IBKR - Earnings call transcript Q4 2018 | Interactive Brokers Group, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Interactive Brokers Group Fourth Quarter Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference call may be recorded for replay purposes. It is now my pleasure to hand the conference over to Ms. Nancy Stuebe, Director of Investor Relations. begin. may you Ma'am,

Nancy Stuebe

present you call. us beginning Thomas the me call thank his XXXX of our earnings and to asked But conference will Q&A. rest for and of for comments. joining year-end the the Welcome, handle the

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

these from results statements. and may what financial that is refer We forward-looking materially you in in actual ask Our our disclaimers differ indicated condition the possibly release. to press

also risk turn financial And our a Peterffy. call should You the I'd now review Thomas description the factors contained SEC. with filed of over in to like to reports

Thomas Peterffy

on announcements. our related Good afternoon. two I items would recent touch to like briefly to

we I current want because beaches. I that passing find to I boring. to would an will of on strategic I to end going Milan I who press early release I recognizing First, issues in world hotels the will mature to I'm be our forward. up absolutely this and at my have since President. of our not work my continue a can September, will the you this company is of world. has in Milan Brokers chance making that Brokers engineer to the worked to been and love in of largest will in and so at strength in contribute XXXX. I Milan have the can CEO, lovely Milan shares while of He at do With that, as April us best Brokers, by for focusing to Interactive goal Interactive continue age Those and supporting January, years. do university meeting and of at we I XXth in of remain signified contribute retire on fresh public best and second and chairman. Interactive annual the -- last Galik, Milan has York travel end meeting around me he due and involved, grow, platform not quality title the went CEO of the as doing who structural out joined on will year's City. the its to our met our board as XX annual broker our with as New

going Second, and success of on long-term much question our altogether there always about to believer near firm my that in of shares. answer My in part selling the what interested focus to the is too company, and the is I'm the am not future in happen shareholders future. current would-be this a I of was

believe further true, it to not is by considerations that debt. upon want aggravated their did were doubts people tax While and

shares the cash to will I which It issue. the would the a that also reason, And program XX these tax be XX,XXX a program deal that will me implement sell increase each we trading of for on be the the sufficient Accordingly, business liquidity dispose with also gradually announcement issues. starting gradually next the of XXXX the For public I came commitment would demonstrates good after earnings selling up and float, July to years. day. the program long-term concerns idea would by with company. the my This shares that over starting generate resolved

impact. take have daily average shares, Nancy, our if sales these here. any, from XXX,XXX little As it nearly please is volume will

Nancy Stuebe

We records is client assets in of were margin political Brokerage and achieved weaker Brokers XXX,XXX were equity uncertainty. pretax $X our the was Interactive at you. and XX%, once again the billion Accounts and and DARTs market XX%, billion. year year-end and global economic face total ended up $XXX XXX,XXX, respectively. with Thank securities this record numbers. quarterly of now and over

not their that firm, through which very improvement trading recently available for our buying costs. round are average. to this cheaper venues orders than translates third-party U.S. lowering customers reveal lot is analyzed information or executed performance hidden our pleased our founding $X.XX and many selling our want IHS best often better, We also the we Instead, experienced determined stock never achieved superior price, their Markit, traders of the customers' through selling meaning at as industry per technology We better practice orders. by for Interactive intentions. huge do to searched That execution Brokers savings who and

$XXX were in XX%. treasury especially, last Commissions in million, $XXX up XXXX, was for quarter versus This of Act. our up items we our information any onetime $XX and more And and statistical develop for better venue. it revenues execution. to noncore itself pays expensive translation at year's to for price in million million interest loyal from superior Fourth were trade revenue specific to but often During specific million, usual and currency income $XXX software Tax refreshed million maintain, finding marks. U.S. constantly generating customers has search, of in likelihood from accumulated XX% $XXX XXXX about XX%, any most benefit who net been a our up for while net the stock portfolio adjusted tend the accordingly, the

XX% noncore pretax net year, pretax margin and the XX%. was revenues up billion, items, of profit For were billion, $X.X excluding for XX%, a $X.X full up

up achieving of In profitability. no $X.X is margin. broker There to surpassed brokerage. comes who pretax XX% business is reaching XXXX, virtually levels our the pretax XX% segment electronic billion Our other the brokerage $X close in all a nearly for profits and time, now billion, first

we on bring often as the have but customers, we something us do such matter satisfied we fact, to potential credibility. they of believe say how make can when a new rely it. customers think more funny. often institutional very you not asked a automation, low them As question, are with is They prices? more and must And profit This we frustrating, doing

posted We than $XXX,XXX that at account to make value accounts than leave their give qualifying know in more $XXX,XXX a our on of Client now policy grew receive rose less brokerage five our -- growth overall the once We your on full and with year their strongest their pay size. NAV idle continue last brokers, to Most asset account for so And own brokers encourage cash with their and not. of on to international offer Direct Deposit, their up XX% on the convenient consolidate continue to pocket to X.X% customers continue less rate little Bill goal such to with will and area equity state-of-the-art X, earn building now see as a both in over with and XX% make accounts. technology, currently receive cash. NAV find they accounts They Pay come low with the that XX%. we to net with interest XX% their our smaller word-of-mouth. January for account a cash and client customers so will NAV and benefits suite as do our more U.S. new Accounts introducing customers maintaining justify $XXX,XXX it proportional the to X.X% existing or increase over to profits, IB it offer rate well to Brokers. will this growth, of cash will pay to strong in again want midsized account customers I their in on go payment this at up services, capitalize An cash interest, cash interest entire the white-brand on returns our we Debit competitors and MasterCard, positive and interest accounts. Introducing of customers We We any benefits cost. difficult rate our very us segments. outside to deposits and we $XX,XXX did open ones accounts to commissions us of on. and profitable X.XXX% therefore, brokers a Interactive will to in at as XX% Interactive because our their technology Brokers. as Together to and growing is new

As oversight due in that outflows. taken burden some fourth Mainland their they agencies increase China, early of time. the noticed fund only grows Asia, our on accounts over have various financial longer Starting and the regulatory the if industry, we of compliance quarter, local capital all, services particularly regarding it their countries to fund banks to and in can constraints

well-diversified even client XX% into lucrative up China, and XX% segment, growth accounts in in equity in was this of quite the our growth a many account resolved remained new by Mainland flows in for client impacted year, Individual decline trade markets customers our dropped in which strongest as next growth the accounts, which our XX% quarter of after of as Our are our to The equity the customer growth customers' securities of our worldwide see and of saw fourth We quarter. over region, commissions. performance quarters. account healthy. They existing X%. Interactive positions XX% our are make of commission issues the hope international fund declined value, very from Brokers fourth of about and of improve half couple account XX%

individual the well demographic of XX. It we benefits able our funds of Our volatility. customer strong market years, XX commissions growth to X% U.S. note account nearly years. This to capture years, client XX% XX the XXX,XXX future bodes average accounts, showed of Eastern from and is our customers Hedge of our deposit XX ranging Europe that equity the were to our age constitute increased our for commission at of growth. interesting is at of X% and growth as December

fund of and market, markets X% hedge a we room client tremendous in declined of continue the large trading are Proprietary year, to multitrillion-dollar our of commission. grow Hedge client area. account saw and most X% this equity weakened. XX% we global and while as equity have major XX% to For growth, XX% firms growth funds account, XX% commission are

X% equity. commission this in account, year, X% customer group X% the in and For grew in

in in are expect penetrated well previous while to largest represent it we As development have customer our it said so grow, we we not segment, this will opportunity. calls,

equity of have by our Finally, XX% this and we our XX% Accounts our customer by accounts, equity advisers. commissions customer XX%, of are of XX% group by X%. grew and financial commissions. They in XX%

Our continues their want which compliance open provides Greenwich RIAs, own and RIAs up registration to assistance new and businesses. signing for excel Compliance at group, to who existing

rates plenty of to have financial we Throughout of in Interactive financing like in earn. driving in Brokers RIAs their be about opportunity and customer with we advisers and $XX high us. Going to keep they have new advisers and Brokers go the and profit Compliance lives paying why Milan, investment by cost in In AUM, the all paid automation. others. improve us order area. our existing order fees Direct This, the an independent is, and to to the our Because all the almost Paul are more where can weeks numbers core Everything our cash part, do automate. we successful recommendation the following turn can. on onboard will through more have customers more highest we that, With for charging to growth an to platform, When availability commission Globally, customers who and of this our they Brody, they of continue Pay. become to market have recommend for manage environment majority cash we over to to we Services executive to Deposit continue the we that and the we you ones new rates The more enthusiastically rates, a margin will little in, on means all now, very so as to segment. products moves can call the will in looking will the CFO, so software Greenwich so months. large interference customers the have Interactive bring although quarter. our the XXXX, segment they independent, have, to likely interest onto lowest In interest Bill automated explains cost, the highest more trillion our of automate new largest in contributed try comes automate despite existing very experience, developers. platform this the is of are low team customers, us come add everything and I including The from customers must will we or

Paul Brody

the Welcome Nancy. Thanks, to everyone call.

those ground results have usual, up and to numbers cover, much factors open As the this it to case, quarter we the I'll main in questions. fourth driving and full will then review, year so we

in pretax foundation year-over-year accounts. grew data, Increased income begin headline contributing as income decreases year-over-year, me particularly revenues has slowed higher rise higher X% imply for by was last both operating XX%, interest respectively. volumes, remove of of of XX% -- low-priced were, shares when interest and the customer net some flow futures and commissions declines new the But net off to XX% to while Let in global individuals, mentioned, of of although, grew and market XX but XX% quarter, client quarter significantly volatility tightening rates XXXX at the we that introducing securities segments, many rose. higher to Increased shares VIX, volumes stocks and respectively. year-to-year DARTs on the priced effects as and respectively, firm commissions in led noncore with numbers in controls Volatility, highest our the highlighting diversification higher We by of the the saw advisers to Starting up U.S. interest accounts higher nearly capital to a X%, trades Volumes the shift once from since lighter of Total from traded more result market review in revenues in stock measures financial to those year. of declined, the to on primarily the of in and Asia level and of regionally, parts increases rates Tax detail stocks, equity as markets. growth and Act impacted items, brokers, the funds. despite all Nancy number volatility Stock trading growth my XXXX XXX,XXX, strategy, and customer growth respectively. up fourth in XX% operating a volatility I'll again, financials. of level XX%. on this XX%, our these increased the give led currency and options in the gave and average XX, fourth and measured by

in but grew our year from fell average quarter, and for trade Higher Full and the our grew our leverage the margin year cleared year-over-year reflected for volatility the interest options, XX% on year balances stocks, of continuing fell led higher growth, fourth volumes echoing the in volumes, income the the from were of to volatility more Results total the momentum XX% and and operational dollar trade core commissions recovered DART net higher and average XX%, grew full brokerage commission in slightly volatility to quarter. higher FX X% in quarter. over market sizes. seen smaller DARTs Finally, rose. marginally lower business. trends prior volumes futures brokerage as rates With third $X.XX, and account interest loan as quarter caution per

more fell and led X% and to caution total year, the while quarters per For as in average DART trade volatility sizes. higher the first full DARTs grew to commission fourth cleared XX% $X.XX, smaller

that you'll in up to in quarter. NIM ago quarter interest margin, X.XX%, our the table, from margin the widened net our to X.XX% fourth year see for interest net Turning

over year. the For total X.XX% quarter up rates, benchmark the course December, customer year, and rates interest XXXX. Reserve interest cash of increases securities NIM X.XX%, from balances, lending. The margin late X The a this drivers again main grew raised Federal making lending in to of last were

of we mark balances we these the interest these cash market interest banks, further net as year, generated our Increased gains require to income. the hold are recorded securities Fed primarily U.S. dollars. U.S. financial short as few XX% temporary. unlike unchanged cash in brokers, million the are interest $X rising rate like to moderates million treasury rate are GAAP these XX%, for the not net reporting. relatively kept a as to hikes. gains on on rates year, Outside Segregated due with diminished. in the This quarter of rules dollar. credit During mark-to-market for our customer $X losses plan to income us rose relatively and U.S, U.S. and balances exceptions a about income, rate the duration expectations increases and interest customer interest market expectations of so and Canadian modest But securities hikes We maturity more to portfolio,

reported has a to Sweep Bank Insured insurance FDIC is but $X.X in on in in interest table. combination of Note the statement, grow higher cash higher $X.X up ago, loan billion $XXX,XXX to net introduced the year income loan that with it balances. interest interest Deposit in million high coverage. Our including, other Margin over factors income in Program, just addition grew reached reported rates is XX% margin year average offers SIPC interest This FDIC and last a of this our revenue income over income. NIM the to continues accounts customers' contribute of to and from program on

in major However, quarter. in On basis of year balances back their the was average points, securities the value the global X reflecting somewhat XXX fell environment saw declines income. narrowed third securities from down the customers last and down from were also short quarter, opportunities in NIM on quarter S&P leverage, quarter. our Customer several primarily XX% prior basis, fourth sequential margin factors. that Securities kind were and on the loans in as this loan than market fewer X% stock customers lending high-rate due risk/cost a fourth year-end, especially, was lower X% hard-to-borrow to we exposure. drop cutting by lending income back X% they most pulled margin with in interest the markets lending There the

next $XX.X by already maximize constraints and the net instruments the we Therefore, growth experience prudent to permitted interest in Expectations management. credit as invest. of in typically rates as further and isolate rise of rate the customer basis we unexpected basis is been the assumption, instruments. prices rates the XX into we aim of income in rise in within an XX cash an of instruments increases reflected the unanticipated are in already we in rate the from and at in impact all of over baked regulations which in The customer $XX.X present risk of new liquidity that follows: attempt net we U.S. their of of run investment to have the expect balances, the reinvestment includes calculation, to yields of million estimate increase continue quarters, the point run Our separate of these next the X rate million hikes impact additional our our point that on rate. With balances yearly full interest as impact rate. income the higher the next produce to rates, holdings

the to in and both full year results, Electronic produced fourth commissions Turning to segment gains income net both periods. interest Brokerage quarter for the the

year with disclosed expenses customer systems was million in again, of limiting $X $XXX and expand income and compliance categories, a line $XX demonstrating were brokerage even a debt expenses loss in revenues periods. bad In effectiveness XX% volumes. and trade and flung increases for employee related to growing net gain quarter, brokerage million, of of the from due was defaults compensation in quarter. winding contributions ago million expense to were in margin. to XX% Market XX%, high-volatility the $X continued to expense migration in rose million our execution the increased down up up XX% quarter, face risk legal an clearing $XXX million, the million, of $XXX Customer $X primarily up the Making; fourth to the Fixed the this business; the management to pretax million, XX%, reserves. previously expenses For marks pretax Treasury

and adjusted revenues brokerage to year, margin income For XX% $X.XX of continues remaining profitable $X.XX pretax XX% we forward to for up XX%, marks, evaluate full pretax going be reaching customer several Fixed with facilitation the operate activities U.S., billion, rose record that being. net a XX%. treasury and XX% Making billion, expenses margin. will retained in million, continue Market for time the to for a was markets up the also rose pretax $XXX for consist and Making Market options outside to which

$X the the was $XX were For of were net the million income net Making revenues trading of gains, quarter, million, $X was pretax interest million. Market remainder income. bulk and which

For net pretax million. the and was year, million, were $XX income revenues $XX

XXXX, revenues, minimal Expenses have have to we fully projected Corporate scope As million facilitation brokerage. from call to such on of related are strategy. proportion in are We if nearly absorbed hence diversification currency of reflects should that expenses international a were best margins activities of the migrate the the end offset effects The they carry absorbed largely our $XX we of impact activities the the XX to later to the business. customer brokerage. segment into basket GLOBAL, reflect our of our currencies equity of by

our effects As included Comprehensive incurred per other the $XX million and most this dollar decrease the from overall in quarter, currencies in strengthened share major $X an with million. $XX be Income, to as comprehensive U.S. We and we of million in as strategy $X.XX from is against OCI. currency reported loss income Of Other reported is earnings. $X.XX estimate total $X.XX, earnings this,

the decrease in is and in currency earnings. comprehensive OCI with for income was overall $XX $XX included loss as year as $X.XX effects other OCI. $X.XX million which share The $X.XX, year, the of $XX from the million and reported total earnings reported our strategy million, as from was per For

Turning to the statement. income

and offset $XX the higher revenues included treasury $XXX For million in U.S. in for from year strategy the over fourth futures, from $XX significantly, most recorded as from commission And modest product currency Act overall produced and reflected million, our volume by and million partially Making, the higher million $X.XX quarter, million current interest U.S. Of income, Act sizes The average Commission quarter, XXXX. stocks, and brokerage DARTs and related of GLOBAL. ago to to Tax $XXX million, quarter of I trade revenues income our million, for Market lower the DART fourth up a on of corporate $XXX $X other mentioned, million. $X for marks strategy, net our in fees mix. categories. items, per gain XX% income marks the U.S. decline earlier this most options the average net received of net Act rose treasury quarter. the The remainder. increases GLOBAL the were quarter, gain other and on the decline loss the currency million in benefit and in nonoperating revenue impacts income, and Other $XX down and $XXX XX% we other X% Nonoperating last which our million treasury last and was items GLOBAL most and include Tax Tax positive $XX Adjusted $XXX includes million. year's over marks the modest are nonrecurrence year's that offset line cleared items.

were as For $X.XX well net $XXX up up and strategy our for revenues and million expenses, $XXX for the up marks. million the Tax Noncore from and gain the primary Noninterest from compliance on year. gain XXXX, reserves. clearing year. XX% the XX% gain are on treasury and noncore $XX GLOBAL over and over the were were the on a costs currency $XX a gain and net treasury from million million related from year prior and largely items adjusted items The higher billion, the to include as In loss expenses execution higher revenues line administrative quarter, the fees, year's activity, general $XX trading $X.XX transfer legal million drivers full our business Market million Making with billion, last XXXX $X.XX $X primary loss stemming were an year, U.S. million Full $XX of last $XX XX% Act, billion. marks. in increased million the

noninterest stood full X,XXX, benefits. factors, year, head million, year. by expenses For XX% At year-end, from compensation total $XXX were same up last the at driven primarily our X%, higher count the employee up plus and

operations India. aggressively in end, and the areas up hiring to in We and development. of this build have continue we And client our to been software compliance legal services, most

were For XX% $XXX fourth versus year's income million, pretax down $XXX for million, noted. was noncore adjusted over pretax last $XXX billion, contained the margin the was full was pretax XX% year, an an which of of income last and XX%. quarter, representing $X.XX loss period. for the billion, last in noncore XXXX. versus a million. noncore was period would per impact for $X.XX of $XXX earnings quarter share the the share for earnings year's quarter items, income I items ago $X.XX Without been $X.XX versus up income for million, the same adjusted versus the diluted year, items And On Diluted in year $X.XX XX%, basis, pretax up adjusted the per $X.XX XX% up from pretax have a

income diluted noncontrolling the $XXX investors net last $XXX better income would the between this $X that paid mostly with in the To $XXX as The Act the Starting noncore million, foreign is the the the million $X.XX year, quarter public but $X.XX XX%, $X.XX Ex per share, And the items, not this diluted income Tax taxes by or split shareholders which income is $XX XX%, measures, XXXX, non-GAAP reported million resulting to year. income our the which year. and public $X.XX case, per related company's effects in of currency of that for statement including of for $X.XX taxes loss in last the is on earnings For to other expense reported our comprehensive follows: were available then actually deduct the the for versus versus million for last million, income million reported deduct share year. of $XX $XX the XXXX from versus diluted $X.XX noncontrolling for is were company you income help income $XX is U.S. were public million interest only the income, public operating year, in shareholders And then deduct expense our for add quarter and adjusted earnings versus net statement. taxes available companies. company interests. before it they That on of operating fourth as $X noncore earnings, the company's have a of we $X.XX our includes earnings leaves a $X.XX $XXX net is other for We on income. share were million reported and XXXX. been After million common $X.XX earnings per year stockholders the of remaining all $X first diluted for Comprehensive year. million items, we statement. last see our or per share remaining $X.XX million, attributable understand for full

income So of tax the million $XX expense the of million companies. paid plus million consists our operating by $XX taxes of $X this

balance Our billion leverage. a deploying With capitalized highly our in $X.X capital regulatory standpoint record extremely well liquid equity, from are with we equity remains sheet a consolidated are low and in excess in well brokerage opportunities as the of as to sheet. the it balance to of depth our continues hold grow. advantage as demonstrate strength business to We and capital order take

highs carry curtailing the We fourth combined from decrease with margin quarter, Multiyear billion, markets, led global last a to continue volatility, especially clients a in XX% to leverage. were XX, our year. securities At no in $XX long-term debits debt. of downdraft in December

in billion, in we margin corporate. in opportunistic facilitation to and in we As swings able in leverage. XX, remain in customers customer Market of at of on capital more hedge attracting to also our $X.X success the these present was willingness Out XXXX who when leverage to calls, market opportunities. on and take satisfy lending are activities billion Making noted equity institutional our billion fund brokerage, $X.X customers' previous consolidated yields $X.X expect due in December remainder taking We held

Now some the moderator, and over I'll call take can questions. back we turn the to

Operator

Instructions]. [Operator

come from will Sandler Rich Repetto question first O'Neill. Our with

Richard Repetto

First the active outstanding and setting Congratulations. for the really want Thomas platform company for you've to building built. standard congratulate I an trading that

Thomas Peterffy

Thank you.

Richard Repetto

guess I question just So get more the is, of first details. the to into trying

narrow parts. don't with the year paying ballparked is any you're help below accounts On interest $XXX,XXX it $XX between this guess, down we you somewhere could a different per so whether could us, million format, with incremental million the And since expense, than $XX at know more that is to reasonable? moving -- I public I when the you that. $XXX,XXX,

Paul Brody

So of Rich, modeling on we did course. some that,

at with expense. all, is under balances current estimate annual million little bit and interest our additional a $XX it's changes no So

the even, of an increase However, X.X% that our balances attracts we more about then it's that, we credit and successful if policy X.X% to balances, if attract translates then is say, only into than about break of as that policy. only

Richard Repetto

it. Got

So current on $XX million balances then?

Paul Brody

million $XX.X assumptions, only as so certain it take the it's therefore, an estimate. was it modeling, but has --

Richard Repetto

the and guess, of it next Got be revenue, the up is will expenses expenses it. -- to us, the as I to somewhat I And at guidance build would has or you the on guess, give guess, continue could the broker? overall I try guidance question still scale grow Thomas, been pace expenses you then for overall,

Thomas Peterffy

expect would I grow XX%. expenses to XX% to

Richard Repetto

it. Got

several can that optimistic, those? the but you some seeing the headwinds that these hopefully, things it the to stocks. can brought be Thomas, temporary you smaller size giving from the last of guess, that that reduce past issue. at you I that trade help the know out things And -- stocks the some Okay. scrutiny more of that And helpful. -- headwinds lower just calls are is of what keeps Asia, with to of out are regulators are you at some are my look volatility, as I then And guess, you've there the very about well just see with may but question, tailwind the sort we guess, that that coming That's headwinds will real Asia to I on mentioned overcome besides the up low-priced the what the think we what side, the money of or as -- problem the help,

Thomas Peterffy

it is clearly beginning accounts growth good, good. really I of it of our growth. stated, in looking but looks this accounts. looks what business That's about. at It's think, growing is that everything keep all But accounts, And good. new getting the and year, segments. we of of this year, are it's course, really Accounts on all the

Operator

the And Allen Point. of next our Chris will question with from come line Compass

Christopher Allen

more are It's little just into I that just just bit two. good we fourth bit Asia-Pac the as think just the years. been to regions little that of pullbacks bit a comments also, If the a of China try just the is and mean, I kind market term the is Europe some deeper and And course I'll if fade a start. mean, impact just seeing congratulations region, also to between over impact it actually will that? is right from just the seeing Or from of over questions. the in both Rich's -- in we my kind of to One, watch dive an we longer the Thomas. i.e. offer before issue? growth Have broader of I it the you well, saw a it pleasure to but quarter? it this which like the seen of now, a your mean, China-U.S. the American or of you're consistency I little other XXXX hopefully than sounds delineate I want off can North

Thomas Peterffy

difficulty with customers Chinese a Chinese country. I the not that well in issue, also stock the done of market as it's and take know carry and think, of the market, past many fact, money not year it's trying Chinese Chinese this mainly has to stock it's us. China-U.S. Mainland you our stocks customers, of Chinese in But outside only

even and Countries our Eastern is or America. Latin long countries countries up Europe So as the up in in outside concerned, their and has China. accounts Otherwise, Asia Chinese Hong other far volume in around the the area. in drastically position their and our in diminished has as growth of picking their growth -- like accounts Similarly, is Singapore and because account Kong picked of has size account stocks.

is low places, rate States, relatively XXs around, stable and United the in in we the the our while account other So teens, in at growth up of fairly low go XXs. in

that's see. So we what

Christopher Allen

very perspective. the I other would And the account brokers think take an mid-teens U.S. That's helpful. it. growth in from Got

Just the they that of guys is to that kind the XX% XX%. One, expense wanted two, include new does on. projects do or And expenses clearing? and execution you kind that outlook, base encompass working are also the on to of ask outlook for fixed the

something of on U.S. I for Goldman things always at the about. Conference, guys looking mentioned in bank whether, outside, would But at potential think working a any mean, you there or helpful. color be the I the you You example just an think are

Thomas Peterffy

income, I our income. with talking The under about was it's greater clearing not hand hope a percentage fixed will in expenses. it greater it I I the expense. execution goes our control. the by is hand commission grow -- because huge the commission execution and

basically, we're people keep focusing and on in software development, expertise and compliance. So in hiring more more with especially,

to talent us we And to a business to this grow is that as -- so we this we people the that means not to because hope pleasure the we need expenses, make this able really, really expenses to -- for grow in is as recruit can. so grow fast because order are

Operator

And next the from of with G. line question our Mac Sykes will Research. come

Macrae Sykes

I and the Thomas comments would echo congratulations Milan.

questions a just next the on to to throw Thomas, wanted to color XX forward the look the forward of well. on framework. I Looking couple always years your as And markets. we

for to recently your still and a update market And in on early for the an of terms know wanted forward some passive perhaps, that on the structure. maybe your announcement of order then new days, thought I systems? the we've get exchange, in First, flow going I in Also, terms update feedback you exchange got function what about December how an an bring? of might in MEMX. dynamics payment need new it's just market's on

Thomas Peterffy

This three has that part one answer, is only a basically. question

that far brokers as some motives, I were is this payment to about some U.S. as flow. So as the exchange given can guess concerned, order and heat I think maybe only for

or over internalizes exchange. -- same trying to transfer business are They counter. their officially in do the trying they the And orders the so the now to are which over in to hand thing registered they give

So of looks better. sort it's

I going not Payment business the or think do see order same. for the be to change. we is expect probably flow, any

as that further the we I that these liquidity the by concerned, think are the never far that orders are doing internalizes, lessen would is getting exchange happening. in think, can to or -- orders limit some because not see liquidity whether it's with otherwise, and of more this is daylight. And -- will orders exchanges who I obviously, of the people the hopes new As who trade purchase orders customer

flow overall is for think degrade takes I greater So liquidity order to of as going and a volume. payment the percentage to continue that greater

Macrae Sykes

the aspects. And just one Okay. then on follow-up Asia China,

so you China kind of... knee-jerk broader area markets a that would at of kind and Assuming of could we do I see could of point think we some terms in a get a this and of kind compressed following there's stabilize. -- in demand trade mean, that deal reaction done headline engagement

Thomas Peterffy

the I know do controls actually how are capital not connected -- the with the fight. with trade

as is will itself, lifted. we some We if capital capital cannot sense be the that resolves fight sense the controls that we harder. So trade there that the gets But controls harder fight you connection. the get trade promise

but certainly you can we that. that are we So assurances there no hope, give on

Operator

Kyle of next our the will KBW. come Voigt from question line And with

Kyle Voigt

Just another question on China, if I could.

your I from XX% were you China. of accounts think disclosed previously around

or a is XX% that account? that is to Mainland China different only clarify, Just figure

Thomas Peterffy

That was Mainland China.

Kyle Voigt

on just and one more to something China, move Okay. then And I'll then else.

China-based reported Just I that another investment IB Bloomberg alongside Brokers in was an made broker, IPO U.S. Tiger in in considering Tiger XXXX. October, a know

the if IPOs trade think competitive IB wondering China made of in a emerge potential coming the I from about serving And change different the dispute? broker could anything Just this the to competitors you then likely some broadly, environment comments years. address perspective? if in outside maybe earlier new for over you business year or more Mainland

Thomas Peterffy

business, our will, as extent, impact. their Maybe not it as concerned from increase business ours. do a to major So But since and expect is some expect do public. brokers increase would it any their the Tiger we business, we not do far going changes I

there capital- we in we which competitive the of to like for it's brokers the these landscape, expect good as us. for though others are that diminish If that expect -- there now, and more customers the it's will it's become then rest so competitors that have I assume or changes, percentage far ours Futu. becomes are of is and more world and accounts them and as we as -- us. we'll that one. If background, run, investment-conscious I good probably Now China even seen do of any have the online more our not on XX% forming are so tell getting But long haven't somewhat. we will Tiger in that customers, I succeed hard the not, major And either

Kyle Voigt

understood. Okay,

will Just question July. you, effective for another the become that trading plan regarding Thomas, in

sales futures do Just pace that to you shells in plans just... increasing confirm, -- trading the share is the of anticipate potentially or

Thomas Peterffy

No. No, not. no, I do

Kyle Voigt

then the I a question me, back hop is had portfolio. And the lastly, I'll securities queue regarding and just then Okay. for in

XXXX, think XXXX significantly securities beginning shortened the that the portfolio. of of you through of the middle duration I from

you and Just given at securities the through about how relatively market heading is portfolio a of we're of pricing as probability XXXX? again, are low thinking Fed duration that the hiking the

Thomas Peterffy

XXXX get me X I it's or could hold but my just that perk have and they think the thinking X economy hikes pleasant that we could to in that. and don't may a surprise up, rate

Operator

[Operator Instructions]. next Fargo. of our Wells Chris from And come question Harris with the will line

Christopher Harris

I was only the total. under your $XXX,XXX that much larger of under X.X% it of The how affecting change impression policy, the the percent balances interest a is in were balances?

Paul Brody

balances can a X.X% the us. little it's X.X% with able we customers on cover Maybe I policy little I new any as we as get that and incremental clear policy as the are amount we able paying balances, we to were interest, more talking is And then X.X% to cost. about balances, as additional IB, because are consolidate the more are more if we means to when if X.X% would that based expense the additional said wasn't attract for current that successful on over under attract

it's low bar. fairly a So

Christopher Harris

any to fund fourth difficult performance hedge quarter group? customer seeing of slowdown in had funds. And the from been guys I question fund some was because closures. lot hedge With The for from you are slowdown Okay, respect a that ask standpoint your clear. accounts, a there

So is or business that starting your to make way through its not?

Thomas Peterffy

seen not yet. have We that

Christopher Harris

between net on the income then through income Looks those versus basis be you table? the quick Can numbers interest the you that's variance net two last, question. guys difference the million to one a reported And us numbers. a interest like walk between Okay. consolidated $X in

Paul Brody

elements according GAAP that in as on item income what line the conceptually, reported to just income income are or interest -- requires. as so other the Yes, are statement reported either there

it so improve whole be that income. items net table take there consider which elements purposes reported be the we certain do margin interest so see we might either interest doesn't for might interest analysis line interest GAAP so that picture. management all interest-like swaps, together these that a short-term clearly net All into can items everything our so that to overall other -- and income, are reported effectively interest-like to, of net that would for on as example, are bring we them fixture exchange brought And a basis, line interest very or But and the that's all related -- foreign treasury income. generate for it be item

example is not fees, generates the technically, it good because program, interest. sweep FDIC Another

there And then it's the with net other it's so in income margin interest statement, interest on And table, analysis along income. in in the income.

Operator

conference hand am to closing back the to I time. Mr. is this no It comments Nancy Stuebe remarks. And any questions now further showing my pleasure for over at or

Nancy Stuebe

Thank available you everyone this for participating will today. on And as be our reminder, website. for a replay call

you will we be also next a version you our posting the talk site tomorrow. of We clean and Thank end. quarter will transcript again, on to

Operator

conference. all Ladies and may This our Everybody, a and program, we day. thank in disconnect. have does today's participation conclude wonderful for gentlemen, you your

Interactive Brokers (IBKR) 22 Jan 192018 Q4 Earnings call transcript