Q1 2025 Interactive Brokers Group Inc Earnings Call

Okay.

Unknown Attendee: Good day, and thank you for standing by. Welcome to the Interactive Brokers Group first quarter 2025 earnings conference call.

Speaker Change: Good day, and thank you for standing by welcome to the interactive brokers group first quarter 2025.

Unknown Attendee: At this time, all participants on a listen only 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 To withdraw your question, please press star 1 again.

Speaker Change: Earnings Conference call at this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one again please.

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

Speaker Change: Be advised that today's conference is being recorded.

Nancy Stuebe: I would now like to turn the conference over to Nancy Stuebe, Directors of Investor Relations. Please go ahead. Thank you.

Speaker Change: Now, let's turn the conference over to Nancy Stuebe Director of Investor Relations. Please go ahead.

Nancy Stuebe: Good afternoon, and thank you for joining us for our first quarter 2025 earnings call.

Speaker Change: Thank you.

Speaker Change: Good afternoon, and thank you for joining us for our first quarter 2025 earnings call.

Nancy Stuebe: Joining us today are Thomas Peterffy, our founder and chairman, Milan Galik, our president and CEO, and Paul Brody, our CFO.

Speaker Change: Turning us today are Thomas Petrucci, our founder and chairman.

Milan Galik: Milan, Galik, our president and CEO and Paul Brody our CFO.

Nancy Stuebe: I will be presenting Milan's comments on the business, and all three will be available at our Q&A.

Speaker Change: I will be presenting malone's comments on the business and all three will be available at our Q&A.

Nancy Stuebe: As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which by their nature are not certain and 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 to the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports with the SEC.

Speaker Change: As a reminder, today's call may include forward looking statements, which represent the company's belief regarding future events, which by their nature are not certain and 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.

Speaker Change: We ask that you refer to the disclaimers in our press release.

Speaker Change: Should also review a description of risk factors contained in our financial reports filed with the SEC.

Milan Galik: We saw in the first quarter the value of a global automated platform that can leverage its low costs and offer a broad range of products and markets. After a solid January buoyed by post-U.S. election enthusiasm, market indexes around the world reach peaks in February in the U.S. and early March everywhere else, after two years of nearly unbroken market increases. After that, cracks in the market began to show. News of DeepSeek and its less capital-intensive AI caused the market to give back half its gains in February. talk about tariffs further accelerated the decline in March. The S&P 500 ended the quarter down 5%, but it was off 9% from its February peak.

Speaker Change: Yeah.

Speaker Change: We saw in the first quarter the value of our global automated platform that can leverage its low cost and offer a broad range of products and markets.

Speaker Change: After a solid January buoyed by post U S election enthusiasm.

Speaker Change: Market indexes around the world reach peak in February in the U S. In early March everywhere else. After two years of nearly unbroken market increases.

Speaker Change: After that cracks in the market began to show.

Speaker Change: News of deep seek and its less capital intensive AI caused the markets give back half its gains in February.

Speaker Change: Talk about terrorists further accelerated the decline in March.

Speaker Change: The S&P 500 ended the quarter down 5%, but it was off 9% from February peak.

Milan Galik: Six of the magnificent seven, the seven stocks that have dominated investor attention, fell significantly more than the market this quarter.

Speaker Change: Six of the magnificent seven seven stocks that have dominated investor attention sell significantly more than the market this quarter.

Milan Galik: However, Interactive Brokers does not need up markets to generate revenue. Our customers were active and remained faithful to their favorite names. of our 25 most active names, 22 saw net buying activity. We also saw global interest from investors, both institutional and individual, in opening accounts. Internationally, it remains the case that investors want broad portfolios with some invested in securities in their home markets and a more significant portion overseas. Product-wise, the popularity of options continued, with our contract volumes up 25% to a quarterly record. Futures volumes are up 16%, also to a record, and stock share volumes are up 47%.

Speaker Change: However, interactive brokers does not need up markets to generate revenue.

Speaker Change: Our customers are active in remained faithful to their favorite names.

Speaker Change: Of our 25, most active names twenty-two saw net buying activity.

Speaker Change: We also saw global interest from investors, both institutional and individual and opening accounts.

Speaker Change: Internationally. It remains the case that investors want broad portfolios with some invested in securities in their home markets and a more significant portion overseas.

Speaker Change: Yeah.

Speaker Change: Product wise the popularity of options continued with their contract volumes up 25% to a quarterly record.

Speaker Change: Futures volumes were up 16% also to a record and stock share volumes were up 47%.

Milan Galik: Our volume growth rates were ahead of industry volumes.

Speaker Change: Our volume growth rates were ahead of industry volumes.

Milan Galik: What all of the above is meant for our business starts with strong account growth as we add more investors to our platform. In the first quarter, we added 279,000 new accounts, a record that well surpassed even the meme stock days of the first quarter 2021. Total account growth was 32%, with even faster growth internationally. New accounts meant more cash in those accounts, which helped raise our client credit balances 19% to a record $125.2 billion. Our client equity was 23% versus 2024 to $573.5 billion and was up 1% in the quarter despite the drop in the market.

Speaker Change: With all of the above is meant for our business starts with strong account growth as we add more investors to our platform.

Speaker Change: In the first quarter, we added 279000 new accounts.

Speaker Change: Record that well surpassed even the mean stock days of the first quarter 2021.

Speaker Change: Total account growth was 32% with even faster growth internationally.

Speaker Change: New accounts met more cash in those accounts, which helped raise our client credit balances, 19% to a record 125.2 billion.

Speaker Change: Our client equity rose, 23% versus 2024 to $573 5 billion.

Speaker Change: And was up 1% in the quarter, despite the drop in the market.

Milan Galik: This translated into strong financial results. Quarterly commission revenue was a record, reaching half a billion dollars for the first time, as were total net revenues. We do not only focus on the top line, however. Our expenses remained well-controlled, and our adjusted pre-tax profit margin was an industry-leading 74%. The eighth time, our adjusted pre-tax margin reached 70% or more.

Speaker Change: This translated into strong financial results.

Speaker Change: Quarterly Commission revenue was a record reaching half a billion dollars for the first time as for total net revenues.

Speaker Change: We do not only focus on the top line. However.

Speaker Change: Our expenses remained well controlled and our adjusted pre tax profit margin was an industry leading 74%.

Speaker Change: The eighth time, our adjusted pre tax margin reached 70% or more.

Milan Galik: in recognition of this, and as a sign of confidence in the strength of our business model, its growth potential and of our capital base.

Speaker Change: Recognition of this and as a sign of confidence in the strength of our business model It has growth potential and of our capital base.

Milan Galik: We revisited our allocation of capital and decided to increase the amount of dividend we pay to $0.32 a quarter.

Speaker Change: We revisited our allocation of capital or decided to increase the amount of dividend, we pay tribute to 32 cents a quarter.

Milan Galik: We will also split the stock four for one to achieve greater liquidity in our float and to make it more affordable for shareholders to buy round lots in the company. With respect to M&A, we have not stopped looking at potential acquisitions. Realistically, there is a dearth of opportunities at a price that makes sense for us. In most cases, because target companies charge more and pay less interest than we do, when we run their accounts using our pricing, the income we estimate and put a multiple on is lower than what they wish.

Speaker Change: We will also split the stock for for one to achieve greater liquidity in our float.

Speaker Change: And to make it more affordable for shareholders to buy round lots in the company.

Speaker Change: With respect to M&A, we have not stopped looking at potential acquisitions.

Speaker Change: <unk> there was a dearth of opportunities at a price that makes sense for us.

Speaker Change: In most cases, because target companies charge more and pay less interest than we do when we run their accounts using our pricing the income we estimate and put a multiple on is lower than what they wish.

Milan Galik: We will keep looking, but in the meantime, for now, returning capital to shareholders via the dividend makes sense. In terms of how the business looked on the client front, our accounts and client equity once again grew fastest in Asia, with Europe a close second. Again, the trend of growing numbers of investors worldwide wanting access to international and particularly U.S. markets has not waned. Individuals saw the fastest account growth among our five client segments, with introducing brokers and proprietary traders not far behind. On the client equity side, individuals grew fastest with introducing brokers and proprietary trading clients just behind them.

Speaker Change: We will keep looking but in the meantime for now returning capital to shareholders via the dividend makes sense.

Speaker Change: In terms of how the business looked on the client front, our accounts and client equity once again grew fastest in Asia with Europe, a close second.

Speaker Change: The trend of growing numbers of investors worldwide wanting access to international and particularly U S markets has not waned.

Individuals' saw the fastest account growth among our five client segments with introducing brokers and proprietary traders not far behind.

Speaker Change: On the client equity side.

Speaker Change: Individuals' grew fastest with introducing brokers and proprietary trading clients just behind them.

Milan Galik: Commission-wise, individuals saw the fastest growth, followed closely by proprietary traders, while net interest growth was led by individuals, followed by financial advisors. Regarding introducing brokers, our pipeline of potential clients remains healthy. We are onboarding iBrokers to the platform and adding prospective ones to it at a steady pace. Onboarding iBrokers can take time, since we offer a variety of ways for them to come on to our platform. The more complex the iBroker, the more time needed. to customize our offering for larger iBrokers needs, with many needing special programming on our part to make sure their clients' investment, tax, and compliance needs are met.

Speaker Change: Commission wise.

Speaker Change: Individuals' saw the fastest growth followed closely by proprietary traders.

Speaker Change: While net interest growth was led by individuals followed by financial advisers.

Speaker Change: Regarding introducing brokers our pipeline of potential clients remains healthy.

Speaker Change: Onboarding I brokers to the platform and adding perspective wants to it at a steady pace.

Speaker Change: Onboarding I brokers can take time since we offer a variety of ways for them to come onto our platform.

Speaker Change: More complex the eye broker the more time needed.

Speaker Change: We customize our offering for larger I brokers' needs with many needing special programming on our part to make sure their clients investment tax and compliance needs are met.

Milan Galik: we are up to the task.

Speaker Change: We are up to the task.

Milan Galik: In terms of new product introductions, we had a busy quarter. We began offering our Forecast X contracts in Canada, as well as across the EEA for professional clients, and we will soon roll them out to the general EEA population. we added to our growing portfolio of country-specific savings and investment accounts, launching Canadian first home savings accounts this quarter. We added four new cryptocurrencies, Solana, Cardano, Ripple, and Dogecoin, and last week introduced three more, Chainlink, Avalanche, and SUI, bringing our total offering to 11 cryptocurrencies. We launched trading of Nifty 50 index futures in Singapore and of equities in Slovenia.

Speaker Change: In terms of new product introductions, we had a busy quarter.

Speaker Change: We began offering our forecast ex contracts in Canada as well as across the E for professional clients and we will soon roll them out to the general E. A population.

Speaker Change: We added to our growing portfolio of country specific savings and investment accounts.

Speaker Change: Watching Canadian first home savings accounts this quarter.

Speaker Change: We added four new crypto currencies Silvana Kardono ripple in dose coin and last week introduced three more channeling avalanche Anna Sui, bringing our total offering to 11 cryptocurrencies.

Speaker Change: We launched trading of Nifty, 50 index futures, and Singapore and of equities in Slovenia.

Milan Galik: We recently made Forecast Trader available, so clients using our IBKR desktop or Trader Workstation platforms can simultaneously use Forecast Trader side-by-side. We continue to see increasing activity in our overnight trading hours. We offer over 10,000 U.S. stocks and ETFs, as well as U.S. equity index futures and options, and on the fixed income side, global corporate bonds, plus U.S. Treasury and European and U.K. government bonds. We added a focused overnight plus day order type so clients can submit an order in the overnight hours that will remain open until the end of the next regular trading session.

Speaker Change: We recently made forecast trader available so clients using our IP care desktop or trader workstation platforms can simultaneously use forecast trader side by side.

Speaker Change: We continue to see increasing activity in our overnight trading hours.

Speaker Change: We offer over 10000 U S stocks and Etfs as well as U S equity index futures and options and on the fixed income side global corporate bonds, plus U S Treasury in European and U K government bonds.

Speaker Change: We added a focused overnight plus day order type so clients can submit an order in the overnight hours that will remain open until the end of the next regular trading session.

Milan Galik: Overall, our overnight volumes grew 250% from first quarter 2024 to first quarter 2025. We spent significant time this quarter on our client service and onboarding projects, our compliance and regulatory projects, and on further automating our internal operations to make them run more efficiently. We are as busy as we have ever been, with multiple projects touching all client types and geographic regions.

Speaker Change: Overall, our overnight volumes grew 250% for first quarter 'twenty 'twenty four to first quarter 2025.

Speaker Change: We spent significant time this quarter on our client service and Onboarding projects, our compliance and regulatory projects.

Speaker Change: Further automating our internal operations to make them run more efficiently.

Speaker Change: We are as busy as we've ever been with multiple projects touching all client types and geographic regions.

Milan Galik: We are excited to introduce them to you in the quarters ahead. Automating substantial parts of the brokerage business for client success is the heart of what we do. While market direction may appear significant in the short run, the long-term trend towards more global investing across multiple customer types and jurisdictions continues. This trend and our ability to serve it with a much lower cost structure and a much broader product and tool set is what sets us apart and will continue to do so in the years ahead.

Speaker Change: We are excited to introduce them to you in the quarters ahead.

Speaker Change: Automating substantial parts of the brokerage business for client success is the heart of what we do.

Speaker Change: While market direction may appear significant in the short run the long term trend towards more global investing across multiple customer types and jurisdictions continues.

Speaker Change: This trend and our ability to serve it with a much lower cost structure and a much broader product and tool set is what sets us apart and will continue to do so in the years ahead.

Paul Brody: With that, I will turn the call over to Paul Brody. Thank you, Nancy. Thanks, everyone, for joining the call again. We'll start with our revenue items on page three of the release. We are pleased with the financial results this quarter as we again produce record net revenues and pre-tax income. Commissions rose 36% versus last year's first quarter, reaching over a half billion dollars for the first time. We saw higher trading volumes from our growing base of active customers. stock share volume up 47% and new quarterly volume records in both options in future. Net interest income rose 3% year-on-year to $770 million.

Speaker Change: With that I will turn the call over to Paul Brody Paul.

Paul Brody: Thank you Nancy thanks, everyone for joining our call again.

Paul Brody: I will start with our revenue items on page three of the release.

Paul Brody: We are pleased that our financial results this quarter as we again produced record net revenues and pretax income.

Paul Brody: Commissions rose, 36% versus last year's first quarter, reaching over $5 billion for the first time.

Paul Brody: We saw higher trading volumes from our growing base of active customers with stock share volume up 47% and new quarterly volume records in both options and futures.

Paul Brody: Net interest income rose, 3% year on year to $770 million.

Paul Brody: driven by higher balances and partially offset by lower benchmark interest rates. We saw strength from margin borrowing and from a decline in interest paid to customers. partially offset by lower yields on our segregated cash portfolio. Other fees and services generated $78 million, up 32% from the prior year. primarily driven by higher risk exposure fees. with contributions from Forecast X fees and from payments for order flow from options exchange mandated programs. Other income includes gains and losses on our investments, our currency diversification strategy, and principal transactions. Note that many of these non-core items are excluded in our adjusted earnings.

Paul Brody: Driven by higher balances and partially offset by lower benchmark interest rates.

Paul Brody: We saw strength from margin borrowing and from a decline in interest paid to customers.

Paul Brody: Partially offset by lower yields on our segregated cash portfolio.

Paul Brody: Other fees and services generated $78 million up 32% from the prior year.

Paul Brody: Primarily driven by higher risk exposure fees.

Paul Brody: With contributions from forecast expertise and from payments for order flow from options exchange mandated programs.

Paul Brody: Other income includes gains and losses on our investments our currency diversification strategy and principal transactions.

Paul Brody: Many of these noncore items are excluded in our adjusted earnings.

Paul Brody: Without these excluded items, other income was $34 million for the quarter. Turning to expenses, execution, clearing, and distribution costs were $121 million in the quarter, up 20% over the year-ago quarter on higher volumes across all product classes. Execution and clearing costs were 19% of commission revenues in the first quarter for a gross transactional profit margin of 81%. We calculate this by excluding from execution, clearing, and distribution $19 million of non-transaction based costs. predominantly market data fees, which do not have a direct commission revenue component. And as a note for the upcoming quarters, the SEC reduced its fee rate to zero, effective this coming May 15th.

Paul Brody: These excluded items other income was $34 million for the quarter.

Paul Brody: Turning to expenses execution clearing and distribution costs were $121 million in the quarter up 20% over the year ago quarter on higher volumes across all product classes.

Paul Brody: Execution and clearing costs were 19% of commission revenues in the first quarter for a gross transactional profit margin of 81%.

Paul Brody: We calculate this by excluding from execution clearing and distribution of $19 million of non transaction based costs predominantly.

Paul Brody: Predominantly market data fees, which do not have a direct commission revenue component.

Paul Brody: And as a note for the upcoming quarters.

Paul Brody: The SEC reduce its fee rate to zero.

Paul Brody: Effective this coming may 15th.

Paul Brody: which should be a tailwind for execution and clearing costs thereafter. SEC fees totaled $27 million for the current quarter. Compensation and benefits expense was $154 million for the quarter, for a ratio of compensation expense to adjusted net revenues of 11%, down slightly from last year's quarter. We remain focused on expense discipline, as reflected in our modest staff increase of 3% over the prior year. Our headcount of March 31st was 3,027. G&A expenses were $62 million. up from the year ago quarter, mainly on expansion of advertising. Our pre-tax margin was 74% for the quarter, as reported, and 73% as adjusted.

Paul Brody: Which should be a tailwind for execution and clearing costs thereafter.

Paul Brody: SEC fees totaled $27 million for the current quarter.

Paul Brody: Compensation and benefits expense was $154 million for the quarter for a ratio of compensation expense to adjusted net revenues of 11% down slightly from last year's quarter.

Paul Brody: We remain focused on expense discipline as reflected in our modest staff increase of 3% over the prior year.

Paul Brody: Our head count at March 31 was 3027.

Paul Brody: G&A expenses were $62 million.

Speaker Change: From the year ago quarter, mainly on expansion of advertising.

Speaker Change: Our pre tax margin was 74% for the quarter as reported and 73% as adjusted.

Paul Brody: Income taxes of $91 million reflects the sum of the public company's $47 million and the operating company's $44 million. This quarter, the public company's adjusted effective tax rate was 18.2% within its usual range. This is a return to expected tax levels from the fourth quarter, which benefited from the annual revaluation of our deferred tax asset and from some foreign tax credit. Moving to the balance sheet on page five of the release. The consistent strength of our business and our healthy balance sheet support our raising the dividend from $1 per year to $1.28. Returning capital to shareholders while still maintaining an ample capital base.

Speaker Change: Income taxes of $91 million reflects the some of the public companies $47 million and the operating companies $44 million.

Speaker Change: This quarter the public company's adjusted effective tax rate was 18, 2% within its usual rich.

Speaker Change: This is a return to expected tax levels from the fourth quarter, which benefited from the annual revaluation of our deferred tax asset and from some foreign tax credits.

Speaker Change: Moving to the balance sheet on page five of the release.

Speaker Change: The consistent strength of our business and our healthy balance sheet support our raising the dividend from $1 per year to $1 28, returning capital to shareholders, while still maintaining an ample capital capital days for.

Paul Brody: for the current business and future opportunities. Our total assets end of the quarter 19% higher at $158 billion, with growth driven by margin lending and rising cash balance. We have no long-term debt. Profit growth drove our firm equity up 19% to $17.5 billion. 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 while also considering overall capital allocation.

Speaker Change: For the current business and future opportunities.

Speaker Change: Our total assets ended the quarter, 19% higher at $158 billion with growth driven by margin lending and rising cash balances.

Speaker Change: We have no long term debt.

Speaker Change: Profit growth drove our firm equity up 19% to $17 $5 billion, 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.

Speaker Change: So considering overall capital allocation.

Paul Brody: Turning to our operating data on pages six and seven. our trading volumes for all customers, outpaced industry growth over the prior year quarter, and all three major product classes. Options and Futures contract volumes rose 25% and 16% respectively, and stock share volume rose 47%. On page seven, you can see that total customer darts were 3.5 million trades per day, up 50% from the prior year and strong in all product classes. Commission per cleared commissionable order of $2.76 is down from last year due to both smaller average order sizes and earning higher rebates, which reduce the cost of a trade and are generally passed through to the customer.

Speaker Change: Yeah.

Speaker Change: Turning to our operating data on pages six and seven.

Speaker Change: Our trading volumes for all customers outpaced industry growth over the prior year quarter in all three major product classes ops.

Speaker Change: Options and futures contract volumes rose, 25%, and 16%, respectively and stock share volume rose 47%.

Speaker Change: On page seven you can see that total customer darts were $3 5 million trades per day up 50% from the prior year and strong in all product classes.

Speaker Change: Commission per cleared commission a bull order of $2.76 is down from last year due to both smaller average order sizes, and earning higher rebates, which reduced the cost of a trade and are generally pass through to the customer.

Paul Brody: Page 8 shows our net interest margin numbers. Total GAAP net interest income was $770 million for the quarter, up 3% on the year-ago quarter. And our net interest margin table, net interest income, was $794 million, up 4%. We include for NIM purposes, certain income that is more appropriately considered interest, but that for GAP purposes is classified as other fees and services or as other income. Our net interest income reflects both the strong increases in balances and the decline in benchmark rates, resulting in a rise in margin loan interest income and lower interest expense on customer cash balances, partially offset by lower interest income on segregated cash.

Speaker Change: Page eight shows our net interest margin numbers.

Speaker Change: Total GAAP net interest income was $770 million for the quarter up 3% on the year ago quarter, and our net interest margin table net interest income.

Speaker Change: Was 70 $794 million up 4%.

Speaker Change: We include for NIM purposes, certain income that is more appropriately considered interest, but that's for GAAP purposes is classified as other fees and services or as other income.

Speaker Change: Our net interest income reflects both the strong increases in balances and the decline in benchmark rates, resulting in a rise in margin loan interest income and lower interest expense on customer cash balances, partially offset by lower interest income on segregated cash regarding.

Paul Brody: Regarding rates. Central banks in most major markets lowered their benchmarks. Several held theirs constant and a few raised. reflecting a decline in benchmark rates versus last year. including 100 basis points of cuts in the average U.S. Fed funds rate. which represents a 19% decline in that rate. Our segregated cash interest income was down 13% while margin loan interest rose by 14% on a 38% increase in average balance. At a high level in the first quarter of 2024, we estimated that a 1% decrease in all benchmark rates would decrease our annual net interest income by $304 million.

Speaker Change: Regarding rates.

Speaker Change: Central banks in most major markets lowered their benchmarks several held there's constant in a few raised.

Speaker Change: Reflecting a decline in benchmark rates versus last year.

Speaker Change: Including 100 basis points of cuts in the average U S fed funds rate.

Speaker Change: Which represents a 19% decline in that rate.

Speaker Change: Our segregated cash interest income was down 13% while margin loan interest rose by 14% on a 38% increase in average balances.

Speaker Change: At a high level in.

Speaker Change: In the first quarter of 2024.

Speaker Change: We estimated that a 1% decrease in all benchmark rates would decrease our.

Speaker Change: Annual net interest income by $304 million.

Paul Brody: In the past year, the U.S. Fed Funds Benchmark did, in fact, fall 1%, and other countries' rates moved more or less than that. But driven by higher balances, this quarter's net interest income represented an annualized increase of $128 million. The average duration of our investment portfolio remained at less than 30 days. The U.S. dollar yield curve remains inverted through the medium term so that we continue to maximize what we earn by focusing on short-term yields rather than accept the lower yields and significantly higher duration risks of longer maturities, particularly in an unpredictable economic environment. The strategy also allows us to maintain a relatively tight maturity match between our assets and liabilities.

Speaker Change: In the past year the U S fed funds benchmark did in fact fall 1% and.

Speaker Change: In other countries rates moved more or less than that.

Speaker Change: But driven by higher balances this quarters net interest income represented an annualized increase of $128 million.

Speaker Change: The average duration of our investment portfolio remained at less than 30 days.

Speaker Change: S dollar yield curve remains inverted through the medium term so that we continue to maximize what we earned by focusing on short term yields rather than accept the lower yields and significantly higher duration risk of longer maturities, particularly in an unpredictable economic environment.

Speaker Change: This strategy also allows us to maintain a relatively tight maturity match between our assets and liabilities.

Paul Brody: Security's lending net interest remained muted for a couple of reasons. There are fewer names that are hard to borrow industry-wide as some of the typical drivers of securities lending, including IPOs and merger and acquisition activities. have remained subdued. Despite this, we've been consistently successful in raising the total notional dollar value of securities we lend. As benchmark interest rates rose from near zero in 2022, more of what we earned from securities lending became classified as interest on segregated cash. 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 $186 million this quarter versus $167 million in the prior year quarter.

Speaker Change: Securities lending net interest remain muted for a couple of reasons.

Speaker Change: There are fewer names that are hard to borrow industry wide as some of the typical drivers of securities lending, including Ipos and merger and acquisition activities.

Speaker Change: Have remained subdued.

Speaker Change: Fight this.

Speaker Change: We've been consistently successful in raising the total notional dollar value of Securities Wieland.

Speaker Change: As benchmark interest rates rose from near zero in 2022 more of what we earn 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 alone.

Speaker Change: Debt Securities lending net revenue would have been $186 million this quarter versus $167 million in the prior year quarter.

Paul Brody: Interest on customer credit balances, the interest we pay to our customers on the cash in their accounts, declined on lower benchmark rates despite higher balances from new account growth. as we have noted in the past. The high interest rates we pay on customer cash, currently 3.83% on qualified U.S. dollar balance. is a significant attraction to new customers. Fully rate-sensitive customer balances ended the current quarter at $20.3 billion versus $18.5 billion in the year-ago quarter and $19.1 billion at year-end. Now for estimates of the impact of changes in rates, given market expectations of further rate cuts in the future.

Speaker Change: Interest on customer credit balances the interest we pay to our customers on the cash in their accounts declined on lower benchmark rates, despite higher balances from new account growth.

Speaker Change: As we have noted in the past.

Speaker Change: The high interest rates, we pay on customer cash currently 383% unqualified U S. Dollar balances is a significant attraction of new customers.

Speaker Change: Fully rate sensitive customer balances ended the current quarter at $23 billion versus $18 5 billion and a year ago quarter and 19.1 billion at year end.

Speaker Change: Now for estimates of the impact of changes in rates.

Speaker Change: Given market expectations of further rate cuts in the future.

Paul Brody: We estimate the effect of a 25 basis point decrease in the benchmark Fed funds rate to be a $65 million reduction in annual net interest income. Our starting point for this estimate is March 31st, with the Fed Fund's effective rate at 4.33% and balances as of that date. Any growth in our balance sheet and interest earning assets would reduce this impact. About 25% of our customer cash balances is not in U.S. dollars, so estimates of a U.S. rate change exclude those currencies. We estimate the effect of decreases in all of the relevant non-USD benchmark rates would reduce annual net interest income by about $29 million for each 25 basis point decrease in those benchmarks.

Speaker Change: We estimate the effect of a 25 basis point decrease in the benchmark fed funds rate.

Speaker Change: To be a $65 million reduction in annual net interest income.

Speaker Change: Our starting point for this estimate is march 31st with the fed funds effective rate at 433% and balances as of that date.

Speaker Change: Any growth in our balance sheet and interest, earning assets, which reduce this impact.

Speaker Change: About 25% of our customer cash balances is not in U S. Dollars. So estimates of a U S rate change exclude those currencies.

Speaker Change: We estimate the effect of decreases in all of the relevant non U S D benchmark rates would.

Speaker Change: Would reduce annual net interest income by about $29 million for each 25 basis point decrease in those benchmarks.

Paul Brody: At a high level, a full 1% decrease in all benchmark rates would decrease our annual net interest income by $364 million.

Speaker Change: At a high level.

Speaker Change: Full 1% decrease in all benchmark rates would decrease our annual net interest income by $364 million.

Paul Brody: In conclusion, we started the year with another financially strong quarter, reflecting our continued ability to grow our customer base and deliver on our core value proposition to customers while scaling the business. We raised our dividend in recognition of our financial strength. Our business strategy continues to be effective, automating as much of the brokerage business as possible and expanding what we offer while minimizing what we charge.

Speaker Change: In conclusion.

Speaker Change: We started the year with another financially strong quarter, reflecting our continued ability to grow our customer base and deliver on our core value proposition to customers while scaling the business.

Speaker Change: Raise our dividend in recognition of our financial strength.

Speaker Change: Our business strategy continues to be effective automating as much of the brokerage business as possible and expanding what we offer while minimizing what recharge.

Unknown Attendee: And with that.

Unknown Attendee: We will turn it over to the moderator and take questions. Thank you.

Speaker Change: And with that.

We will turn it over to the moderator and.

Questions.

Unknown Attendee: At this time, if you would like to ask a question, please press star one one on your telephone, you'll hear an automated message advising your hand is raised. 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 compile the Q&A roster.

Speaker Change: Thank you.

Speaker Change: At this time, if you would like to ask a question. Please press star one on your telephone you hit an automated message advising your hand is raised 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 compile the Q&A roster.

James Yaro: The first question that we have today is coming from James Yaro of Goldman Sachs. Your line is open. Sorry, hello? Can you hear me? Hi, it's James. Sorry, the moderator got cut off there. So just two questions here.

Speaker Change: The first question that we have today is coming from James Rowe.

James Rowe: Of Goldman Sachs. Your line is open.

Speaker Change: Alright Hello.

James Rowe: Can you hear me.

James Rowe: Oh, Hi, it's James sorry.

James Rowe: The moderate it got cut off there.

James Yaro: The first one, could you just speak to the impact of retail pressure on equity market levels on your business in April? Has there been any notable deleveraging across your client base? And what has this meant for trading activity?

James Rowe: So just two questions here the first one.

James Rowe: Could you just speak to the impact of retail pressure on equity market levels on your business.

James Rowe: In April has there been any notable deleveraging across your client base and what does this meant for trading activity and then separately could you just speak to a.

James Yaro: And then separately, could you just speak to a shift in client allocations to cash versus in risk assets, and then the impact on margins?

James Rowe: A shift in client allocations.

James Rowe: To cash versus in risk assets, and then the impact on margin loans.

Milan Galik: I'll take it.

Milan Galik: Thank you for your question. So we have seen a very significant volume. As the market dropped and then it bounced back up, we saw record volume. There were some shifts that we noticed. Our clients traded. or less fewer options. they traded more futures than usual. And as you would expect. We saw more trading in the fixed income instruments and for an exchange. I think our customers are very happy that from a single platform, they can access all these asset classes and as they are. market dislocations like we noticed. a week ago, they can seamlessly trade from a single account all these I think it's a great benefit that our customers enjoy and appreciate.

James Rowe: I'll take it.

James Rowe: Thank you for your question so we have seen.

James Rowe: Very significant volumes.

James Rowe: As the market dropped and then backup we saw record volumes.

James Rowe: There were some shifts.

James Rowe: We noticed our clients trade it.

James Rowe: Less fewer options.

James Rowe: Titrated more future than usual.

James Rowe: Would expect.

James Rowe: We saw more trading in fixed income instruments.

James Rowe: Foreign exchange.

James Rowe:

James Rowe: I think our customers are very happy that from a single platform. They can access all these asset coffee if they arent.

James Rowe: Market dislocation likely notice.

James Rowe: A week ago.

And.

James Rowe: Cumulatively trade from the single account all of the.

James Rowe: Asset classes I think it's a great benefit.

James Rowe: Our customers enjoy and.

James Rowe: And I appreciate it.

Milan Galik: As far as the de-leveraging is concerned. We saw a slight decrease around 10% or so, 10 to 12% of decrease in margin loans. which is something you would expect. When there is such large move downward, you would expect the customers to reduce their risk posture. We also saw somewhat less aggressive positions in options and future. I think that roughly summarizes it. for what we've recently seen.

James Rowe: As far as.

James Rowe: As far as the deleveraging is concerned.

We saw a slight decrease around 10% or so 10% to 12%.

James Rowe: In margin loans.

James Rowe: Which is something you would expect.

James Rowe: There is such a large move.

James Rowe: Don work you would expect the comp.

James Rowe: Congrats to reduce de risked box posture, we also so.

James Rowe: What less aggressive positions in options.

James Rowe: And futures.

James Rowe: I think thats roughly come or IV.

James Rowe: We won't be producing leasing.

James Yaro: Thank you, Milan. That's very helpful.

Speaker Change: Thank you that's very helpful. Just one other one here I know you talked a little bit about continued appetite for U S.

James Yaro: Just one other one here. I know you talked a little bit about, you know, continued appetite for U.S. investments by non-U.S. customers, but any change in the appetite for U.S. stocks since the tariff news began? And then, I guess, just your longer-term expectations for what tariffs could mean for that non-U.S. appetite for trading U.S. stocks given that, you know, of course, the fact that you do offer U.S. markets is a key aspect of your value proposition versus local.

Speaker Change: <unk> by non U S customers, but.

Speaker Change: Any change in the appetite for U S stocks since the <unk>.

Speaker Change: Tariff news began and then I guess, just your longer term expectations for what.

Speaker Change: Tariffs could mean for that non U S appetite for trading.

Speaker Change: Next given that of course, the fact that you do offer U S.

Speaker Change: Markets is a key aspect of your value proposition versus local brokers.

Milan Galik: So, as I mentioned earlier, we saw a very significant influx of new accounts and Most of them were coming from overseas. So we do not yet see any decrease in the appetite of our non-US clients for opening an account and trading. mostly U.S. market. As to what the tariffs can mean in the long run, I mean, it's very difficult to gauge because I think We see a lot of inconsistency as to what and I. What is, what goes into effect and then it gets reversed a few days later. So I don't think anybody can guess as to what the tariffs will ultimately mean.

Speaker Change: So as I mentioned earlier, we saw very significant influx of new accounts and.

Speaker Change: Most of them they were coming from overseas.

We do not yet see any decrease in the appetite of our non U S clients for opening an account and trading.

Speaker Change: Mostly.

Speaker Change: The U S markets.

Speaker Change: Two what the tariff.

Speaker Change: Terry can mean in the long run.

Speaker Change: It is very difficult to gauge because I think.

Speaker Change: We see a lot of.

Speaker Change: And consistency as to what's.

Speaker Change: And now what.

Speaker Change: What goes into effect and then it gets reversed a few days later, so I don't think anybody can gasoline to walk the.

Speaker Change: <unk>.

Milan Galik: But I think the investors. probably remember that there are other tenets of. the administration. They did announce tariff increases, but their plans called for lower taxes. and lower regulation. So these two effects. should have the markets and should continue generating a lot of appetite in our customers for investing in the United States. Okay, thanks a lot.

Speaker Change: Ultimately mean, but I think the investors.

Speaker Change: Robley remember that there are other tenants.

Speaker Change: <unk>.

Speaker Change: The administrations posture.

Speaker Change: They did.

Speaker Change: Tariff increases, but they plans called for lower taxes.

Speaker Change: Lower regulation. So these two.

Speaker Change: Thanks.

Speaker Change: It should have the markets and should continue generating a lot of appetite in our customers who are investing in the United States.

Speaker Change: Yeah.

Speaker Change: Okay. Thanks, a lot.

Unknown Attendee: Thank you.

Speaker Change: Thank you one moment for the next question.

Craig Siegenthaler: And our next question will be coming from the line of Craig. Siegenthaler of Bank of America, your line is open. Good evening, Thomas, Milan. Hope everyone's doing well.

Speaker Change: And our next question will be coming from the line of Craig.

Speaker Change: Second dollar of Bank of America. Your line is open.

Speaker Change: Good evening, Thomas one hope everyone's doing well.

Craig Siegenthaler: I wanted to ask that last question a different way. But we view IBCARE's model as the ability to provide global assets to mostly individual investors around the world at a low cost. But, you know, given this new emerging trade conflict, we could see a period where investors, you know, especially individuals, focus more domestically and less on the U.S. market, even though you haven't seen this yet, as you pointed out.

Speaker Change: I wanted to ask that last question a different way but.

Speaker Change: We view I'd be curious model.

Speaker Change: The ability to provide.

Speaker Change: Global assets to mostly individual investors around the world at a low cost.

Speaker Change: Given this new emerging trade complex.

Speaker Change: We could see a period, where investors, especially individuals focus more domestically and less on the U S market, even though you haven't seen this yet as you pointed out.

Milan Galik: How do you think this could impact IBCARE's global model with most of your accounts coming from outside the U.S.? We do not think that it will impact our model because, as you recall, our aim is to always offer not just U.S. markets but local markets side by side on the same platform to our clients so that they can have their assets in a single account and be able to deploy their capital to investments outside their home country or region, as well as in the United States. So we do not think that this will negatively affect us in any way.

Speaker Change: How do you think this could impact <unk> global model with most of your accounts coming from outside the U S.

Speaker Change: We do not think that would be truly impact our model because.

Speaker Change: You will recall.

Speaker Change: Our aim is always offer not just U S markets, but the local market side by side on the same platform.

Speaker Change: Clients, so that they can have their assets in a single account.

Speaker Change: And be able to deploy their capital to investments.

Speaker Change: Their home country or region.

Speaker Change: As well as in the United States. So we do not think that this will negatively affect us in any way, but more importantly, something that I explained earlier, it's something that we noticed last three quarters.

Milan Galik: But more importantly, something that I explained a little earlier, something that we noticed last week was we are very well positioned, exceptionally well positioned for volatility and the type of market like we saw last week. We if, as our customers notice changes in yield. they were able to act on them they were able to to trade. Sovereign Bonds. as they So changes in the currency, if the theory that the U.S. dollar is weakening. they can they can buy other currencies on the same platform or do the investments via ForexFuture.

We are very well positioned exceptionally well positioned for volatility.

Speaker Change: The type of market movement like we saw last week.

Speaker Change:

Speaker Change: We.

Speaker Change: Yes.

Speaker Change: As our customers noticed changes in.

Speaker Change: In yields.

Speaker Change: They were able to act on them they were able to to trade.

Speaker Change: Sovereign bonds.

Speaker Change: Hum.

Speaker Change: <unk>.

Speaker Change: So changes in the currency.

Speaker Change: The U S dollar is weakening.

Speaker Change: They can they can buy other currencies on the same platform or do the investments going forward ex futures.

Speaker Change: If they think the oil recovery from the value they can they can buy that.

Speaker Change: Through future ebay wants to increase their allocation in gold they can buy bogie them on our platform. So we think that we are very well positioned for four markets that are as uncertain as we have seen last week.

Unknown Attendee: at www.thevenusproject.com Thanks Milan.

Unknown Attendee: And I actually had a follow up on James's first question too, but wanted to go outside of trading. We wanted to see if you could provide any insight on how client activity was tracking month to date. Specifically, we're curious if you saw any deviations to your one Q trajectory for account growth, customer credit balances, and margin loans. We saw very significant client inflow. So our department that approves new accounts So significant increase in the number of approved accounts. These were obviously, not all of them were funded. The defunding event happens days later. So there was an influx of new accounts.

Speaker Change: Thanks, Mohan and I actually had a follow up on James's first question too, but wanted to go outside of trading.

Speaker Change: We wanted to see if you could provide any insight on how client activity with tracking month to date.

Speaker Change: Specifically, we are curious if you saw any deviations to your <unk> trajectory for account growth customer credit balances in margin loans.

Speaker Change: We saw very significant client inflow so our.

Speaker Change: Department that approves new accounts.

Speaker Change: So significant increase in the number of approved accounts. These were obviously not all of them were funded.

Speaker Change: <unk> funding event happens.

Speaker Change: So there was an influx of new accounts and I'm sorry, what was the other part of your question.

Milan Galik: And I'm sorry, what was the other part of your question? So what I wanted to get at is account growth, customer credit balances, and margin loans. Did you see any deviation in the trajectory of those three in the first two weeks of April? So there was the drop in the margin loans by around 12%. There was there was greater than I would expect inflow of cash, which could be somewhat related to the leveraging, but could also be related to new funds coming in. We do not separate these two numbers, so it's hard for me to tell.

Speaker Change: So what I wanted to get at is.

Speaker Change: The account growth.

Speaker Change: Customer credit balances and margin loans did you see any deviation from that.

Speaker Change: <unk> of those three.

Speaker Change: In the first two weeks of April.

Speaker Change: But there would be dropping the margin loans by around 12%.

Speaker Change: There was there was.

Speaker Change: Greater than I would expect the inflow of cash which could be somewhat related to deleveraging, but could also be related to new funds coming in and we do not separate these two numbers that we talked for me to tell.

Milan Galik: But as far as the trading activity is concerned, the values that we see roughly correspond to average volume levels in the previous quarter. So we're back to the normal trade.

Speaker Change: But as far as the trading activity is concerned.

Speaker Change: <unk> that we see roughly correspond to average volume levels in the previous quarter. So we're back to normal trading.

Unknown Attendee: Great. Thanks for taking my question. Thank you.

Speaker Change: Great. Thanks for taking my question one.

Speaker Change: Okay.

Speaker Change: Thank you one moment for the next question.

Patrick Moley: And our next question will come from the line of Patrick Moley. of Piper Sandler, your line is open. Yeah, good afternoon. Thanks for taking the question.

Speaker Change: And our next question will come from the line of Patrick Molly.

Speaker Change: Piper Sandler your line is open.

Speaker Change: Yeah. Good afternoon, thanks for taking the question.

Patrick Moley: Maybe shifting to the the product side of things, you nearly or you're on pace to nearly triple the size of your crypto offering this year. So can you talk about what drove the decision and your comfortability with expanding that offering? And then going forward, how are you thinking about the growth opportunity here? Is this, you know, something you could be think could be a significant growth driver? Or is this more of just, you know, you're plugging a previous, or what you view as a previous product gap?

Speaker Change: Maybe shifting to the product side of things you nearly or you're on pace to nearly triple the size of your crypto offering this year.

Speaker Change: So can you talk about what drove the decision and you're comfortably with expanding that offering and then going forward. How are you thinking about the growth opportunity here or is this something you could be think could be significant growth driver or is this more just youre plugging a previous.

Speaker Change: What you view as a previous product yet thanks.

Milan Galik: Thanks. So we have added seven currencies that we mentioned in one of the previous earnings calls that we would do that. as soon as we see changes. in the regulatory environment by the SEC. And we indeed see that there were several changes that took place. The accounting guidance that requires that we record the obligation associated with safeguarding crypto assets on the balance sheet has been rescinded by the SEC. That's one change that we saw. Another change that we saw was the There was an announcement that the SEC tends to. decrease the regulation by enforcement going forward in crypto.

Speaker Change: So we have added.

Speaker Change: Seven currencies.

Speaker Change: Mentioned in the previous earnings call that we.

Speaker Change: We would do that.

Speaker Change: As soon as we see changes.

Speaker Change: And the regulatory environment why DSD.

Speaker Change: And we indeed see that there were several changes that took place.

Speaker Change: The accounting guidance requires that we record the obligation associated safeguarding repo assets on the balance sheet.

Speaker Change: Has been rescinded.

Speaker Change: By the SEC, that's one change that we saw in other change that we saw was the.

Speaker Change: <unk>.

Speaker Change: There was an announcement.

Speaker Change: The SBC.

Speaker Change: 10 two.

Speaker Change: Decrease the regulation by enforcement going forward in <unk>.

Milan Galik: We also saw that the Coinbase lawsuits have been dismissed. So all these changes. gave us. They increased our appetite for for the crypto space. And we added the seven currencies, as well as we increase the limit. that governs how much assets a client account can hold in cryptocurrencies. We went from 10% to 30% of NLD. So these are the changes that we have made. As far as what the crypto space means to us, we would obviously like it to grow. It's not growing as fast as we would like, which to me personally, somewhat of a surprise, because if you look at The cost of trading of crypto assets on our platform is significantly lower than the cost that our competitors charge, yet we do not see a huge influx of cryptocurrency traders to our platform.

Speaker Change: We also saw that the coinbase law suits have been dismissed so all of these changes gave.

Speaker Change: It gave us.

Speaker Change: We increased our appetite for for the crypto space and we added seven currencies.

Speaker Change: As well as we increase the limit.

Speaker Change: That govern how much assets are client account can hold in crypto currencies, we went from 10% to 30% of MLB. So these are the changes that we've made.

Speaker Change: As far as what the crypto space means to US we would obviously like it to grow.

Speaker Change: Not growing as fast as we would like which to me personally somewhat of a surprise because if you look at it.

Speaker Change: The cost of trading of crypto assets on our platform, we can significantly lower than the cost.

Speaker Change: Our competitors charge, yet we do not see a huge influx of.

Speaker Change: Crypto currency traders to our platform. So I would I would expect more who now we just have to be satisfied.

Milan Galik: So I would expect more. For now, we just have to be satisfied with rounding up our offering, giving our clients and financial advisors access to the crypto cash so that they can access these asset costs for themselves and for their clients.

Speaker Change: Rounding up our operating giving our clients and financial advisers access to their forecast.

Speaker Change: They can the kind of access to this asset class will themselves and accordingly quota clients as well.

Milan Galik: All right, great. And then just to follow up on on the Forecast X platform and maybe event contracts, more broadly, we've seen, you know, one of your competitors has really leaned into event contracts, specifically sports events contracts. I know that, you know, IBKR in the past has been a little bit more hesitant to, you know, pursue launching sports related event contracts, but just curious on your thoughts about expanding that offering and maybe whether you could in the future look to maybe rethink about sports contracts. Thanks.

Speaker Change: Alright, Great and then just a follow up on.

Speaker Change: The forecast X platform, and maybe even contracts more broadly we've seen.

Speaker Change: One of your competitors has really leaned into contracts specifically.

Speaker Change: Arts events contracts I know that.

Speaker Change: I'd be care in the past has been a little bit more hesitant to.

Speaker Change: Pursue watching sports related contracts, but just curious on your thoughts about expanding that offering and maybe whether you could in the future look to maybe rethink about sports contracts. Thanks.

Milan Galik: So I would answer this question in two parts. So Interactive Brokers is the owner of the ForecastEx Exchange, which ForecastEx Exchange can have other FCM members. ForecastEx Exchange will be listing sports contracts so that other FCMs can offer them to their clients. We at Interactive Brokers, we have not yet made a decision as to whether we will or will not offer them.

Speaker Change: So I would answer the question in two parts.

Speaker Change: Brokers is the owner of the forecasted exchange, which forecast exchange can have other HCM members forecast back to the exchange will be we think sports contracts. So that other ftm's can offer them to their clients.

Speaker Change: At interactive brokers, we have not yet made.

Speaker Change: Decision as to whether we will or will not offer them.

Unknown Attendee: That is where we cut in. All right. Great. Thanks.

Speaker Change: That is where we currently are.

Unknown Attendee: That's it for me. Thank you.

Speaker Change: Alright, great. Thanks, Thats it from me.

Speaker Change: Thank you one moment for the next question.

Chris Allen: And our next question will come from the line of Chris Allen of Citi. Your line is open. Yeah, afternoon. Afternoon, guys. I wanted to, wanted to ask actually about Europe over the course of the first quarter. So a really strong overall European equity volumes. Anecdotally, it sounds like European retail investors are starting to increase their activity and becoming a little bit more like US based customers. I'm just wondering, are you seeing similar things from that region? Where does where do things stand from adoption of options as well? Any comment on that front would be helpful.

Speaker Change: And our next question will come from the line of Chris Allen of Citi. Your line is open.

Speaker Change: Yes afternoon afternoon, guys I wanted to I wanted to ask actually about Europe over the course of the first quarter. So a really strong overall European equity volumes anecdotally it sounds like.

Speaker Change: European retail investors are starting to increase their activity and becoming a little bit more of a U S. Based customers I'm. Just wondering are you seeing similar things from that region, where does where do things stand from an adoption of options as well any color on that front would be helpful.

Milan Galik: Well, our international clients are busy trading options, mostly US options, because that's where the volumes are. But we are offering European options, as well as Asian options, and we see significant volumes in Asian options being traded by Asian clients.

Speaker Change: Well our international clients are busy trading options, mostly U S options, because that's where the volumes are.

Speaker Change: We are offering.

Speaker Change: In options as well as Asian option, and we see significant volumes in Asian options being traded by Asian clients.

Milan Galik: I am sort of curious whether Europe is going to have their own Magnificent Seven or Six. I don't know how many it is. There is some talk of the defense talks in Europe taking up that role, so it's going to be interesting to see whether that happens. Thanks.

Speaker Change: I am sort of curious whether Europe is going to have their own magnificent seven or fixed I don't know how many you did.

Speaker Change: Im talk of the stocks in Europe picking up at all sort of its going to be interesting to see but it could happen.

Paul Brody: And just maybe on the on net interest income related to seg cash, just the sequential movement. When you when just given the color last quarter, it seems I mean, it basically implies that you saw an overall decline about 100 basis points across central banks. Is that correct? Is this just driven by movements and benchmark rates? Or is there anything else underneath the service, maybe shortening duration, anything like that, that impact the seg cash? Yeah, I'll take that. So yes, primarily the drop in rates, you know, there were several drops by the Fed in in late fourth quarter.

Speaker Change: Thanks, and just maybe on the on net interest income related to cash just the sequential movement.

Speaker Change: When you.

Speaker Change: Just given the color of last quarter it seems.

Speaker Change: This implies.

Speaker Change: You saw an overall decline of about 100 basis points across central banks.

Speaker Change: So is this just driven by movements in benchmark rates was there anything else underneath the service, maybe shortening duration or anything like that that impact the side cash and AR.

Speaker Change: Yeah I'll take that.

Speaker Change: Yes, primarily the drop in rates you know there were several jobs.

Speaker Change: By the fed in in late fourth quarter, so the fourth quarter itself.

Paul Brody: So the fourth quarter itself, you know, carried some higher rates from earlier, really right through the middle of the quarter. So the full impact of those decreases were felt in the first quarter. And and some of the foreign rates dropped at least that much on a percentage basis. So for example, I think the euro went from a 3% benchmark to two and a half. So that does impact all the Fed cash. But as well, you know, it impact what we're paying our customers on the other side. So we do have offsets there. Thanks, guys. Thank you.

Speaker Change: Carried some higher rates from earlier really right through the middle of the quarter. So.

Speaker Change: The full impact of those decreases.

Speaker Change: Were felt in the first quarter end and some other foreign rates.

Speaker Change: <unk> dropped at least that much on a percentage basis. So for example, I think the euro went from 3% benchmark to two and a half.

Speaker Change: That does impact all of us that cash, but as well as <unk>.

Speaker Change: What we're paying our customers on the other side.

Speaker Change: So we do have offsets there.

Speaker Change: Thanks, guys.

Unknown Attendee: And one moment while we prepare for the next question.

Speaker Change: Thank you and one moment, while we prepare for the next question.

Benjamin Budish: And the next question will be coming from the line of Benjamin Budish of Bar Pays, your line is open. Hi, good evening and thanks for taking the question. I wanted to follow back up on the earlier comment on margin balances, just want to make sure we're kind of clear. When you commented that margins declined 12% from the end of the quarter, is that as of sort of the lowest point perhaps a week ago? Or is that as of yesterday? Just hoping to get a better sense of kind of where we are currently. The job happened very quickly and then it remained the same for several So no further decreases.

Speaker Change: And the next question will be coming from the line of Benjamin bullish of Barclays. Your line is open.

Benjamin Bullish: Hi, good evening and thanks for taking the question.

Benjamin Bullish: I wanted to follow back up on the earlier comment on margin balances just wanted to make sure. We're kind of clear when you commented that margins declined 12% from the end of the quarter is that as of sort of the lowest point, perhaps a week ago or is that as of yesterday.

Benjamin Bullish: Hoping to get a better sense of kind of where we are currently.

Benjamin Bullish: The drop happened very quickly and to anybody.

Benjamin Bullish: For several days.

Benjamin Bullish: So no further decreases.

Benjamin Budish: So there was a significant reaction by I wouldn't even call it significant. 12% is not that big. There was a reaction by our clients initially and then they remained.

Benjamin Bullish: Okay.

Benjamin Bullish: The accident.

Benjamin Bullish: We recorded significant 12% is not that great.

Benjamin Bullish: There was a reaction by our clients initially and then they remain the same.

Benjamin Budish: Understood. Very helpful.

Paul Brody: One other kind of modeling nuance, maybe for Paul, in terms of making sure we kind of calibrate our models correctly, given the SEC reduction, I think you said $27 million for the current quarter. Should it be fair to assume those kind of equally come out of commissions and transaction-based expenses? Is that the way to think about, you know, the impact going forward? Yeah, the regulatory fees are passed through, right, and it was about $27 million out of that total number for Execution Clearing and Distribution Line.

Benjamin Bullish: Understood very helpful.

Speaker Change: One other kind of modeling nuance maybe for Paul.

Speaker Change: In terms of making sure we kind of calibrate our models correctly, given the SEC reduction.

Speaker Change: I think you said $27 million for the current quarter should it should it be fair to assume those kind of equally come out of commissions and transaction based expenses is that the way to think about the impact going forward.

Speaker Change: Yeah, the regulatory fees are passed through right and it was about $27 million out of that.

Speaker Change: Total number four.

Speaker Change: Execution clearing and distribution line.

Speaker Change: Very helpful. And then maybe one other like Super kind of small one but just curious for the market data fees. I think you said $19 million of expense in the quarter. If I recall that was $21 million last quarter I know that line goes up very very gradually over time and I think it's kind of assume theres cost inflation I'm curious if there's any reason that number went down.

Paul Brody: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. Sorry, you're saying just the market data fees? Yeah, the $19 million. That's, that's, that's fairly even with prior quarter. And a little up a little bit from the it's actually up a little bit from the prior quarter and maybe 2 million from the year ago quarter. Okay. All right. Thank you for that clarification. Thank you.

Anything you can kind of comment on there.

Speaker Change: Alright, you're saying just the market data fees.

Speaker Change: The $19 million.

Speaker Change: That's that's.

Speaker Change: That's fairly.

Speaker Change: Even with prior quarter and.

Speaker Change: Up a little bit from the it's actually up a little bit from the prior quarter and maybe $2 million from the year ago quarter. Okay. Alright. Thank you for that clarification.

Speaker Change: Okay.

Speaker Change: Thank you one must have the next question.

Dan Fannon: And our next question will be coming from the line of Dan Fannon. of Jeffreys, your line is open.

Speaker Change: And our next question will be coming from the line of Dan Fannon.

Speaker Change: Of Jefferies. Your line is open.

Dan Fannon: Hi, this is Jun on behalf of Dan. Could you maybe just remind us what your excess capital was as of March 31st? That's the capital available for M&A and any changes in terms of your inorganic priorities or maybe like progress on sourcing your deal? Yeah, it kind of remains in the six to seven billion range, you know, As this business grows, we earn more and we have more capital and more of it is devoted into the business to support things like customer trading and clearing fund deposits, where we are, you know, self-clearing in most places and various buffers that have to be maintained, both for regulatory purposes and for standard operating, you know, liquidity buffers.

John: Hi, This is John on behalf of Dan.

Speaker Change: Could you maybe just remind us what your excess capital was as of March 31st that's the capital available for M&A and any changes in terms of your inorganic priorities or maybe like progress on this afternoon you Gail.

Gail: Yes, it kind of remains in the 6% to $7 billion range.

Speaker Change: Uh huh.

Speaker Change: As this business grows we earn more and we have more capital and more of it is devoted into the business to support things like customer trading and clearing fund deposits, where we are self clearing in most places and various.

Speaker Change: Buffers that have to be maintained both for regulatory purposes and for.

Speaker Change: That's standard operating liquidity buffers.

Milan Galik: It does take a lot of capital, which is why we maintain it. And but, you know, we're profitable enough that we determine we can raise the dividend and and still grow that capital.

Speaker Change: It does take a lot of capital which is.

Speaker Change: Why are we maintain it.

Speaker Change: And but we're profitable enough that we determined we could raise the dividend and still grow that capital.

Milan Galik: And just in terms of M&A, has there been any progress on sourcing a new deal, any new prospective talks here? Not really. We still look at all the opportunities that arrive on our desks. We haven't yet found anything that would work. The last significant one, we did not succeed in purchasing the competitor. We tried. Actually, we were able to offer a very significant and attractive price. The deal did not happen because we were interested in buying the entire ownership 100%, and one of the sellers was not interested. We would be able to only acquire 70%, which was a deal breaker.

Speaker Change: And just in terms of M&A.

Speaker Change: <unk> made progress on sourcing new deal or any new prospective talks there.

Speaker Change: Not really we still look at all the opportunity.

Speaker Change: The amount that we.

Speaker Change: We haven't yet found anything that would work.

Speaker Change: Significant one.

Speaker Change: We did not succeed in purchasing.

Speaker Change: Competitor.

Speaker Change: We tried we actually we were able to to offer a very significant and attractive price.

Speaker Change: The deal did not happened because we were interested in buying the entire ownership, 100% and runoff was not interested so we were we would be able to only acquire 70% which was a deal breaker.

Milan Galik: That's why we didn't do it. It's difficult for us to find an acquisition that we would like. Obviously, it cannot be too small because it would be just a distraction, but So far, we haven't succeeded.

Speaker Change: Hi, good evening.

Speaker Change: It's difficult for us to find an acquisition that we like obviously it cannot be too small because it could be just the distraction.

Speaker Change: But.

So far.

Speaker Change: We haven't succeeded.

Unknown Attendee: Okay, that was helpful. Thank you.

Speaker Change: Okay that was helpful. Thank you.

Speaker Change: Okay.

Unknown Attendee: As a reminder, if you would like to ask a question, please press star 1-1 on your telephone.

Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone.

Kyle Voigt: And our next question will be coming from the line of Kyle Voigt of KBW. Your line is open. Hi, good evening.

Speaker Change: And our next question will be coming from the line of Carl vote of VW. Your line is open.

Kyle Voigt: Maybe I could ask a question about your dividend policy. You increased the dividend again this year after an increase at the same time last year. Can you just speak a bit more about your policy? Should investors expect an annual increase in the dividend going forward, whether you would be open to targeting a specific dividend payout ratio over time, or whether you're instead targeting a certain implied dividend yield on the share?

Carl Vote: Hi, good evening.

Speaker Change: If I could ask a question about your dividend policy you increase the dividend again this year after an increase at the same time last year.

Speaker Change: Can you just speak a bit more about your policy should investors expect an annual increase in the dividend going forward, whether you would be open to targeting a specific dividend payout ratio over time or whether youre instead targeting a certain implied dividend yield on the shares.

Milan Galik: Yes, we target our dividends to be between half a percent and 1% Okay, understood, Thomas, thank you.

Speaker Change: Yes.

Speaker Change: We target.

Speaker Change: Dividends to be three and a half a percent than 1% of the stock price.

Speaker Change: Okay understood Thomas Thank you.

Milan Galik: And then Milan, you spoke about the 12% pullback in margin balances in April, just given the equity market volatility and a move towards less risky positioning by your clients more broadly. Within your other fees and services line, it looks like your risk exposure fees fell sequentially in one cue for the first time in over two years. Is it also fair to assume that those fees move lower throughout the first quarter and also likely move lower into April as well? Or is there anything else to note that's driving that line and the decline in the first quarter?

Speaker Change: And then Mohan you spoke about the 12% pullback in margin balances in April just given the equity market volatility.

Speaker Change: And a move towards less risky positioning by your clients more broadly.

Speaker Change: Within your other fees and services line it looks like your risk exposure fees fell sequentially in <unk> for the first time in over two years is it also fair to assume that those fees move lower throughout the first quarter and also likely move lower into April as well or is there is there anything else to note that's driving that line and the decline.

Speaker Change: In the first quarter.

Milan Galik: So the exposure fees, they fluctuate more than the margin balances. The margin balances tend to be very steady, and they obviously reflect the income from shares that the customers buy in margin. The exposure fees are generated based on the exposure that we, as a firm, can have from clients' options and futures positions, not only the leveraged stock position. So they tend to fluctuate more. The clients of ours are very nimble. They reduce their options exposures quickly as the markets fall. So we expect these exposure fees to fluctuate more than the margin balance. Understood.

Speaker Change: The exposure fees, they fluctuate more than the margin balances the margin balances tend to be.

Speaker Change: Tend to be very steady and they obviously have you flagged the income.

Speaker Change: I'm sure that the customers buying in margin the exposure fees are generated based on the exposure that we have the firm can have from clients options and futures positions not only be the.

Speaker Change: Leverage stock position, so they tend to fluctuate more the clients of ours are very nimble.

Speaker Change: David use their options exposure as quickly as the market Paul So.

Speaker Change: We expect these exposure piece to fluctuate more than the lending.

Speaker Change: And then the margin balances.

Unknown Attendee: Thank you very much. Thank you.

Speaker Change: Understood. Thank you very much.

Nancy Stuebe: And that does conclude today's Q&A session.

Speaker Change: Thank you and that does conclude today's Q&A session I would like to turn the call back to Nancy for closing remarks. Please go ahead.

Nancy Stuebe: I would like to turn the call back to Nancy for closing remarks. Please go ahead. Thank you, everyone, for participating today.

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 the site tomorrow.

Nancy Stuebe: 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.

Unknown Attendee: Thank you again, and we will talk to you next quarter end. Thank you for joining today's conference call.

Speaker Change: You again, and we will talk to you next quarter end.

Speaker Change: Thank you for joining.

Unknown Attendee: You may all disconnect. Yeah, eight men, they're all...

Speaker Change: Joining today's conference call you may all disconnect.

Speaker Change: Thank you guys.

Speaker Change: Yeah, Hey thereof.

Unknown Attendee: Thank you for watching!

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].