Investor Presentation February, 2014
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 forwardlooking 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
Our Business Today Business transformation Brokerage is our focus Our brokerage segment is growing at a rapid pace Market maker is a mature business in a challenging environment, yet highly complementary to brokerage Highly diversified enterprise Broad global reach and breadth of products Serving multiple customer segments and geographies Largest U.S. electronic broker by number of trades Strong value proposition is fueling industry-leading growth Financial Strength $5.1B consolidated equity capital at 12/31/13 IB LLC is rated 'A-/A-2'; Outlook Stable by Standard & Poor's 3
Business Transformation Our electronic brokerage segment, born 20 years ago, now the driving force of our business Recent history of the business: 2008 - Highest annual earnings ever 2009 - Market activity slows substantially, HFT s begin to compete 2010 - Market making business bottoms amid intense HFT competition 2011 - Market making stabilizes and brokerage continues to grow 2012 Trading volumes slowed, yet continued focus is on expanding the brokerage business 4
Diversified Enterprise We serve a broad array of customers across the globe Customer Equity by Segment EQUITY Customer Accounts - by Region 1 Proprietary trading groups 15% Hedge and mutual funds 7% Introducing brokers 7% Individual traders and investors 44% Europe 28% Other 10% U.S. 43% Financial advisors 27% 1 Based on country of residence as of Dec. 31, 2013 Asia 19% Our customers reside in 190+ countries 5
Diversified Enterprise Asia continues to drive our strongest growth abroad Customer Accounts Customer Equity Commissions 157.9K 239.3K $22.1B $45.7B $386.8M $502.1M 47.4% 43.0% 55.6% 52.3% 45.6% 42.0% 27.2% 28.6% 15.1% 20.5% 21.3% 24.2% 15.9% 18.6% 15.8% 18.3% 15.3% 21.8% 9.5% 9.8% 13.5% 8.9% 17.8% 12.0% Other Asia Europe U.S. Based on country of legal residence 6
Diversified Enterprise Multi-product, country and currency Our customers can trade on over 100 market centers in 23 countries and 20 currencies. Electronic market access to stocks, options, futures, forex, bonds, ETFs and CFDs from a single IB Universal Account. 7
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 Winner 2013 Stock Brokerage Winner 2013 Futures Brokerage Winner 2013 Forex Brokerage 1st Runner Up 2013 Institutional Platform 1st Runner Up 2013 Professional Platform 1st Runner Up 2013 Options Analysis Software Winner 2013 "Best Broker-Dealer Options" Winner 2013 "Best Broker-Dealer Futures" * Supporting documentation for any claims and statistical information will be provided upon request. For additional information see www.interactivebrokers.com/compare. 8
Recognized Industry Leader We strive to offer the best price execution and lowest trading and financing costs so our customers can realize more profits Forex Our customers are more profitable Data provided by forexmagnates.com, includes the impact of any commissions Everybody says they provide best executions but only one can be best and only we can prove it. The same philosophy and technology that enables our clients to achieve superior forex trading results also drives our clients trading and investing of stocks, options, futures, and bonds worldwide on over 100 market centers. 9
Value Proposition: Low Costs Rated Lowest Margin Rates and Low Cost Broker 9 years in a row by Barron s US Margin Loan Rates Comparison US Commission Rates Comparison $25K $200K $1.5M $3.5M 100 Shares 1 Stock Option 1 E-mini S&P 500 Future Interactive Brokers 1.58% 1.33% 0.95% 0.73% $1.00 $1.00 $0.85 E-Trade 7.94% 6.14% 3.89% 3.89% $7.99 $8.74 $2.99 Fidelity 7.58% 6.58% 3.75% 3.75% $7.95 $8.70 N/A optionsxpress 8.25% 7.00% 6.00% 6.00% $8.95 $12.95 $3.50 Schwab 8.00% 6.88% 6.25% 6.00% $8.95 $9.70 N/A TD Ameritrade 8.50% 7.25% 6.25% 6.25% $9.99 $10.74 $2.25 thinkorswim 8.50% 7.25% 6.25% 6.25% $9.99 $10.74 $2.25 Interactive Brokers has lower commission rates for larger volumes and comparable rates worldwide. Services vary by firm. * Supporting documentation for any claims and statistical information will be provided upon request. For additional information see www.interactivebrokers.com/compare. 10
Value Proposition: Low Costs Our industry low margin rates have increased our market share of total margin borrowing Total Customer Dec. Margin 2007 of Industry (1) Dec 2007 - $29 billion Total - $29 Billion AMTD 29% IB 6% ETFC 25% Dec. 2013 Total - $42 Billion Dec 2013 - $42 billion AMTD 23% IB 32% SCHW 40% SCHW 30% ETFC 15% In four years, IB s margin balances have increased over 600% 11
Value Proposition: Best Execution The IB SmartRouting SM Advantage Net Dollar Price Improvement vs. Best Bid/Offer (1) 1st Half 2013 Unlike other routers, IB SmartRouting SM dynamically routes and re-routes all or parts of the order for optimal execution. We do NOT sell order flow to internalizers. (1) Net $ Improvement per Share Definition: ((# of Price Improved Shares * Price Improvement Amount) - (# of Price Disimproved Shares*Price Disimprovement Amount)) / Total Number of Executed Shares Transaction Auditing Group, Inc., (TAG), a third-party provider of transaction analysis, has determined that Interactive Brokers U.S. stock and options price executions and European stock price executions were significantly better than the industry during 2013. *For more information visit www.interactivebrokers.com 12
Financial Strength Liquid balance sheet and low financial leverage Highly Liquid Solid balance sheet Dec. 31, 2013 - $38 billion total assets, 98.9% liquid Low financial leverage Low Financial Leverage Distributing capital from market making segment Quarterly dividend of $0.10/share started June 2011 (represents ~10% post-tax return of MM capital) Special dividends paid: $1.00 in Dec. 2012; $1.79 in Dec. 2010 S&P Credit Ratings Comparison 1 : [1] Ratings were obtained on July 26 2013 from each firm's website. Supporting documentation for any claims and statistical information will be provided upon request. 13
#1 Strategic Priority: Brokerage Expansion We will achieve this through: Institutional Branding Technology Enhancements Leader in Options Trading Targeted marketing to increase market share amongst advisors, hedge funds, prop traders, introducing brokers These institutional customers are our fastest growing segment Continuously optimizing our platform and trading tools 2013 improvements: Probability Lab, EmployeeTrack, expanded mobile solutions, Mosaic trading workspace, market scanners, Money Manager Marketplace Building upon our nearly 4 decade history of options trading Strategic focus on developing innovative tools for options traders is the key to our continued success Measuring success: Maintain our lead as largest ebroker by number of trades Strong progress towards goal to be largest ebroker by profits Industry leading growth in all key metrics Increase market share in options trading (currently 12% of US exchange-trade volume) 14
Daily Average Revenue Trades (DARTs) Brokerage Expansion Maintaining position as largest ebroker by number of DARTs 500,000 499,000 414,000 400,000 300,000 200,000 160,000 297,000 Very active customer base: Our customers trade on average ~500 times/year 100,000 Daily average revenue trades grew 23% YoY - AMTD ETFC IBKR SCHW 4Q13 Results 15
Brokerage Expansion Strong progress towards our goal to be the largest broker by profits Rapidly gaining on the competition 200% 150% 100% 50% 0% -50% -100% Pretax Profits - Normalized to Q408 162% Interactive Brokers (1) Schwab TD Ameritrade 1 Brokerage segment only 4Q13 excludes unusual item ($64M Singapore loss) 16
Jan-09 Jan-10 Jan-11 Jan-09 Mar-09 May-09 Jan-12 Jan-13 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 Jan-14 May-10 Jan-09 Jul-10 Sep-10 Jan-10 Nov-10 Jan-11 Mar-11 Jan-11 May-11 Jan-12 Jan-13 Jan-14 Jul-11 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Brokerage Expansion Market leading growth in every key metric 140% 120% 100% 80% 60% 40% 20% 0% -20% Customer Accounts 100% 80% 60% 450% 400% 350% 300% 250% 200% 150% Average Customer Equity/Account 100% 50% 0% -50% Customer Equity 80% 60% 40% 20% Daily Average 40% Revenue Trades (DARTs) IB AMTD ETFC SCHW 20% 160% 140% 120% 100% 80% Average Customer Equity/Account IB AMTD ETFC SCHW 0% -20% -40% 0% -20% 60% 40% 20% 0% -60% -20% Peer data only available through Dec 2013 IB AMTD ETFC SCHW IB AMTD ETFC SCHW IB AMTD ETFC SCHW 17
Brokerage Expansion Accounts (000's) Total Customer DARTs (000's) Year-over-year growth Account Adds (000's) Customer Margin ($B) Customer Equity $B Margin as % of Customer Equity Equity per Account (000's) IB Brokerage Statistics 240 220 200 180 160 140 120 100 Customer Accounts 12 11 10 9 8 7 6 5 4 3 2 50 45 40 35 30 25 20 15 10 5 0 Customer Equity $200 $190 $180 $170 $160 $150 $140 $130 $120 $110 $100 Accounts Accounts adds Equity Equity per account 700 600 500 400 300 200 100 0 DARTs 40% 30% 20% 10% 0% -10% -20% -30% -40% 16 14 12 10 8 6 4 2 0 Margin 40% 38% 36% 34% 32% 30% 28% 26% 24% 22% 20% Total Customer DARTs YoY Growth Margin Margin as % of Customer Equity 18
Institutional Branding Focused marketing and specialized institutional tools and services are driving the shift in customer segments Customer Accounts Customer Equity Commissions Introducing brokers 157.9K 231.3K $22.1B $45.7B $386.8M $502.1M 3.7% 0.5% 4.0% 0.5% 5.9% 7.3% 4.2% 3.9% 5.6% 6.5% 18.3% 20.2% 15.7% 14.7% 1.4% 2.0% 6.1% 6.5% 15.3% 17.8% Hedge and mutual funds 22.2% 27.3% 17.0% 17.7% Proprietary trading groups 73.3% 71.4% Financial advisors 50.6% 44.2% 60.2% 56.0% Individual traders and investors Dec 2010 Dec 2013 Dec 2010 Dec 2013 2010 2013 19
Technology Enhancements Our latest developments IB FYIs Free, customized portfolio event notifications and reminders Upcoming Earnings Reminder one day prior to portfolio company earnings announcements Option Expiry Reminder one day prior to option position expiry M&A Event Notification of takeover involving a portfolio company Borrow Locate Notification that IB stock loan desk has secured a borrow on shares for which you initiated a locate request Exercise Advisory Notification that an option position s value would be maximized through exercise prior to an upcoming dividend Mosaic Market Scanners Allows customers to quickly and easily scan global markets for the top performing contracts, including stocks, options, futures, bonds, indexes and more, in numerous categories Scan multiple products around the world Choose from popular scan parameters Save your favorites Create custom scans Redefine a scan in two clicks Run scans after market hours 20
Technology Enhancements Our latest developments cont. The IB Investors Marketplace is an electronic forum where IB customers and IB service providers meet to form connections and conduct business with one another on Interactive Brokers platform www.interactivebrokers.com/ marketplace 21
Technology Enhancements Our latest developments cont. IB Traders Insight Our new blog tool provides market insights throughout the trading day direct from global market participants to the public at large 22
Leader in Options Trading Options Tools: Our sophisticated option trading Labs make it easier than ever for clients to understand, price, and create profitable option and combination trades - The Probability Lab Provides a practical way to think about options without complicated mathematics - The Options Strategy Lab Create strategies tailored specifically to your price or volatility forecast - The Volatility Lab A suite of nine volatility and option activity tools that provides an in-depth snapshot across a variety of option analytics 23
Leader in Options Trading Interactive Brokers Probability Lab (Patent Pending) The ultimate options trading tool: Encompasses the basic understanding and approach to options trading in a visual, interactive tool Customers can use Probability Lab to experiment with the shape of probability distributions and study the resulting best combination trades We introduced this tool in order to increase our customers profitability which remains our ultimate objective Subsequent releases of this tool will address buy writes, rebalancing for delta, multi-expiration combination trades, rolling forward of expiring positions and further refinements 24