IBKR - Interactive Brokers

[Travis Wiedower]

I expect introducing brokers will continue to be a growing and meaningful part of their business, which means trades per day and commissions per order will decline in step (to a certain point obviously, I suspect the worst hit is already behind us). The big question is if they can move upmarket among professional investors. More hedge fund and professional trader clients will counteract the decline from introducing brokers.

[glorysk87]

Anyway, the real question: is this pressure on revenue per account cyclical or secular? If it is cyclical, then the stock might be mis-priced. I assume a mix of secular and cyclical.

I think this is the main question that needs to be answered, and most people unfortunately tend to gloss over it, focusing exclusively on the long-term potential.

I do think Travis makes a good point about the mix shift to introducing brokers being a driver behind the DART/account declines.

[roark33]

Ok, thought I would share an experience re: IBKR.  For some unknown reason, IB calculated March as only having 30 days, so the fluctuations in your account on March 31 did not get entered into the calculations for performance fees for the first Q.  So, if March 31 was a down day, you were overpaid and vice versa.  I have talked to an IB representative about this and their explanation makes no sense.  How can their tech change each year, such that they have to change the calendar dates for March?  It isn't like March just got its 31st day this year. 

My experience with IB is that their tech claims seem completely hogwash when it is about something I can see, fee calculations, customer linking, enrollment process, and there are so many things that I can't see, trading execution, that those same tech claims are seriously in question. 

[maybe4less]

Ok, thought I would share an experience re: IBKR.  For some unknown reason, IB calculated March as only having 30 days, so the fluctuations in your account on March 31 did not get entered into the calculations for performance fees for the first Q.  So, if March 31 was a down day, you were overpaid and vice versa.  I have talked to an IB representative about this and their explanation makes no sense.  How can their tech change each year, such that they have to change the calendar dates for March?  It isn't like March just got its 31st day this year. 

My experience with IB is that their tech claims seem completely hogwash when it is about something I can see, fee calculations, customer linking, enrollment process, and there are so many things that I can't see, trading execution, that those same tech claims are seriously in question.

100% agree with you. It's amazing how many "features" don't work right half the time, how they can't explain simple things like fee calculations, or simple requests (i.e., linking of accounts of married couples) can't be accommodated. I've been seriously wondering recently if I made a mistake going with them for my RIA business.

[roark33]

I am not sure your size, but IB basically has a monopoly on RIA businesses under about 10-15m, so out of the gate a lot of people are selecting IB, but I don't know how long these people stick around. 

[atbed]

I am not sure your size, but IB basically has a monopoly on RIA businesses under about 10-15m, so out of the gate a lot of people are selecting IB, but I don't know how long these people stick around.

+1

[abyli]

I am not sure your size, but IB basically has a monopoly on RIA businesses under about 10-15m, so out of the gate a lot of people are selecting IB, but I don't know how long these people stick around.

+1

+2

[Spekulatius]

I am not sure your size, but IB basically has a monopoly on RIA businesses under about 10-15m, so out of the gate a lot of people are selecting IB, but I don't know how long these people stick around.

+1

Until their account RIA business reaches $15000001 in size probably 

[KCLarkin]

If you spend time on IBKR, let me know what you conclude on the appropriate tax rate. I could never figure it out to a degree that I could get comfortable - though I know others have...

For public shareholders, it's basically a full US corporate tax payer.  Low 30s rate.

They actually broke this down on yesterday's call:

Starting with income before income taxes of $213 million, we deducted $8 million for income taxes paid by our operating companies which are predominantly foreign taxes. That leaves us with $205 million of which 83.4% or about $171 million reported on our income statement is attributable to the non-controlling interest. 16.6% or $34 million is available to the public company stockholders.

GAAP accounting presents us in putting the $34 million on our income statement. As you can see, after we expense the remaining taxes of $10 million owed on the $34 million as the public Company's net income is $24 million and is reported on our income statement. Total income tax expense $18 million consist of this $10 million, plus the $8 million paid by the operating companies.

Based on my math, public shareholders paid 33% in foreign and U.S. income tax this quarter.

[atbed]

Does anyone mind helping out an unenlightened peon with IBKR?

The company has maintained a position on my watchlist for quite some time, but I have thus far shied away from diving in deep. I reconsidered today and began researching in earnest.

However, I have a high level question:

Why has the massive growth in # of accounts and total client equity not translated into improved financial performance? Accounts have doubled since 2013 and client equity has almost tripled, yet revenue has only increased by ~30%.  Revenue per average account has been declining YoY for well over a year now.

Curious what the driver here is.

I would expect lower volatility leads to less trading

Petterfy mentioned this video on the call. Thought it was interesting

http://video.cnbc.com/gallery/?video=3000608157&play=1