional dollar value of shares traded in the quarter was about even with the growth in our share volumes overall.
On page 7, you can see that total customer darts.
Speaker Change: and a shift to proportionally more trading in stocks versus options and futures from last year.
Speaker Change: Total GAAP net interest income was $807 million for the quarter, up 77 million or 11% from the prior year, while our net interest margin net interest income was $830 million or $91 million higher.
Speaker Change: In the NIM computation, we include some income that is classified as other fees or other income on our income statement, but we believe is more appropriately considered interest.
Our net interest income reflects strength in margin loan interest.
Partially offset by lower segregated cash interest.
and higher interest expense on customer cash balances.
Speaker Change: Many central banks cut made cuts to their benchmark rates this quarter including the US, Europe, the UK, Switzerland, Canada and Hong Kong.
Our overall segregated cash interest income declined 2%.
Speaker Change: despite a 10% increase in average balances, while margin loan interest rose by 26% on a 41% increase in average balances.
Speaker Change: with the U.S. dollar yield curve continuing to be inverted during the first part of the quarter, though flattening somewhat in the medium term by quarter end.
Speaker Change: We continue to maximize what we earn by focusing on higher short-term yields rather than accepting the lower yields and added risk of longer maturities.
Speaker Change: This strategy allows us to maintain a relatively tight maturity match between our assets and liabilities.
Speaker Change: Security's lending net interest does not appear as strong as in prior years for three main reasons.
Speaker Change: First, as benchmark interest rates rose from near zero beginning in 2022, more of what we earned from securities lending became classified as interest on segregated cash.
Speaker Change: We estimate that if the additional interest earned and paid on cash collateral were included under securities borrowed and loaned, then securities lending net revenue would have been about $182 million this quarter.
Speaker Change: versus 156 million in last year's fourth quarter on the same basis.
Second
Speaker Change: We've seen strong stock market performance with the S&P up over 20% in each of the past two years, which tends to reflect a smaller proportion of clients looking to put on shorts.
Speaker Change: Third, there are fewer hard-to-borrow names industry-wide, both because the overall market is rising sharply and due to weakness in some of the typical drivers of securities lending, including IPOs, market volatility, and merger and acquisition activity.
Speaker Change: Despite this trend, we were successful in raising the total notional value of what we loaned out.
Thank you.
Speaker Change: Interest on customer credit balances, the interest we pay to our customers on the cash in their accounts, rose on higher balances from new account growth.
Speaker Change: As we have noted in the past, the high interest rates we pay on customer cash, currently 3.83% on qualified U.S. dollar balances, is a significant attraction to new customers.
Speaker Change: Fully rate-sensitive customer balances ended the current quarter at $19.1 billion versus $17.8 billion in the year-ago quarter.
Speaker Change: Now, for our estimates of the impact of changes in rates, given market expectations of further rate cuts in the future.
Speaker Change: We estimate the effect of a 25 basis point decrease in the benchmark Fed funds rate to be a $64 million reduction in annual net interest income.
Speaker Change: Note that our starting point for this estimate is December 31st with the Fed Fund's effective rate at 4.33% and balances as of that date.
Speaker Change: Any growth in our balance sheet and interest earning assets would reduce this impact.
Speaker Change: About 25% of our customer cash balances is not in U.S. dollars.
Speaker Change: At a high level, a full 1% decrease in all benchmark rates would decrease our annual net interest income by about $339 million.
Speaker Change: This reflects our continued ability to grow our customer base and deliver on our core value proposition to customers while simultaneously scaling the business.
Our business strategy continues to be effective.
Speaker Change: automating as much of the brokerage business as possible, continuously improving and expanding on what we offer, while minimizing what we charge.
Speaker Change: And with that, we will open up the line for questions.
Speaker Change: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. We also ask that you please wait for your name and company to be announced before you proceed with your question. One moment while we take the first question.
Speaker Change: And our first question for the day will be coming from Craig Siegenthaler of Bank of America. Your line is open.
Craig Siegenthaler: Hey good morning or good evening everyone hope you're all doing well. First one I have a modeling one on expenses.
Craig Siegenthaler: So, execution clearing distribution fees, you know, as you pointed out in your prepared remarks, they did grow a lot slower than darts and commissions. In the press release, you kind of called out what looked like a few negatives.
Craig Siegenthaler: In the prepared remarks, you called out rebates, but how should we think about this line item heading into 1Q? And then any high-level thoughts on modeling it, because a lot of us model it relative to commissions or DARTs. Thank you.
Speaker Change: Yeah, so I'll take that one. Generally, yes, it's driven by volume. Obviously, those are all the variable costs, you know, they're per share or, you know, per contract.
But within that...
You know, there are things like order routing.
Speaker Change: And it can do that while maximizing rebates, which are provided by some of the venues on liquidity enhancing orders. And then we generally pass those rebates.
Speaker Change: through to the customers, and that would show up in reducing commission revenue. So they're somewhat paired. And therefore, if you only look at the expense side, it doesn't tell you the whole picture.
Got it.
Speaker Change: And then just for my follow-up, you know, we keep watching equity build, it's almost at $17 billion now. I just wanted your thoughts on how fast we should expect this capital balance to continue building. And is this really helping your hedge fund prime marketing efforts given the size? And, you know, any updated thoughts on share repurchase in the future?
© transcript Emily Beynon
Speaker Change: Well, there is no plan to do any type of share repurchasing. We will in the future consider increasing the dividend, but that of course assumes that the stock price will be about $200,000 and it will remain there.
Speaker Change: As far as the strong capital, we like it that way for a couple of different reasons.
Speaker Change: For hedge fund clients, for institutional clients, we compete with large banks that have been in business before.
More than 100 years.
They obviously have an established reputation and...
Speaker Change: By many managers, they're considered to be the safe choice. They will never be blamed.
Speaker Change: If something were to go wrong with a bulge bracket competing bank.
Speaker Change: We have to work hard to earn our reputation. We have been consistently growing the company in our capital base.
Speaker Change: It's visible, our balance sheet is strong, that is one way we signal to the marketplace that we are a serious player and they should consider us for custody of their assets.
The other way the
and I thank you.
Speaker Change: Those are the two reasons why we like the number to be ever-growing.
Thank you.
Thank you, Mon.
Thank you. Bye.
Thank you. One moment for the next question.
Speaker Change: And our next question will be coming from the line of Benjamin Budish of Barclays, your line is open.
Speaker Change: and advertising spend. So just curious what your thoughts there are on what account growth could look like this year.
Well, our
Our marketing spend will be slowly increasing.
obviously it's necessary to attract
Speaker Change: The individual accounts, so that's why it's going to go up We expect a steady growth
Speaker Change: in the number of accounts. As you could see, this past quarter, we really enjoyed a high number. There is a lot of enthusiasm in the market, partially related to the ever-increasing prices in the market, stock prices in the market, partially related to the change of the administration that is largely considered to be pro-business.
Speaker Change: And the US markets, as a result, are expected to continue to do well.
Speaker Change: accounts, new accounts being opened, some investors who were sitting on the sidelines decided to open an account and start investing. So we are bullish on the continued growth of the accounts.
Speaker Change: Got it. Maybe one quick modeling follow-up for Paul. I think for the employee comp and benefits line you called out a capitalized expense. Just curious in Q1 and kind of going into the year, should we think about you know the the level and kind of the first couple of quarters of 2024 as the starting point or does it kind of reset lower? Just any guidance you could give there would be helpful. Thank you.
Speaker Change: Right, well it does go along with our hiring, which was only 2% higher than prior year. I think the best way to look at it is on the full year, because the capitalization is measured only periodically and can be added in a given quarter. Our average for all of 2024 was $143 million a quarter.
And that's probably your best starting point for going forward.
okay all right great thanks so much
Thank you. One moment for the next question.
Speaker Change: And our next question will be coming from the line of James Yarrow of Goldman Sachs. Your line is open.
James Yarrow: Thanks Milan and Paul for taking the questions here. Maybe just starting on aspirations in the high-touch part of the prime brokerage offering which you've obviously expanded in 2024. If there's...
James Yarrow: Deregulation of the bulge bracket prime brokers, which the market clearly expects, could this present a more meaningful threat to growth of the business? And then just, you know, what is on the product roadmap for this business in 2025?
Speaker Change: I would not expect the regulation to really have an impact.
Speaker Change: As I explained a bit earlier, what we're dealing with is competing with very large, established
Speaker Change: I cannot see how a small newcomer would really be able to make a significant dent in our business.
Speaker Change: So, the regulation, I do not think, would impact our business that way. As far as the products, did you mean within this white glove offering for the hedge funds?
That's right.
Speaker Change: Well, I can tell you that one of the things that we have done is we have revamped the way we do the capital introduction events in the past quarter. We do those events approximately once every three months.
Speaker Change: We changed the name of the event, we changed the way it's organized, we advertised it better.
Speaker Change: and the result of that was that the last event we had double the number of participants. Instead of 120, we had 240 accredited investors participating in the capital introduction event.
Speaker Change: Otherwise, we are pleased with how the wide-globe offering is going. We have 34 hedge funds on-boarded with the average...
Speaker Change: assets of 160 million. The goal here is to provide them with better service. They all appreciate direct access to the subject matter experts.
Speaker Change: They like talking to us. We handle approximately 50 different issues on a on a particular week and as we talk to them more we we make adjustments. For example, just recently we have
Speaker Change: , , , , , , , , , , , , , ,
started offering.
Algorithms
Thank you for your time.
We're pleased with the way it's going so far.
Speaker Change: Excellent, that's very clear. Maybe just turning to the margins, your adjusted margin did rise to best-in-class 75.6%. Can it continue to rise off of these levels? Is there an efficient horizon that you see for the margin?
Speaker Change: Well, I would not expect that number to go up. That is not the number that we are optimizing for. What we're trying to do is delivering value to our clients.
Speaker Change: We obviously have to pay attention to not just automating everything we can so that we can offer.
Our service is at the lowest prices.
Speaker Change: but we also have to make sure that when our clients need help we have sufficient personnel to answer their questions, to help them on the customer service line. And there are obviously the ongoing costs of the compliance which are ever-increasing given the very large number of jurisdictions where we operate.
So, I would not expect that number to go higher.
Okay, that's very clear. Thank you.
Speaker Change: And our next question will be coming from the line of Brennan Hawkin of UBS. Your line is open.
Brennan Hawkin: Good afternoon. Thanks for taking my question. Margin balances have really shown very, very solid growth despite the volatility in the market. So, you know, how should we be thinking about that on a go-forward basis? What trends have you seen quarter-to-date?
Brennan Hawkin: And maybe taking a step back, when you think about how your custom race has changed in recent years, you know, how should we be thinking about margin penetration for you versus history?
© transcript Emily Beynon
Margin balances have been increasing thus
Brennan Hawkin: Due to the risk-on appetite of our clients, their positions have been more assertive not only by trading stocks on margin but by putting on aggressive positions in the derivatives.
Um.
Brennan Hawkin: We, if you remember, back in August of last year, there was a rather sharp sell-off and we quickly saw our clients reducing their risk positions.
But as the stock market turned and things calmed down...
Brennan Hawkin: They quickly came back on, so I would expect some amount of correlation with what the stock market is doing.
Brennan Hawkin: But for now, we seem to be in the discount mode because of the change of the administration, for example. So margin balance on all things being equal, I think, will be maintained at this level or slightly go higher.
© transcript Emily Beynon
Brennan Hawkin: And when you think about some of the different cohorts of your customer base, you know, advisors are a larger portion.
Brennan Hawkin: what impact do you expect that could have on those metrics?
Well, financial advisors
Brennan Hawkin: Some of them obviously trade on margin, majority of them do not. We have the...
Traders, I would expect them to continue to trade aggressively.
Brennan Hawkin: We have all sorts of individual accounts, small ones, large ones.
Brennan Hawkin: More sophisticated ones, less sophisticated ones. So obviously the more sophisticated ones I would expect to continue to deploy leverage. And then you have the hedge funds, which again, I would expect to continue aggressively.
Thanks for taking my questions.
Thank you. One moment for the next question.
Speaker Change: And our next question will be coming from the line of Dan Fannin of Jeffrey's. Your line is open.
Speaker Change: Thanks, good evening. So just following up on areas of investment and product development as you think about 2025, you've talked a bit about the prime brokerage as well as you know some of the things that we're in that you've come to market with here in the fourth quarter. So curious to just about the areas of investment and really on that product development side for the individual that you see or are focused on into 2025.
Speaker Change: Well, all the time we look at all the segments that we, all the client segments that we service.
Speaker Change: We carefully listen to the feedback we're receiving from them. What is it that they're looking for? And we continuously pass that feedback and ask ourselves the question, how is it that we can improve our offering?
Speaker Change: So that is what really a bulk of the work goes into when we're discussing the client facing.
Speaker Change: investments. And then there's obviously a lot of work that we're doing on the back end.
Speaker Change: The number of accounts is increasing fast, the trading activity is going up fast. We have to make sure that our systems can handle the load, spike it, which can be very often in spikes. You can have a normal day and all of a sudden you have a really busy day when
Speaker Change: All the computers are running hot, so to speak. We have to pay attention to making sure that our systems are reliable, that we have no outages, that we have very significant backups.
Speaker Change: And then we have to work on systems that our operators use.
Speaker Change: both the Client Service and our Compliance Departments. Significant number of employees work in those departments and so that we do not have to hire as many of them as a less automated competing firm would, we have to give them the right tools.
Speaker Change: So that is sort of where the attention is being paid to all these different reactions.
Speaker Change: Understood. And then as a follow-up, Mon, you've talked at previous periods about M&A and kind of inorganic growth. Can you give us an update on your thoughts today and maybe, you know, kind of the current market opportunity for inorganic potential combinations?
completing a transaction.
Speaker Change: We remain open to it, we will consider any opportunity that comes our way.
Understood. Thank you.
Thank you. One moment for the next question, please.
Speaker Change: And our next question will be coming from the line of Patrick Moley of Piper Sandler. Your line is open.
here.
Yeah, good evening. Thanks for taking the question.
Speaker Change: So I had one on the just prediction markets and the forecast X platform. It seemed like the election brought a lot of people into the prediction markets. So just was hoping you can give us an update on kind of the traction that you're seeing there, your outlook for for next year, and whether there's any kind of milestones or things we should be looking out for on the product roadmap there. Thanks.
Well, you know, the prediction markets are going slowly.
We are
being very careful not to step on the wrong foot.
Speaker Change: and we believe that this is going to be a huge market, but we want to do it slowly and carefully.
Speaker Change: and build out our personnel and our systems so that we can do it in a really, really big way. And that's what we are, that's what I'm devoting my time to.
Thank you.
Speaker Change: All right, great. Thank you. Then maybe just to follow up on
Speaker Change: Crypto, there's a lot of excitement around crypto here, it seems like.
Speaker Change: you know, the incoming administration, the change in leadership in the SEC is gonna foster a new kind of era of more favorable to the crypto trading firms, I guess, if you will.
Speaker Change: Your offering right now is, you know, relatively robust compared to some of the others. How are you feeling right now about about that offering? And if there was to be more comprehensive legislation, you know, what areas, if at all, would you look to expand the offering? Thanks.
Well, what our immediate plan is to offer cryptocurrency trading.
Speaker Change: to the customers in the European Union, but that's obviously not affected by the changes in the administration. I'm cautiously optimistic about what's going to happen next. I think the regulations...
Speaker Change: in this area need to be firmed up and the task force was announced.
Speaker Change: today, and I think they will work hard to make sure that the rules are clear.
and that will obviously improve.
Speaker Change: the area for the investors as well as the companies that service them, like ours.
There are obviously things that are somewhat concerning.
Speaker Change: There are these meme coins, for example, there have been two of them issued just in the last few days. I'm not...
Not really.
pleased with that development.
Speaker Change: I think it looks a little strange. It may give the cryptocurrency industry someone of a bad name if things like that continue to happen. But overall, I'm optimistic about the regulation that is going to be clarified and firmed up.
All right, thanks for that. That's it for me.
Speaker Change: And our next question will be coming from the line of Chris Allen from Citi. Your line is open.
Chris, your line is open.
Bye.
Speaker Change: Oh, apologies. My headphone went out. Good evening, everyone. Maybe to just follow up on the crypto question, any color you could provide in terms of
Speaker Change: Your customer base how like any percent it represents is actually trading crypto on your platform currently and if there wasn't Regulation where be the the opportunity set to expand in the in the u.s.. Maybe from a product different perspective
Speaker Change: At the moment, there are four coins that are really heavily traded on our platform, if I can call it heavily.
It's the Bitcoin, Ethereum and Stablecoin then.
Speaker Change: Bitcoin Cash. I would expect us to increase the number of tokens we would make available on the platform, which would make our platform more attractive.
to the realm of the male cryptocurrency traders.
They have interest in trading.
Speaker Change: For example, Solana, which we are currently not able to offer because there wasn't sufficient regulatory clarity as to whether that would be considered a security or not.
Speaker Change: So, those kinds of questions will be, will get clarified. So as a result, I expect us to be able to list.
Speaker Change: More tokens in the future and attract crypto currency traders who really focus on trading crypto currencies.
Speaker Change: Another thing that I would expect is for us to be able to increase the percentage of assets we allow a single account to invest.
Speaker Change: in the crypto assets. At the moment, that number is set to 1%. It's a very conservative figure, but as the crypto assets become...
Speaker Change: more widely accepted, we would we would raise that number higher.
Speaker Change: Thanks. And just as a follow-up, on SEC lending, recognize the headwinds from low levels of IPO and M&A activity. Just kind of curious, how does your capacity to lend for securities lending compare now versus the end of 23 and even 22? Has it expanded with the account growth? I'm trying to think about what the potential could look like in a better environment, which many expect as we move through 2025 and into 26.
Speaker Change: Yes, it absolutely expands with our account growth and simply more participation in the markets by our clients who tend to go long and hold the stocks.
Speaker Change: that are attractive for lending out primarily to other broker-dealers and banks. And yeah, we would expect that to continue to rise because our customer base is simply going to hold more of those positions.
Thanks, guys.
Thank you. One moment for our next question.
Speaker Change: And our next question will be coming from the line of Kyle Volt of KBW. Your line is open.
Kyle Volt: Hi, good evening. So I know you gave some commentary on pre-tax margin and investments for 2025, but maybe I could just ask a question specifically on fixed expense growth.
Kyle Volt: If we exclude some of the one-time items that you had in the third quarter, and even the 5 million of 4Q comp that you noted earlier in the call,
Kyle Volt: We're kind of calculating fixed expense growth of roughly 12% for the full year 2024.
Kyle Volt: I would not expect it to accelerate. I think you are likely to see
in next year, what you have just seen.
Kyle Volt: That obviously assumes that the inflation doesn't kick in and we will have to pay.
Kyle Volt: I might just add to that that advertising is a component of that and so to the extent that we expect to do more.
That will be somewhat of a driver.
Speaker Change: Thank you. And for my for my follow up, and I know this was asked last quarter as well, but the stock continues to perform very strongly, even since then. But for Thomas just curious as to whether you would consider any stock sales to help increase the public float. And if so, would that still only be in blocks and not in open market transactions.
Speaker Change: I don't see Thomas. It would be, it would be in the box.
Speaker Change: and I will do that when the price reaches what I believe is the right price.
Understood, thank you.
Speaker Change: Thank you. And that does conclude today's question and answer session. I would like to turn the call back over to Nancy for closing remarks. Please go ahead.
Speaker Change: Thank you everyone for participating today. As a reminder, this call will be available for replay on our website, and we will also be posting a clean version of our transcript on the site tomorrow. Thank you again, and we will talk to you next quarter end.
Speaker Change: Thank you for joining today's conference call. You may now disconnect. Have a good evening.