Interactive Brokers Group Investor Presentation Third Quarter 2018
Disclaimer The following information contains certain forward-looking statements that reflect the Company s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company s operations and business environment which may cause the Company s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements are based upon information available to the Company on the date of this presentation. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company s financial results may be found in the Company s filings with the Securities and Exchange Commission. 2
Who we are, Where we are going We began as a market maker in 1977. We used this technology and knowledge of markets to launch our brokerage business in 1993. Today We Are: One of the largest U.S. electronic brokers as measured by DARTs. Fastest organically-growing, publicly-traded U.S. electronic broker as measured by client accounts and client equity. Broad global reach Access to over 120 markets in 31 countries. Seamless access to products worldwide Trade stocks, options, futures, commodities, FX and fixed income in up to 23 currencies. Highly efficient, scalable business model $1.4M net revenue / employee (4). 576,000 Client Accounts 3 $6.9B 763,000 66% 26% Equity DARTs 1,2 Brokerage Pretax YoY 3 Account Capital 3 Margin 1 Growth (1) 3Q18 (2) DARTs are based on client orders (3) 9/30/18 (4) Trailing twelve months to 9/30/18 3
Strong Balance Sheet Since our IPO, we have maintained a strong and growing balance sheet At May 2007 At September 30, 2018 Long-term debt $0.3 billion $0 Total equity $2.8 billion $6.9 billion + $3.9 billion in dividends distributed since IPO Excess regulatory capital $1.2 billion $5.5 billion Public shares 40 million 10% 75 million 18% Private ownership 360 million 90% 339 million 82% Total 400 million 100% 414 million 100% 4
Corporate Strategy Automation allows IB to be the lowest cost processor in our industry Majority of senior management are software engineers From account opening to the entire transaction lifecycle, our processes are automated As a result, we were able to execute, clear and settle over 1 million trades per day in 3Q18, across multiple product classes and in multiple currencies, at over 120 market centers in 31 countries with 1,380 (3Q18) employees Automated, real-time risk management 5 Excludes MtM on Treasuries and extraordinary events: Singapore losses in 2013 and CHF client losses in 2015.
Diversifed Enterprise Brokerage Accounts Brokerage Client Equity Brokerage Year To Date Commissions by Client 576K $572M $142B As of September 30, 2018 6
Geographic Distribution 100% Client Accounts Client Equity LTM Commissions 370K 457K 576K $83B $116B $142B $606M $627M $742M Asia 90% 80% 26% 30% 35% 21% 24% 26% 24% 26% 29% Europe & Africa 70% 60% 50% 26% 25% 24% 14% 13% 14% 18% 18% 18% 40% Americas 30% 65% 63% 60% 58% 56% 53% 20% 48% 45% 41% 10% 0% Sep-16 Sep-17 Sep-18 Sep-16 Sep-17 Sep-18 Sep-16 Sep-17 Sep-18 7
Client Segment Distribution Client Accounts Client Equity LTM Commissions Introducing brokers Proprietary trading groups Financial advisors Hedge and mutual funds Individual traders & investors 100% 90% 80% 70% 60% 50% 40% 370K 457K 576K $83B $116B $142B $606M $627M $742M 6% 7% 9% 15% 20% 19% 21% 26% 30% 17% 17% 15% 3% 13% 12% 3% 10% 19% 3% 18% 17% 16% 18% 17% 1% 26% 24% 24% 9% 1% 9% 10% 1% 9% 9% 9% 30% 20% 57% 52% 49% 37% 36% 36% 50% 50% 50% 10% 0% Sep-16 Sep-17 Sep-18 Sep-16 Sep-17 Sep-18 Sep-16 Sep-17 Sep-18 8
Our Competitive Strengths Low Cost & Best Execution Low execution costs: Starting rates decrease with higher volume tiers U.S. Stocks $0.0005 to $0.0035 per share U.S. Options $0.15 to $0.70 per contract 1 U.S. margin interest tiers range from 2.5% to 3.7% 2 IBKR s Smart Order Router is designed to achieve best price execution by routing directly to market centers. We do not sell client order flow. 3 Breadth of Product Clients can trade on over 120 market centers in 31 countries and up to 23 currencies Seamless electronic market access to stocks, options, futures, forex, commodities, bonds, funds and ETFs from a single IB Universal Account Superior Trading Technology Sophisticated market-maker designed technology Multiple desktop and mobile trading platforms Advanced trading tools 60+ order types and algos API solutions (1) For more information see ibkr.com/commissions (2) As of October 1, 2018. See ibkr.com/interest (3) See ibkr.com/bestexecution
Effect of IBKR s Low Margin Rates Industry defined as IBKR, AMTD, SCHW, and ETFC 10
Brokerage Expansion Market leading growth in every key metric 11
Competition Metrics 3Q18 Brokerage Metrics (in thousands) IBKR ETFC AMTD 1 SCHW 3-year 3-year 3-year 3-year 3Q2018 Change 3Q2018 Change 3Q2018 Change 3Q2018 Change Number of accounts 2 576 79% 3,949 23% 11,514 74% 11,423 18% Client equity (in billions) 3 $143 129% $418 76% $1,298 94% $3,564 48% Average commission per DART (actual) $3.78-8% $7.04-35% $7.35-38% $7.27-38% Average client equity per account $248 28% $106 43% $113 12% $312 25% Total DARTs 763 12% 266 71% 795 66% 382 26% DARTs per account (actual, annualized) 312-37% 17 39% 17-5% 8 7% Number of employees 1,380 31% 4,091 24% 9,183 61% 19,100 24% Trailing 12 Months' Financials ($ in millions) Revenues per employee $1.4 $0.7 $0.6 $0.5 Compensation per employee (in thousands) $200 $158 $169 $163 Total pretax profit 4 $1,167 $1,352 $1,887 $4,305 Pretax profit margin 63% 49% 35% 44% (1) Ameritrade bought Scottrade, 3Q17 (2) E*Trade and Charles Schwab are brokerage accounts only (3) Charles Schwab s client equity includes all client assets (4) Interactive Brokers pretax profit is adjusted for currency diversification, one-time gains and Treasury marks-to-market 12
Cost Comparison Rated as Low Cost Broker 17 years in a row by Barron s 1 US Margin Loan Rates Comparison 2 Commission Rates Comparison 3 $25K $300K $1.5M $3.5M Equity Trades Option Trades Futures Trades E-Trade 10.00% 8.50% 7.00% 7.00% $6.95 Fidelity 8.82% 7.57% 5.00% 5.00% $4.95 Interactive Brokers 2 3.42% 3.08% 2.78% 2.54% $2.20 $6.95 base + $0.75 per contract $4.95 base + $0.65 per contract no base cost $0.68 per contract exchange & regulatory fees plus $1.50 NA $1.78 Schwab 8.82% 7.75% NA NA $4.95 TD Ameritrade 9.75% 8.25% 7.50% 7.50% $6.95 $7-$20 Vanguard 8.50% 7.00% 5.25% 5.25% depends on the number of trades $4.95 base + $0.65 per contract $6.95 base + $0.75 per contract $7.00 base + $1.00 per contract exchange & regulatory fees plus $1.50 exchange & regulatory fees plus $2.25 NA 1 Low Cost Broker 2002 through 2018 according to Barron s Annual Best Online Brokers - All Together Now. For additional information, see ibkr.com/awards. Barron s is a registered trademark of Dow Jones & Co. Inc. 2 IBKR calculates the interest charged on margin loans using the applicable rates for each interest rate tier listed on its website. For additional information, see ibkr.com/interest 3 Rates were obtained on October 1, 2018 from each firm s website and are subject to change without notice. Services vary by firm. The IBKR commission rates shown are the average of the client commissions for trades executed in September 2018 and are subject to minimums and maximums as shown on the IBKR website. For more information, see ibkr.com/compare 13
Integrated Investment Management from One Account EARN BORROW SPEND INVEST Earn Market Rate Interest on idle cash balances and earn income on securities by lending out fully paid shares. Directly deposit your paycheck and instantly earn high interest. 1 Borrow against your account whenever needed at our extremely low, marketbased rates. Spend using our Bill Pay to pay any expense, or use our Debit Mastercard to make purchases anywhere. Invest in stocks, options, futures, commodities, forex and fixed income on over 120 global exchanges at low cost. 2 Use our Insured Bank Deposit Sweep Program to get up to $2.75 million of SIPC and FDIC insurance on the cash in your accounts, and still earn the same market rate interest. 1) Credit interest as of 10/1/2018. USD credit interest is paid on balances over USD 10,000 in securities accounts with Net Asset Value exceeding USD 100,000. For more information, see ibkr.com/interest. 2) According to Barron s Broker Survey 2018 All Together Now, March 26, 2018. For complete information, see ibkr.com/info.
Recent Enhancements and New Products IBot Trade and manage your account wherever you are, simply and easily, by using text or voice. Now integrated with several popular chatbot and voice assistants, so clients can access the benefits of their IB accounts no matter what platform they use. New Client Portal Clients can access all the features and services of their accounts from anywhere. One login will take you to all IBKR web tools, such as Portfolio Analyst, Account Management, Forum, and more, in a streamlined view. Order Management System (OMS) Our new OMS for Advisors and institutional clients features an intuitive, easy-to-use interface that moves seamlessly between desktop and mobile devices. A new pre-trade compliance tool was added to support the trading and regulatory requirements of our growing institutional investor client base. 15
Investors Marketplace Introductions to More than Capital Interactive Brokers clients can reach hundreds of thousands of individual and institutional investors worldwide, and find service providers among the over 1,500 listed that can help grow their businesses. Investing Research Technology Administration Business Development Advisors Research Software Vendors Administrators Advertising Firms Hedge Funds Education & Coaches Programming Consultants Auditing Firms Business Analysts Money Managers News Feeds Compliance Firms Careers Brokers Trading Publications Legal Firms Corporate Access Providers Tax Firms 16
Recognized Industry Leader IB s multiple trading platforms, extensive suite of advanced trading tools, algos and order types continue to earn awards, year after year. 2018 Barron s Awards 1 : Interactive Brokers earned an overall rating of 4.5 and Rated #1 Best Online Broker Rated 4.5 for Best for Options Traders Rated 4.6 for Lowest Cost Rated 4.9 for Best Portfolio Analysis and Reports Rated 4.7 for Best Trading Experience and Technology Rated 4.5 for Best for Frequent Traders Rated 4.8 for Range of Offerings 2018 Fund Technology and WSL Institutional Awards: Best Trading Platform Overall Best Broker-Dealer Options 2018 HFM Week US Hedge Fund Services Awards: Best Mobile Application 2018 Stockbrokers.com: Rated #1 for Commissions and Fees Rated #1 for Offering of Investments Rated #1 for Active Trading Rated #1 for International Trading Rated #1 for Professionals Earned a Best in Class rating for Platforms & Tools Earned a Best in Class rating for Options Trading Earned a Best in Class rating for Order Execution Earned a Best in Class rating for Mobile Trading 2018 CTA Services Awards: Best FCM Technology - US 17 1 Barron s is a registered trademark of Dow Jones & Co. Inc.