I have recently made IBKR a rather large position. Before I get into the long thesis, I'd like to ask a question: How many people on this board use Interactive Brokers? If you don't, who do you use?
The short answer is this: Any professional investor has no other option except IBKR, especially if they use leverage. No other broker offers the commissions, direct access, and margin rates that they do.
Why is IBKR interesting here? Well, historically, they have made 80+% of their money as an option market maker. The last 2 years the options market making business has been a disaster and the CEO, who owns 90% of the company and started it, has announced that they might wind it all down and just focus on the broker business. This sparked my eye.
The elevator pitch is this: There are 400 Million shares, dilluted, outstanding - but only ~42 million float. $2.8 Billion of capital, or $7 a share, is in the market making business. $1.4 Billion is in the broker, and it's overcapitalized. Thomas Peterffy (TP, the CEO) has stated that if the market making business doesn't return to making a decent ROI, they will shut the business down and return all this capital to shareholders. They returned $1 Billion in Q4 to start. Note: The market making business once brought in almost $1b in pre tax earnings! It now only does ~150m a year and still shrinking. It's basically long vol and needs the vix to be in the mid 20's for ideal conditions. But, let's pretend it doesn't ever go back to earning a decent ROI and TP returns all $7 to shareholders. What does that leave us?
We have $8.50 left with a book value of $3 and change. But it's a pure play brokerage that requires no capital to grow, has tiny cap ex needs, and has 50% pre tax profit margins! It's all automated, growing new accounts 20% a year, and growing bottom line at 20% a year. There are no true competitors (take it from me, I wanted to leave them or find a back up account and couldn't) and they currently have 164k accounts and TP estimates the addressable market (savvy financial professionals) to be 2 million globally.
They will do ~55 cents in 2011 in EPS in the brokerage business, so you are paying 16x for this fantastic business. It is very likely that in 2013 they do close to a $1 in EPS given growth in new accounts and a small uptick in fed funds rate. Schwab, Ameritrade, etc, all trade at 20x. This business has literally no need for capital and should not be valued off of book.
The reason I really like it is what's your downside? Todays book = $10.50 + a funky tax attribute that puts it at $12. The tax situation is very odd and still trying to get to bottom of it but their effective tax rate is only 12% due to the way it was set up. My numbers above (55 cents in 2011) assumes 35% tax rate and full G&A hit if they shut down market making. The street expects them to earn 80-90 cents in 2011 combined with market making. I think downside is extremely limited and upside is mid 20's in 18-24 months or so.
The way I played it is I sold Jan 12 and Jan 13 puts, strike $13.21 (funky cause of the 1 time dividend they paid) at 45 and 85 cents, respectively. If I am put the stock, I'm put it below book which is highly liquid securities that can be run off in under 3 months. I then bought Jan 13 18.21/23.21 call spreads for 85 cents which will pay $5 at max return, or almost 6x. One could just put on the call spread and not sell the puts but I like the combo trade. I also own the common given how low margin rates are on IBKR and how low the downside is, I have no problem using leverage to own this and have made it a pretty big position in my book, ~25%.
I can answer questions. In short, the catalyst is that Market Making, a crappy business, is being shut down/irrelevant, while the brokerage business has finally grown to a level where it's making real money. It used to be <20% of profits and in 2011 will be >50%.
given2invest -
I looked at this idea about a year ago and I liked it a lot. I passed as I found other businesses at that time that I liked better (no regret; stock price hasn't done anything in the past year). I remember that I liked the CEO a lot - running the show, very entrepreneurial, strong personality, speaks his mind and very honest. I think that he was in his mid-60s or something. I doubt he is the kind of guy who would retire soon but I wonder if you know about any succession plans? Does he have a strong #2? What would happen if he gets hit by a bus tomorrow?
Thanks,
Eric
So would you look at this almost like a commodity business that is the lowest cost producer? Doesn't sound to me like they have franchise value but they are in a strong market position.
Something I think is very interesting is the lack of tradable shares... maybe they are being missed by analysts because it is difficult to get an sizable investment with them! I wish I had more time to devote to reading about this, will spend as much time as I can during the week and hopefully be able to take a look further this weekend. I like this idea!
they currently have 164k accounts and TP estimates the addressable market (savvy financial professionals) to be 2 million globally.
My numbers above (55 cents in 2011) assumes 35% tax rate and full G&A hit if they shut down market making. The street expects them to earn 80-90 cents in 2011 combined with market making.
they currently have 164k accounts and TP estimates the addressable market (savvy financial professionals) to be 2 million globally.
My numbers above (55 cents in 2011) assumes 35% tax rate and full G&A hit if they shut down market making. The street expects them to earn 80-90 cents in 2011 combined with market making.
Do you have any other estimates for the size of the market opportunity?
Along with that, what is the market size for investors that trade these volumes? Average annual trades are far higher than the competition, if they continue to grow new accounts will profit growth increase at a far slower pace from less frequent trades?
Do you think competition will increase with Schwab's purchase of OptionsExpress?
What do you calculate for an EBIT impact as the result of a 25, 50, 100 bps move in rates?
I established a position in IBKR at the end of February for similar reasons. The questions above are some of the things I've been working on.
$13B mkt cap is a typo I'm assuming? It's ~1.9 billion as of this morning
On the valuation, in the VIC writeup and the writeup just posted, the treatment of a substantial portion of the excess capital as effectively an excess asset seems a bit aggressive. I suppose it is possible that the % excess over regulatory requirements could be reduced over time, but has management shown any inclination to reduce this figure? The assumption here does make a sizable difference in returns on capital today and going forward.
(Newbie to IBKR)
Can someone explain why they believe IBKR is the lowest cost broker? They advertise as having the lowest commission rate. But it is based on 100 shares.
https://www.interactivebrokers.com/en/index.php?f=1590
If I have a Schwab account I can buy/sell $10M worth of Apple stock for under $10 (fee). If I placed the same order through IBKR wouldn't I pay significantly more based on their fixed pricing structure of (USD 0.005 per share). In this case more like a $400 commission.
What am I missing?
Thanks
Market cap is $13B today, if the business grows at 20%/yr for a decade and the multiple didn't decline, you'd be looking at a $80B business. Schwab, TD Ameritrade, and E*Trade have a combined market cap of $67B today.
I think perhaps IB has designed their offering / interface / business model in a way to encourage the kinds of customers they want, and also to discourage (and thus, leave with competitors) the kind of customer they don't want.
A business doesn't have to go after all customers to be successful, I think there is a place for Fidelity / SCHW... I just think in the long run, the more frequent traders, and investors desiring IB's rates / commissions will migrate. This will allow IB to continue to grow, and probably have a disproportionate impact on the competition as these customers I would think tend to be higher margin.
It's good to know that they don't want me as a customer. Makes me feel fuzzy and happy inside. :-X
It's good to know that they don't want me as a customer. Makes me feel fuzzy and happy inside. :-X
It's good to know that they don't want me as a customer. Makes me feel fuzzy and happy inside. :-X
Honestly I'm wondering what is so bad about the interface, because this is a relatively common complaint from others. The only thing I found annoying about IB is the security card thing, which is a pain to have to look up / enter everytime I log in. Otherwise, things may not be as colorful as other brokers, but functionally I haven't had any real issues. And regardless of anything, bought 75 shares this morning for a grand total commission of $0.25, so screw the interface :D
Maybe this argument could be analogous to a Walmart/Target argument. A Walmart shopper says "who cares that the store is dirty, aisles filled with crap and long lines at the cashier. I saved $6 on my purchase so I could care less." Verses the Target argument which is that the stores are nicer but you pay a bit more. I prefer to shop at Target. My guess is most IB users are Walmart shoppers?
I am probably the company's target user. But after using their demo for a few days I decided it wasn't worth the time to learn the UI. I'm satisfied with Fidelity and have no desire to learn some warped system. I want to switch and IB offers a lot of features I want. But the UI holds me back. It's like handing someone an iPhone with a rotary dial attached. Why limit yourself like that?
Just a brainfart: I really like IB as a broker and I would love to own the stock but it just looks to expensive for my taste. Has anybody considered setting this up as a pair trade? E.g. long IBKR, short AMTD and/or ETFC. All brokers have relatively high valuations, if you can set this up with low margin requirements it might be a nice bet 'on the side' that IBKR will perform better than its competitors.
It's good to know that they don't want me as a customer. Makes me feel fuzzy and happy inside. :-X
Honestly I'm wondering what is so bad about the interface, because this is a relatively common complaint from others. The only thing I found annoying about IB is the security card thing, which is a pain to have to look up / enter everytime I log in. Otherwise, things may not be as colorful as other brokers, but functionally I haven't had any real issues. And regardless of anything, bought 75 shares this morning for a grand total commission of $0.25, so screw the interface :D
Maybe this argument could be analogous to a Walmart/Target argument. A Walmart shopper says "who cares that the store is dirty, aisles filled with crap and long lines at the cashier. I saved $6 on my purchase so I could care less." Verses the Target argument which is that the stores are nicer but you pay a bit more. I prefer to shop at Target. My guess is most IB users are Walmart shoppers?
I am probably the company's target user. But after using their demo for a few days I decided it wasn't worth the time to learn the UI. I'm satisfied with Fidelity and have no desire to learn some warped system. I want to switch and IB offers a lot of features I want. But the UI holds me back. It's like handing someone an iPhone with a rotary dial attached. Why limit yourself like that?
I think that's irresponsible. You're leaving a lot of money on the table in the long run just because you are too lazy to spend half a day on their software? Because, frankly, it's not _THAT_ difficult to use. Their software should appeal to value investors. It's ugly, unloved, but very cheap!
I am probably the company's target user. But after using their demo for a few days I decided it wasn't worth the time to learn the UI. I'm satisfied with Fidelity and have no desire to learn some warped system. I want to switch and IB offers a lot of features I want. But the UI holds me back. It's like handing someone an iPhone with a rotary dial attached. Why limit yourself like that?
I really don't understand why you, of all people, think this way. You're leaving a lot of money on the table in the long run just because you are too lazy to spend half a day on their software? Because, frankly, it's not _THAT_ difficult to use and if you get to know it actually works very good - I now prefer it above almost all alternatives.
Their software should appeal to deep value investors like you. It's ugly at first glance & unloved but very cheap! The Walmart comparison is way off the mark. IB is like a wholesale store compared to a retail store around the corner. Sure, it looks a little bit less cosy but if you are a professional you can't do without it.
Anyway, back ontopic: nobody likes my idea? Opinions would be appreciated.QuoteJust a brainfart: I really like IB as a broker and I would love to own the stock but it just looks to expensive for my taste. Has anybody considered setting this up as a pair trade? E.g. long IBKR, short AMTD and/or ETFC. All brokers have relatively high valuations, if you can set this up with low margin requirements it might be a nice bet 'on the side' that IBKR will perform better than its competitors.
I am probably the company's target user. But after using their demo for a few days I decided it wasn't worth the time to learn the UI. I'm satisfied with Fidelity and have no desire to learn some warped system. I want to switch and IB offers a lot of features I want. But the UI holds me back. It's like handing someone an iPhone with a rotary dial attached. Why limit yourself like that?
I think that's irresponsible. You're leaving a lot of money on the table in the long run just because you are too lazy to spend half a day on their software? Because, frankly, it's not _THAT_ difficult to use. Their software should appeal to value investors. It's ugly, unloved, but very cheap!
Is it that much? IB hits you with a $10 per month minimum trade fee plus a $10 per month real time quote fee as well as an IRA fee. That's $240 year in minimum fees. And that's real-time quotes for the US only. At Fidelity I get real-time quotes worldwide. If I were to pay for that at IB there's no comparison, but let's leave that out. There's also a $30 per year fee for each IRA. I have 4 IRA accounts, that's another $120. I'd be looking at $360 a year in minimum costs with less information than I get now. That's 45 trades at Fidelity to break even. I just checked Fidelity, I've made 44 trades in the last year. IB would be slightly more expensive.
If you add in all the real-time data from all the markets I get at Fidelity I'd have to trade a lot more to make it worthwhile.
Sometimes I get the impression that my investing style translates into the perception that I'm some miser living in a mobile home driving a 1992 Tarus and wearing worn out clothes to save a few bucks.Yes. You definitely give off that impression :P.
If you want a simpler interface you can always use the IB phone or ipad app. Nate what you pay at fidelity sounds like a good deal, but i don`t know one european broker that comes even close to the low commissions at IB that has the same stability/trustworthy background. At Cortalconsors/BNP Paribas for example i pay nearly 1% in commisions for every US/canadian stock transaction. And then they split each big transaction into smaller ones to get even more commissions, regardless if necessary or not. And most other brokers earn even more on your transaction when they frontrun your trade without you not even taking notice.
I am probably the company's target user. But after using their demo for a few days I decided it wasn't worth the time to learn the UI. I'm satisfied with Fidelity and have no desire to learn some warped system. I want to switch and IB offers a lot of features I want. But the UI holds me back. It's like handing someone an iPhone with a rotary dial attached. Why limit yourself like that?
I think that's irresponsible. You're leaving a lot of money on the table in the long run just because you are too lazy to spend half a day on their software? Because, frankly, it's not _THAT_ difficult to use. Their software should appeal to value investors. It's ugly, unloved, but very cheap!
Is it that much? IB hits you with a $10 per month minimum trade fee plus a $10 per month real time quote fee as well as an IRA fee. That's $240 year in minimum fees. And that's real-time quotes for the US only. At Fidelity I get real-time quotes worldwide. If I were to pay for that at IB there's no comparison, but let's leave that out. There's also a $30 per year fee for each IRA. I have 4 IRA accounts, that's another $120. I'd be looking at $360 a year in minimum costs with less information than I get now. That's 45 trades at Fidelity to break even. I just checked Fidelity, I've made 44 trades in the last year. IB would be slightly more expensive.
If you add in all the real-time data from all the markets I get at Fidelity I'd have to trade a lot more to make it worthwhile.
I rephrased my reply while you replied, it was maybe a bit over the top. You are correct in the sense that IB isn't very well suited for small accounts. Still your comparison isn't really fair. The IB minimum trade fee is waivered if you have > $100k equity. Also, any commission you pay during a month cancels out the monthly minimum fee. The same thing happens with US quote fees. In other words, with a small account all your trading is effectively free: the $360 package is all-in.
Foreign dividends cost 1% through Fidelity (IB 0%). Margin interest is higher (IB is 1% - 2% cheaper.) Corporate actions through Fidelity: $38 (IB: free). Also you are potentially leaving more money on the table because Fidelity is selling your order flow to HFT firms instead of routing it to exchanges directly. But the most egregious are the FX fees. If you trade international stocks through Fidelity you pay 1% FX fees for every trade assuming you have a small account (IB 0.0001%). That means that if you buy and sell a ~$20k European stock position during a year you are already paying $400 in hidden forex fees - you can trade a whole year for free with that if you had an IB account!
All these things add up quickly and as soon as you pass the $400 / year hurdle (which I am pretty sure you are currently paying with Fidelity, _EVERYTHING_ considered) you would be better off with IB. And the more you trade / the bigger your account gets the better proposition IB becomes. With $10k it's probably not the best choice (but why would you be investing anyway), with $100k it probably is and with $1m+ you are a fool if you park the majority of your assets at a different broker.QuoteSometimes I get the impression that my investing style translates into the perception that I'm some miser living in a mobile home driving a 1992 Tarus and wearing worn out clothes to save a few bucks.Yes. You definitely give off that impression :P.
Foreign Dividends / Reorganizations 1% of principal; charged when a dividend is paid or a reorganization event occurs on a foreign asset held in an account in USD
"Interesting, I guess I didn't know about the $100k account thing. How do they manage accounts are they all combined for a household value? I have some IRA's with $10k in them. They're well worth investing as part of the larger portfolio, but getting slammed with the fees on those isn't fun."
All accounts are independent (if you are an advisor, there is a more nuanced answer, and I think you can aggregate fees to kill the minimums if you do a friends and family setup)... so your IRAs would get hit baring the prior provisos.
"Does IB force a FX back to the home currency? Not sure I'd like this."
No, I think there was an assumption in the original comment that you (as in Nate) would want to do this, I agree based on what you shared about your trading, that you pay 1% one time, and then you can keep your earnings/returns in the foreign currency with no penalty at Fido.
"One thing that intrigues me is their API access. I'd love to write something that connects and executes trades through this. In browsing the documentation it appears I could integrate this with our desktop software. But I don't know how many users have a Bloomberg but trade through IB, seems like a strange combo.."
I think the combo is becoming less strange. But selfishly, if you do ever decide to go down that path, please keep me posted on your experience(s)!
I always get too jacked up and post to much on IBKR when it comes up, but if I had to say one thing about them that I like most is that they essentially are very similar to Costco in the brokerage space. They provide a somewhat premium service (not necessarily for everyone) and they provide it with a cost plus model. They don't try to nickel and dime you unless it goes back to their cost structure (eg, IRAs have additional paperwork for the custodian, so they charge for this vs. taxable accounts). IB's motto is to make sure that every account they have is at least a breakeven proposition... and beyond that, if they build it, people will trade. The beauty is that in my almost 10 years with them, you see steady improvements, and continual (but lumpy) cost reductions. It's not always pretty, but it's always getting better, and somewhat amazingly it gets better without you knowing it (which is frustrating as an investor...).
I can't speak badly of Fidelity as I think they do a good job, but I find companies like IB very rare in that they acknowledge what they are good at, and they try to keep doing it better, and they treat their customers fairly with very transparent pricing. To me as both an investor and user, I just like it. I know it's not everyone's cup of tea, but I think most on this board, if forced to start from scratch, would probably be happiest / wealthiest by choosing IB.
Fanboy out. :)
Honestly I'm wondering what is so bad about the interface, because this is a relatively common complaint from others. The only thing I found annoying about IB is the security card thing, which is a pain to have to look up / enter everytime I log in. Otherwise, things may not be as colorful as other brokers, but functionally I haven't had any real issues. And regardless of anything, bought 75 shares this morning for a grand total commission of $0.25, so screw the interface :D
I am probably the company's target user. But after using their demo for a few days I decided it wasn't worth the time to learn the UI. I'm satisfied with Fidelity and have no desire to learn some warped system. I want to switch and IB offers a lot of features I want. But the UI holds me back. It's like handing someone an iPhone with a rotary dial attached. Why limit yourself like that?
I think the big things for IB over Fido are real easy to quantify:
1) If you trade internationally (online, not by phone)
2) If you short
3) If you borrow on margin
4) If you trade options
5) If you trade futures
6) If you trade foreign exchange
7) If you are an RIA / HF
with $1m+ you are a fool if you park the majority of your assets at a different broker.
Fido offers the only international Roth IRA platform I could find. In addition it has markets IB does not like S. Korea. I think you cannot hold foreign currency in an IRA so the FX fees are required no matter what.
Packer
with $1m+ you are a fool if you park the majority of your assets at a different broker.
Let's not start hurling insults
On valuation, depending on your assumptions about how to treat the market making business and corporate overhead, if you assume $600M after-tax 2015 net income from the brokerage business I get it trading at a low-20s forward multiple of brokerage net income. The stock is up more than 40% over the past 6 months, which never feels good, but the valuation still does not seem that expensive for a business with the growth trajectory, runway, and competitive advantages.
Packer,
it's true that certain markets IB doesn't support (yet), but their IRAs are fully international, and I can (and have) held currency other than USD in them.
Packer,
it's true that certain markets IB doesn't support (yet), but their IRAs are fully international, and I can (and have) held currency other than USD in them.
Unless I am reading something wrong on the IB site - "IRA accounts may be opened in any base currency, but when trading in a non-base currency product a currency trade must be executed first as you cannot borrow currencies."
Packer
"I understand it is cheaper but I don't like the interface" is just nonsense if you have a 7-digit account. Spend one day getting used to it and you save a ~$1000 / year or more.
Packer, yes, you are confused as the wording you are reading.
What IB is saying could be rewritten as this:
***You can't borrow foreign currencies.***
If you have $100k USD in an IRA, and you want to buy XYZ on the Spanish exchange, XYZ trades in Euro, so you can't buy it without Euro. So at IB (in an IRA) it's two steps, you "buy" Euro vs. USD, and then you buy XYZ (with the Euros).
In a taxable account, IB allows margin, so they can combine the forex / XYZ purchase into an attached order (they can, it's not the default) where the buy / borrow happen simultaneously. I think the reason they can't attach the forex order in an IRA is that there is no guarantee on pricing since forex and equity moves could theoretically gap between purchases... because IB is not acting as a forex dealer (like Fidelity is... charging 1%), they are just executing forex at the best bid/ask on the OTC market, they can't "guarantee" that a simultaneous dual trade like this would be limited to a specific value. (This is probably why Fido just says "they can't do this in an IRA" which is total BS, it's just that they can't guarantee you won't use margin if you executed badly in a volatile market... I wonder if Fido let's you trade overseas if your taxable account isn't a margin account? Anybody know?)
Does that make sense?
Thanks,
I wonder if Fido let's you trade overseas if your taxable account isn't a margin account? Anybody know?
I can't figure out why IBKR is attractive at this valuation. It's clearly a good business, but the valuation is sky high. Curious to see if anyone else has a variant view here. (Clearly, Mecham likes it since he added in Q1.)
Are people just assuming a significantly higher revenue growth than me? It doesn't seem that great of an investment assuming a 10% growth rate in revenues.
I can't figure out why IBKR is attractive at this valuation. It's clearly a good business, but the valuation is sky high. Curious to see if anyone else has a variant view here. (Clearly, Mecham likes it since he added in Q1.)
Are people just assuming a significantly higher revenue growth than me? It doesn't seem that great of an investment assuming a 10% growth rate in revenues.
He probably added the day in january when the swiss central bank depegged CHF from the €. That was at 30% lower prices and at the moment the business is growing faster than 10%.
But he initiated his position before that - in Q4. Where it wasn't "cheap" either. I've been wondering what he sees as well.I can't figure out why IBKR is attractive at this valuation. It's clearly a good business, but the valuation is sky high. Curious to see if anyone else has a variant view here. (Clearly, Mecham likes it since he added in Q1.)
Are people just assuming a significantly higher revenue growth than me? It doesn't seem that great of an investment assuming a 10% growth rate in revenues.
He probably added the day in january when the swiss central bank depegged CHF from the €. That was at 30% lower prices and at the moment the business is growing faster than 10%.
Ah, that would make sense.
As far as I can tell, the account adds are increasing greater than 10% but the revenue is not necessarily growing at greater than 10% -- but I could be wrong...
The other nice thing about the business is that it is somewhat counter-cyclical. Volatility helps both the market maker and broker business. Current earnings are low due to low volatility, low trading volumes, and low interest rates.I'm not quite sure why people think higher interest rates will be good? Almost (if not all?) of the rates they charge are based on benchmark rates plus a fixed percentage. Charging BM + 1,5% actually seems to be a better deal when rates are low since the 1.5% will be a larger part of the overall rate relatively speaking.
Their numbers, prices and deal with Scottrade does indicate that their brokerage business is superior but can anyone explain in plain English why and what stops other from copying? I understand the massive operating leverage but not how they got there.
Their numbers, prices and deal with Scottrade does indicate that their brokerage business is superior but can anyone explain in plain English why and what stops other from copying? I understand the massive operating leverage but not how they got there.
In less than 12 months IBKR has increased their US FX Broker market share by >3% from 7% to 10.2%.
http://www.financemagnates.com/forex/brokers/cftc-fcm-data-us-retail-forex-funds-drop-2-august-interactive-brokers-steady/
http://www.financemagnates.com/forex/brokers/interactive-brokers-retail-fx-funds-spike-11-8-in-march-cftc-data-shows/
Also, they were rated the best online broker in 2014 by Barron's:
http://online.barrons.com/articles/SB50001424053111904628504579433251867361162
What is the best estimate of their US equity broker market share? Can IBKR realistically realize 20% compound growth in earnings over a 10-20 year period? What is the implied 2025 or 2030 market share of the US equity/FX broker markets? IBKR is pretty close to the GEICO Warren Buffett described as it is the low-cost provider in a commoditized, large market and their cost advantage is significant. However, 25x takes away too much of the upside in my opinion. You need extremely optimistic expectations to expect returns >10% unless you feel you will get substantially more than 25x at time of sale.
https://docs.google.com/spreadsheets/d/1Vw7vtF-lhbLP3hXqcA9dxJz5i6NQELNu3XBuBismnx0/edit?usp=sharing
Assumptions:
* Price multiple at sale = purchase
* 20% compounded growth in earnings is sustained for 15 years
In less than 12 months IBKR has increased their US FX Broker market share by >3% from 7% to 10.2%.
http://www.financemagnates.com/forex/brokers/cftc-fcm-data-us-retail-forex-funds-drop-2-august-interactive-brokers-steady/
http://www.financemagnates.com/forex/brokers/interactive-brokers-retail-fx-funds-spike-11-8-in-march-cftc-data-shows/
Also, they were rated the best online broker in 2014 by Barron's:
http://online.barrons.com/articles/SB50001424053111904628504579433251867361162
What is the best estimate of their US equity broker market share? Can IBKR realistically realize 20% compound growth in earnings over a 10-20 year period? What is the implied 2025 or 2030 market share of the US equity/FX broker markets? IBKR is pretty close to the GEICO Warren Buffett described as it is the low-cost provider in a commoditized, large market and their cost advantage is significant. However, 25x takes away too much of the upside in my opinion. You need extremely optimistic expectations to expect returns >10% unless you feel you will get substantially more than 25x at time of sale.
https://docs.google.com/spreadsheets/d/1Vw7vtF-lhbLP3hXqcA9dxJz5i6NQELNu3XBuBismnx0/edit?usp=sharing
Assumptions:
* Price multiple at sale = purchase
* 20% compounded growth in earnings is sustained for 15 years
As the people I work with can tell you, I am a little slow at understanding excel files. And I think I am missing something in the one you provided. This feels like a stupid question and I will preface it by saying I haven't thought through this enough, but if earnings grow 20% per year and you sell at the same multiple as your purchase, why wouldn't your return be 20%? For instance, if I buy a company for $20 today ($1 in earnings) and it earns 50% (using to make the math simple) and I sell at a 20x multiple 1 year later, I earn 50% as well ($30 divided by $20 initial price). I believe the math would keep working the same way years into the future but I am typing on a phone so I'm not going to test it out.
To the point on IBKR, I think you have to take into account the fact that the pie is growing. Market share is one thing if the market size is constant but if the market grows 8-10% a year (given foreign market growth and prospects switching to online prime brokers), IBKR doesn't need to steal all of the business from someone else. They can steal some and capture the growth in the market itself. Now, I have no idea what the market growth rate will be but I suspect the pie will be much larger 20 years from now and IBKR will own a significantly larger piece of that pie.
I don't have my notes at hand but will come back to you on IBKR's current market share tomorrow. Also, I like the GEICO comparison. I think it is apt in many ways. If memory serves me correctly people didn't think BRK got a steal when they acquired the remaining 50% of GEICO.
Our business is growing faster now than it did in the past several years and I believe that this will continue to grow faster.
Why? Let's look at the following developments during the quarter. Scottrade chose to use our platform to service their more sophisticated option trading customers. These are customers who maintain a complex set of option position and want to trade several different series on the same underlying in one order. The broker realized that it's less expensive for them to use our platform than to develop and maintain their own. We maintain each of their customers' accounts separately in the customers' name and they get the same technology as our direct customers get.
Why don’t they worry that their customers will come to us directly? Because our commissions are based on volume and we charge Scottrade as though their customers came to us from one account. This setup allows them or for that matter any of our introducing brokers to charge their customers the same lower rate we will charge them if they came to us directly. And yet keep the bulk of that commission for themselves and pay us less than it would cost them to maintain their own technology around those accounts.
If the broker also provides live contact and assistance as Scottrade does so well, they may even charge a service premium that many customers are happy to pay. This is a milestone event for us because it is the first big household name to decide to use our technology. The fact that Scottrade chose us to provide this service is a vote of confidence in our platform that we are proud of. We think it is an example that other brokers will follow and that eventually we will become the industry utility providing exceptional technology to brokers and advisors at a very low cost cheaper and better that they could do it themselves.
Are there other benefits to the fixed fee over the tiered fee platform?
Interactive Brokers, also referred to as “IB”: IB mainly works with two pricing schemes: fixed commission plan and tiered commission plan. The fixed plan is a flat rate for each transaction (e.g. per trade or per contract) and is inclusive (e.g. VAT, exchange and regulatory fees are included). Not all fees are included in the fixed rate commission, rather some (e.g. transaction fees) are passed along to the trader. The tiered commission plan is a non-inclusive plan whereas exchange, regulatory and clearing fees, as well as VAT are “add-ons,” and is inversely related to the number of contracts or the volume traded (decreasing as the transaction value increases). Savings passed along to the traders include a share of the rebates from the exchanges.
Read more: http://www.investopedia.com/articles/active-trading/040715/brokerage-reviews-tradestation-vs-interactive-brokers.asp#ixzz3c4tv8rQ4
Follow us: @Investopedia on Twitter
Really? Is there a minimum portfolio size or minimum number of trades per month?
What are your fees on top of the 70 and 30 cents?
Really? Is there a minimum portfolio size or minimum number of trades per month?
What are your fees on top of the 70 and 30 cents?
https://www.interactivebrokers.com/en/index.php?f=commission&p=stocks2
Maybe you should do some research first. They literally created this page to answer your questions. First hit on Google for 'IB tiered pricing'.
I didn't.Really? Is there a minimum portfolio size or minimum number of trades per month?
What are your fees on top of the 70 and 30 cents?
https://www.interactivebrokers.com/en/index.php?f=commission&p=stocks2
Maybe you should do some research first. They literally created this page to answer your questions. First hit on Google for 'IB tiered pricing'.
Of course I read that. If you check the (sourced) quote in my previous post you'll find the result a few lines down on the same Google query.
It didnt answer my question however. I think Hielko forgot his additional costs over the 70 cents in the tiered model.
I didn't.Really? Is there a minimum portfolio size or minimum number of trades per month?
What are your fees on top of the 70 and 30 cents?
https://www.interactivebrokers.com/en/index.php?f=commission&p=stocks2
Maybe you should do some research first. They literally created this page to answer your questions. First hit on Google for 'IB tiered pricing'.
Of course I read that. If you check the (sourced) quote in my previous post you'll find the result a few lines down on the same Google query.
It didnt answer my question however. I think Hielko forgot his additional costs over the 70 cents in the tiered model.
I rarely go over the $10 minimum monthly charge anyway... I may switch to tiered pricing for a few months and compare the cost differences. Right now I stick with 200 share orders for $1 and make ten or less trades a month...
I rarely go over the $10 minimum monthly charge anyway... I may switch to tiered pricing for a few months and compare the cost differences. Right now I stick with 200 share orders for $1 and make ten or less trades a month...
They have taken out the 10$ minimum for portfolios >$100K. So in that case tiered pricing works out better if u trade less frequently like few times a month.
I rarely go over the $10 minimum monthly charge anyway... I may switch to tiered pricing for a few months and compare the cost differences. Right now I stick with 200 share orders for $1 and make ten or less trades a month...
They have taken out the 10$ minimum for portfolios >$100K. So in that case tiered pricing works out better if u trade less frequently like few times a month.
Nice. I didn't notice. One of my on gripes about IB compared to other brokers is how all account systems are separated. Outside of running my yearly portfolio analysis I don't get into the 'Account Management' portal much as contributions are automatic. Is there a ledger of account actions on the 'Web Trader' portal or smartphone app? I used to use TWS for option trading but now 'web trader' is sufficient for what i need as far as order complexity. I wish the securities lending program was transparent within the trading portals as well. Accrued Interest is shown but I have to run a report to see what is currently being lent and at what rate.
I'm wondering why you even bother to give your own opinion about this trade-off because it is obvious that you A) don't understand the tiered pricing structure and B) have never tried it.
You can take the worst case scenario when estimating the variable fees, which would be the case when you take liquidity at the most expensive exchange. When you switch to variable rate you see an estimated fee range when you try to submit an order to IB:
I'm wondering why you even bother to give your own opinion about this trade-off because it is obvious that you A) don't understand the tiered pricing structure and B) have never tried it.
See my first post in this topic. Tiered is a fixed plus a variable amount where the variable amount is impossible to estimate. Because the amount of trades I make is low I guessed that fixed would be better for me but I still have no idea how you are even estimating the variable costs per trade of the tiered system.
See my first post in this topic. Tiered is a fixed plus a variable amount where the variable amount is impossible to estimate. Because the amount of trades I make is low I guessed that fixed would be better for me but I still have no idea how you are even estimating the variable costs per trade of the tiered system.
Remove liquidity @ NYSE: .0035 (tiered level 1 fee) + remove liquidity NYSE fee: .0027 (look up on website) + clearing fee: .0002 (look up on website) = .0064 cent / share. The FINRA fees etc. add up to ~ .0001 cent / share (again, look up on website). I just bought 100 lots of an unnamed stock on NYSE today and that cost me 64 cent. Exactly the calculated amount.
Add liquidity @ NASDAQ: .0035 (tiered level 1 fee) - add liquidity NASDAQ rebate: .0021 (look up on website) + clearing fee: .0002 (again, look up on website) = .0016 cent / share. Today I bought 500 shares MCGC (free idea (http://seekingalpha.com/article/3191476-accretive-capital-partners-believes-hc2-holdings-offer-for-mcg-capital-may-be-superior-than-pennantparks)) and it cost me exactly 80 ct. Again, exactly the calculated amount
Multiple people here have been using the tiered system and have been clearly explaining that tiered pricing would be cheaper for you but you are too stubborn to do the actual calculations and keep repeating claims about 'unknown hidden costs' while you have never even tried it. I'll stop trying to convince you. Just stick to the fixed pricing - much cheaper. ::)
Can any of you speak to the benefits other than trading costs with interactive brokers. I currently am with a brokerage that offers me $0 trades but the other charges and fees have been adding up to around $200 a year. I am also not real happy with their order execution as I sometimes see trades execute at prices just below or above my limit orders.
Finally there is no option to lend shorts etc. so thinking about making a move.
6) Access - international and product access is *almost* unparalleled (exceptions are South African equities, Korean equities, and a few others. I would bet money this will be solved in 2 years).
6) Access - international and product access is *almost* unparalleled (exceptions are South African equities, Korean equities, and a few others. I would bet money this will be solved in 2 years).
This would be so sweet given the relative cheapness of those markets. I'm a customer through Lynx in Belgium (they use the ib platform) and am very happy, no other broker available comes close here in Belgium imo. Service (both ib and Lynx) is great as well which is very important to me.
Also agree on the fills btw which is extremely important when buying those more illiquid and smaller stocks. A bad or missed fill could cost you quite a bit more than a few trades.
I just moved to IBKR. Do you guys subscribe to real time quotes? I mainly invest in US companies but I don't want to pay a $10 monthly fee just to get the real time of stock prices. This is going to make it more expensive than other brokerages. I rarely trades.. Probably 10-20 trades per year.
6) Access - international and product access is *almost* unparalleled (exceptions are South African equities, Korean equities, and a few others. I would bet money this will be solved in 2 years).
This would be so sweet given the relative cheapness of those markets. I'm a customer through Lynx in Belgium (they use the ib platform) and am very happy, no other broker available comes close here in Belgium imo. Service (both ib and Lynx) is great as well which is very important to me.
Also agree on the fills btw which is extremely important when buying those more illiquid and smaller stocks. A bad or missed fill could cost you quite a bit more than a few trades.
Why don't you use IB directly? It's cheaper.
I just moved to IBKR. Do you guys subscribe to real time quotes? I mainly invest in US companies but I don't want to pay a $10 monthly fee just to get the real time of stock prices. This is going to make it more expensive than other brokerages. I rarely trades.. Probably 10-20 trades per year.
I just moved to IBKR. Do you guys subscribe to real time quotes? I mainly invest in US companies but I don't want to pay a $10 monthly fee just to get the real time of stock prices. This is going to make it more expensive than other brokerages. I rarely trades.. Probably 10-20 trades per year.
I just moved to IBKR. Do you guys subscribe to real time quotes? I mainly invest in US companies but I don't want to pay a $10 monthly fee just to get the real time of stock prices. This is going to make it more expensive than other brokerages. I rarely trades.. Probably 10-20 trades per year.I do, but if you generate enough commissions ($30/month or something like that) you get the value bundle for free. I also pay for the NYSE, NASDAQ and AMEX quotes, but that's mainly because I'm too lazy to look up real-time quotes at another broker since I do almost all my trading at IB and it's just a couple of dollars a month.
CEO recently asked why a lot of IBKR investors use another broker;
CEO recently asked why a lot of IBKR investors use another broker; having tried to sign up twice, I think I know why. It's such a fucking hassle compared to my other brokers. They've returned three different proofs of address with a generic comment. Oh well - guess it means there are some low hanging fruits.
CEO recently asked why a lot of IBKR investors use another broker; having tried to sign up twice, I think I know why. It's such a fucking hassle compared to my other brokers. They've returned three different proofs of address with a generic comment. Oh well - guess it means there are some low hanging fruits.
People on here LOVE IBKR, so I decided today to try to roll over my wife's IRA from Vanguard. The process restarted on me once and is extremely confusing. I'm trying to get my money to them and they keep putting up blockades to do so.
I just quit, I spent 30m trying to open the account and finally gave up.
#FirstWorldProblems
#FirstWorldProblems
Perhaps. But ultimately I pay Fido <0.5% of my assets for all the services they provide. Sure, I might pay IBKR only 0.1%, but it's not worth the headache for me. (The percentages are somewhat crude estimates. They are likely lower for Fido and possibly for IBKR).
CEO recently asked why a lot of IBKR investors use another broker
Buy 5000 shares of GM (where price execution will be equivalent due to high liquidity).Not actually going to do that trade, but estimated commission are between 0.51 and 33.51 USD (it matters on what exchange you execute your order and if you provide or take liquidity)
IB : $25
Etrade: $9
CEO recently asked why a lot of IBKR investors use another broker
Buy 5000 shares of GM (where price execution will be equivalent due to high liquidity).
IB : $25
Etrade: $9
Buy 5000 shares of GM (where price execution will be equivalent due to high liquidity).Not actually going to do that trade, but estimated commission are between 0.51 and 33.51 USD (it matters on what exchange you execute your order and if you provide or take liquidity)
IB : $25
Etrade: $9
#FirstWorldProblems
Perhaps. But ultimately I pay Fido <0.5% of my assets for all the services they provide. Sure, I might pay IBKR only 0.1%, but it's not worth the headache for me. (The percentages are somewhat crude estimates. They are likely lower for Fido and possibly for IBKR).
One way to look at it: How long do you plan to invest and how much of a cumulative difference does that delta adds up to compounded over that period?
#FirstWorldProblems
Perhaps. But ultimately I pay Fido <0.5% of my assets for all the services they provide. Sure, I might pay IBKR only 0.1%, but it's not worth the headache for me. (The percentages are somewhat crude estimates. They are likely lower for Fido and possibly for IBKR).
You have never used IB right? If there is a broker where almost everything almost always works and is processed correctly it is IB.#FirstWorldProblems
Perhaps. But ultimately I pay Fido <0.5% of my assets for all the services they provide. Sure, I might pay IBKR only 0.1%, but it's not worth the headache for me. (The percentages are somewhat crude estimates. They are likely lower for Fido and possibly for IBKR).
One way to look at it: How long do you plan to invest and how much of a cumulative difference does that delta adds up to compounded over that period?
Another way to look at it: how often IBKR can give you a stroke or a heart attack because something is screwed up?
You might not survive to enjoy your cumulative difference.
#FirstWorldProblems
Perhaps. But ultimately I pay Fido <0.5% of my assets for all the services they provide. Sure, I might pay IBKR only 0.1%, but it's not worth the headache for me. (The percentages are somewhat crude estimates. They are likely lower for Fido and possibly for IBKR).
One way to look at it: How long do you plan to invest and how much of a cumulative difference does that delta adds up to compounded over that period?
Another way to look at it: how often IBKR can give you a stroke or a heart attack because something is screwed up?
You might not survive to enjoy your cumulative difference.
Another way to look at it: how often IBKR can give you a stroke or a heart attack because something is screwed up?
You might not survive to enjoy your cumulative difference.
#qualityoflifematters
You have never used IB right? If there is a broker where almost everything almost always works and is processed correctly it is IB.
Edit: Do they allow buying individual bonds? I do that on Fido. Not a huge deal possibly.
I've used IB since 2014, and have no complaints. Its the best broker I've used by far - although the interface takes a little time to get used to. Still, it isn't harder then using a Bloomberg terminal.
| 2012 2013 2014 Q2 2015 Schwab 140% 134% 133% 130% TD Ameritrade 195% 192% 245% 258% Etrade 118% 131% 143% 142% IBKR 205% 267% 329% 363% Average 165% 181% 212% 223% |
Anyone consider the credit risk embedded on the margin loans ? My thesis relies on continued margin debt growth but as a % of net equity capital it is already the highest amoung peers. It posted a 34% CAGR (2011-2014) vs. peer average of 14% growth. I believe they want to hold excess capital to absorb ST losses on its loan book in the events of severe market turmoil similar to the Swiss surprise revaluation in January.
I compared them to SCHW, AMTD, and ETFC. As of Q2 2015, it looks like for every dollar of capital they 3.63 dollars of loans compared to 1.77 at their peers. I understand everyone's mix is a bit different as SCHW has a banking business but in terms of margin loans it still interesting.
Margin Loans - % of Equity Capital
2012 2013 2014 Q2 2015
Schwab 140% 134% 133% 130%
TD Ameritrade 195% 192% 245% 258%
Etrade 118% 131% 143% 142%
IBKR 205% 267% 329% 363%
Average 165% 181% 212% 223%
Anyone worried ?
Look up what IB does when customers hit margin limit and compare that to what others do...
I think that limits credit risk and that's why they can afford to have capacity to lend more...risk management.
Shouldn't you be also looking at margin risk from naked options trades? It seems incomplete to be looking just at loans.
Further, shouldn't you be looking at the netted risk? I have a large margin loan with IBKR... but so what, they can't lose money on it because I've got put options that ensure my equity can't be wiped out. So there is zero risk to IBKR from my margin loans. They make money from my account without any risk.
Anyone have an idea what's up with the insider sales? Since August there's been a lot of them, all the way from Galik to other directors etc.
https://www.insidertracking.com/company?ticker=IBKR
I think the stock is statistically quite pricy.... Seems like a decent time to sell if you are overweight. I think probably as simple as that. I have had a large stake for a long time and have reduced this year a bit.
How are you valuing this?
i don't think the simulator will help conversions. I have an 8% position in this stock. Yet, I have started applications twice to open an account. i have never converted. The onboarding process is just too complicated.
The good news is they are growing 18% per year despite the 35% conversion.
Weird, I never had to prove my identity using a notary. Probably just did fairly standard stuff, but I can't remember exactly what it was. Are you an edge case on that front (non-citizen or something like that)?
- selecting your real-time quote packages is crazy complicated. i don't know why they don't offer some basic package free based on your assets.
I do agree that opening a new account is tedious (they pretty much acknowledged this in the latest conference call) but if you have a >80 IQ and a spare evening you should be able to figure things out.
Second level thinking would imply that their complex sign up process and intimidating platform are opportunities.
How do you guys feel about company issuing 8-10% stock options annually? Growing at 20% is great, but should constant dilution be overlooked?
How do you guys feel about company issuing 8-10% stock options annually? Growing at 20% is great, but should constant dilution be overlooked?
Answer here https://twitter.com/NoonSixCap/status/657571760930463744
I have a nearly 10% position in this for my accounts, but I was 15% recently (I sold a large ~20% chunk of my holdings above $44)... Long term I probably should have done nothing... but this stock could easily drop 30% without a ton of folks stepping up to the plate. At <$30, I'd probably take it back up to 12-15% all else equal. As they say, lots of reasons people sell (both me and IBKR insiders)... but only one reason to buy more. ;-)
IBKR is the stock that I looked at and drew a similar conclusion as this one:
https://punchcardblog.wordpress.com/2014/12/10/interactive-brokers-group-ibkr/
What make you think he is wrong?
In the Q4 conference call Peterffy talked about market shares. He mentioned them as 25% of proprietary trading groups, 15% of financially sophisticad individuals, 0.2% of hedge funds, <0.1% of RIAs. 1% hedge fund market share would be roughly $250m in commissions only, 1% of RIAs likely a nice sum too.
Currently the e-broker is doing about $1b revenues. I have no idea how big of a share IB could realistically capture of these markets over time. But if one believes that their technological advantage will enable them to win share over time across the board, then it's not hard to see how they could continue growing fast. As an example, getting a combined 5% share of HFs and RIAs would +2x sales.
I see a big problem here that all earnings are just reinvested in the marketmaker at a very low return. If they would dividend out all or could find better uses for all the cash, this investment would probably be a no brainer. Its easy to extrapolate the past growth into the future, but will it really grow at that rate going forward?
I see a big problem here that all earnings are just reinvested in the marketmaker at a very low return. If they would dividend out all or could find better uses for all the cash, this investment would probably be a no brainer. Its easy to extrapolate the past growth into the future, but will it really grow at that rate going forward?
I thought the company was deemphasizing its market making. Why do you say that all earnings are being reinvested in that business?
I see a big problem here that all earnings are just reinvested in the marketmaker at a very low return. If they would dividend out all or could find better uses for all the cash, this investment would probably be a no brainer. Its easy to extrapolate the past growth into the future, but will it really grow at that rate going forward?
I thought the company was deemphasizing its market making. Why do you say that all earnings are being reinvested in that business?
I thought the company was deemphasizing its market making. Why do you say that all earnings are being reinvested in that business?
If I remember correctly, they are taking 10% of equity out of the MM unit per year, so if it earns less than 10% ROE, it'll shrink to nothing over time, but if it earns more than that, it'll keep going.
But the broker side is growing so much faster than the MM that over time the MM will become relatively less important even if it doesn't shrink in absolute numbers.
That's my understanding, anyway.
What make you think he is wrong?
What make you think he is wrong?
I like his work but he makes some very curious assumptions. As others have mentioned:
1. Terminal PE = 15. Schwab has averaged 27.7x over the last 15 years, so why 15x?
2. Assumes 50% margins vs 60% margins the last two years. Operating leverage should result in higher margins, not lower.
3. Market maker has $1.7 B in equity. Why do we ignore this value?
3b. ignores dividends in his return calculation
4. Tax rate of 35% seems high given the international operations.
5. Are there other growth opportunities (price increases, new products, better NIM)?
So, if you assume significant multiple compression, falling margins, higher taxes, and a write-off of the market making unit...then the returns will be mediocre.
What did you think of the results? I really appreciate your thoughts on IBKR.
Rob Koehn
Okay, okay. So I guess maybe last question. To what extent, and I probably know the answer to this, but to what extent do you ever – how often do you think about raising prices? I mean, I know for me as a customer –
Thomas Peterffy
I think about it almost every day and I always say I will never do it.
Rob Koehn
Okay. I mean, I think there are a lot of people out there that have nowhere else to go, and so they might –
Thomas Peterffy
I don’t want to be like Oracle.
That one made me smile as well - espescially the next part where the analyst obviously didn't understand the reply. :) Thanks for the comment, I agree with your points but have so far waited for a better entry. Maybe it's silly when you consider their ability to increase prices. They have a long term focus but there is lots of optionality.
Agreed. My point was that valuing them on current earnings is silly because they're kept low to gain additional accounts which probably have more long term value. So it's just my own valuation technique that needs to be refined, but I'm really not good at valuing growth. And I agree on the whilelabel/licensing strategy - I think that's brilliant and one of the options I like, but it could take a long time to play out.That one made me smile as well - espescially the next part where the analyst obviously didn't understand the reply. :) Thanks for the comment, I agree with your points but have so far waited for a better entry. Maybe it's silly when you consider their ability to increase prices. They have a long term focus but there is lots of optionality.
As long as they have customer accounts to gain, I don't think they need to raise prices. It could be a lot of years before they reach that point.
I like how they are licensing their technology and backend to other brokers. They are making themselves indispensable to the system and further strengthening their moat by doing so. This is a much better method than directly trying to compete with them for "less sophisticated" retail accounts.
Lots of comparisons have been made from the technical/user standpoint between IB, Fido and SCHW.
I am wondering if someone can compare IB and SCHW from an investing point of view. Clearly the model is different and they go after different customers. Both have been owned by value investors. Lou Simpson has a lot of SCHW.
Are there any merits SCHW has that IB doesn't?
Schwab has many merits that IBKR doesn't have. Most notably, Schwab's revenue model is much more sensitive to rising interest rates. So Simpson and Greenberg are probably betting that current earnings don't represent the true earning power.
IBKR is a bet on the lowest cost provider with a strong moat in a niche market growing 15% per year.
If you look at a pie chart showing revenue distribution, you will see that they are two very different businesses.
Anyone have Goldman Sach's reports on IBKR?
--
I'm having a hard time understanding consensus estimate of $1.53 for 2016.
2015 was hit with a number of large items, that could be considered "one-time" costs.
Reported Earnings: $415
Currency Effects: 206
Swiss Franc Bad Debt: 119
Mark-to-market on Short Term Treasuries: 33
Adjusted Earnings: 773
Adjusted EPS: $1.90
Reported EPS: $0.78
Adjusted PE (ttm): 16.4
--
So far this year:
US Dollar is down, so currency effects could reverse
Treasuries are up, so mark-to-market losses could reverse
Bad debt - unknowable, but likely to reverse unless the Yuan is broken
Volatility and trading up
Margin debt and equity per account will be down
Client accounts will be up
Fed rates +0.25%
--
How is sell-side modelling the currency impact? What am I missing? Am I crazy to think that currency impact could actually be positive this year?
Anyone have Goldman Sach's reports on IBKR?
--
I'm having a hard time understanding consensus estimate of $1.53 for 2016.
2015 was hit with a number of large items, that could be considered "one-time" costs.
Reported Earnings: $415
Currency Effects: 206
Swiss Franc Bad Debt: 119
Mark-to-market on Short Term Treasuries: 33
Adjusted Earnings: 773
Adjusted EPS: $1.90
Reported EPS: $0.78
Adjusted PE (ttm): 16.4
--
So far this year:
US Dollar is down, so currency effects could reverse
Treasuries are up, so mark-to-market losses could reverse
Bad debt - unknowable, but likely to reverse unless the Yuan is broken
Volatility and trading up
Margin debt and equity per account will be down
Client accounts will be up
Fed rates +0.25%
--
How is sell-side modelling the currency impact? What am I missing? Am I crazy to think that currency impact could actually be positive this year?
Are the amounts you're adding back pre-tax number or post-tax numbers? For example, I see the reference to $119 million in the Q4 press release, but is that after the tax benefit from the loss, or before it?
As for the currency issue, I suspect it's anybody's guess how the dollar will do against the GLOBAL basket. I don't know what sell-side models are forecasting.
Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC? For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415).
That is why your adjusted EPS number more than doubles even though your adjusted income number does not.
Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC? For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415).
That is why your adjusted EPS number more than doubles even though your adjusted income number does not.
Yes, that makes a big difference. Thanks. It is not immediately clear why the economic interest and the net income attribution are so different. Presumably, this is because the common shareholders are responsible for more tax? But I can't find an explicit disclosure on this attribution. Actually, I can and it contradicts the income statement:
"Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for 2014 was approximately 14.0% and similarly, outstanding shares of our common stock represent approximately 14.5% of the outstanding membership interests of IBG LLC." 2014 annual report.
But this isn't true. Only 10% of Net Income is attributed to common shareholders.
--
I have asked IR for clarification.
You cannot recalculate the 12.4% from our income statement because net income attributable to common shareholders for 2013 was 12.4% of IBG LLC’s net income. However, you’re looking at a consolidated income statement which includes IBG LLC in addition to IBG, Inc.
Thanks. I will try to clarify with IR. It is important to know whether these corporate level expenses are variable (e.g. taxes) or fixed (public company expenses).
Any luck with IR?
The amount of stupidity on IB website defies all expectations.
If I could get rid of my IB account, I would immediately.
Who are the idiots who programmed it and why are they still employed.
How does this company survive.
FU********************************************K!
What is the issue with IB's website. I don't use it much except at tax time. The standalone apps for the Windows and the ipad are pretty good.
There.
What is the issue with IB's website. I don't use it much except at tax time. The standalone apps for the Windows and the ipad are pretty good.
Dear IB Customer,
Form 1099 for tax year 2015 is now available for account XXXXXXX. To view your tax form, please login to Account Management:
<login url>
Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC? For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415).
That is why your adjusted EPS number more than doubles even though your adjusted income number does not.
Yes, that makes a big difference. Thanks. It is not immediately clear why the economic interest and the net income attribution are so different. Presumably, this is because the common shareholders are responsible for more tax? But I can't find an explicit disclosure on this attribution. Actually, I can and it contradicts the income statement:
"Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for 2014 was approximately 14.0% and similarly, outstanding shares of our common stock represent approximately 14.5% of the outstanding membership interests of IBG LLC." 2014 annual report.
But this isn't true. Only 10% of Net Income is attributed to common shareholders.
--
I have asked IR for clarification.
Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC? For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415).
That is why your adjusted EPS number more than doubles even though your adjusted income number does not.
Yes, that makes a big difference. Thanks. It is not immediately clear why the economic interest and the net income attribution are so different. Presumably, this is because the common shareholders are responsible for more tax? But I can't find an explicit disclosure on this attribution. Actually, I can and it contradicts the income statement:
"Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for 2014 was approximately 14.0% and similarly, outstanding shares of our common stock represent approximately 14.5% of the outstanding membership interests of IBG LLC." 2014 annual report.
But this isn't true. Only 10% of Net Income is attributed to common shareholders.
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I have asked IR for clarification.
I think there are more moving parts here than most realize. It looks to me like the pretax number is for IBG LLC as a whole. But some of the costs are only attributable to IBKR as a public company. Only IBKR bears those costs (thus they earn less than their ownership % of the reported pre-tax number). The income tax line appears to include some foreign taxes for IBG LLC but mainly income taxes for IBKR (but not IBG LLC).
I still don't see an attractive valuation on a fully diluted basis.
I don't think you're missing anything. But they're growing accounts +15% y/o/y, accounts are sticky and they could easily sacrifice some growth for increased profitability. No position but I was very close at buying @ 30. And am still considering.Is part of the issue that common stockholders to not get attributed net income that is proportional to their ownership interest in IBG LLC? For example, common shareholders have a 15.7% interest in IBG LLC and EPS is calculated based on that number of shares, but they were attributed only 11.8% of net income in 2015 (49/415).
That is why your adjusted EPS number more than doubles even though your adjusted income number does not.
Yes, that makes a big difference. Thanks. It is not immediately clear why the economic interest and the net income attribution are so different. Presumably, this is because the common shareholders are responsible for more tax? But I can't find an explicit disclosure on this attribution. Actually, I can and it contradicts the income statement:
"Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for 2014 was approximately 14.0% and similarly, outstanding shares of our common stock represent approximately 14.5% of the outstanding membership interests of IBG LLC." 2014 annual report.
But this isn't true. Only 10% of Net Income is attributed to common shareholders.
--
I have asked IR for clarification.
I think there are more moving parts here than most realize. It looks to me like the pretax number is for IBG LLC as a whole. But some of the costs are only attributable to IBKR as a public company. Only IBKR bears those costs (thus they earn less than their ownership % of the reported pre-tax number). The income tax line appears to include some foreign taxes for IBG LLC but mainly income taxes for IBKR (but not IBG LLC).
I still don't see an attractive valuation on a fully diluted basis.
I don't either, as much as I love this idea. If I take Q1 and take out the "other income" line - which is currency related - I get close to $200MM pre-tax profit in total. But the common, as noted, seems to be getting 10.6% of that. That leaves us with $21MM net. There are 65MM diluted shares O/S, or .32 for the common.
Multiply that by 4 and you get $1.28 run - rate
Current price $37 / $1.28 = 29X.
What am I missing?
based on current balances, we estimate that a general rise in overnight interest rates of another 25 basis points would produce an additional $48 million in net interest income annually. Further increases in rates would produce smaller gains, because the interest we pay to our customers is pegged to benchmark rates, less a narrow spread.
Multiply that by 4 and you get $1.28 run - rate
Current price $37 / $1.28 = 29X.
What am I missing?
KC, they probably have some margin losses here, maybe $5-15m (guessing) from general whatever... but I think net effect is more trading and higher spreads / commissions / MM margins.
So slightly net positive for them mid term. Just my feel.
KC, they probably have some margin losses here, maybe $5-15m (guessing) from general whatever... but I think net effect is more trading and higher spreads / commissions / MM margins.
So slightly net positive for them mid term. Just my feel.
KC, they probably have some margin losses here, maybe $5-15m (guessing) from general whatever... but I think net effect is more trading and higher spreads / commissions / MM margins.
So slightly net positive for them mid term. Just my feel.
Would you mind explaining how the loss from margin works? I'm envisioning that downward spiral of the markets left many people under their margin limits which would result in liquidations and forced sales. For heavily leveraged/highly volatile accounts, I can see how that might wipe out the equity value of the account and leave a deficiency that IBKR would carry as a liability, but is there no recourse to get that money back? No claims or courts or anything? That person just gets away without owing money to IBKR as long as they don't open another account with them?
I have taken some study on IBKR. I found that each year they have customer bad debts and currency fluctuations as one time gain/losses. Excluding those, the earnings have been flat, which customer accounts grow by 17-20% a year. Does anyone know why?Their marketmaker business has historically been their golden goose, but not so much today. Earnings from MM have plummeted in recent years, dragging down overall profitability and somewhat masking the growth from brokerage. That might be it?
Another concern: Their class A share count grows by about 7% a year. That's quite a dilution.
Excluding those, the earnings have been flat, which customer accounts grow by 17-20% a year. Does anyone know why?
I have taken some study on IBKR. I found that each year they have customer bad debts and currency fluctuations as one time gain/losses. Excluding those, the earnings have been flat, which customer accounts grow by 17-20% a year. Does anyone know why?Their marketmaker business has historically been their golden goose, but not so much today. Earnings from MM have plummeted in recent years, dragging down overall profitability and somewhat masking the growth from brokerage. That might be it?
Another concern: Their class A share count grows by about 7% a year. That's quite a dilution.
I see total sharecount rising from 400m in 2007 to 408m in recent Q.
I have taken some study on IBKR. I found that each year they have customer bad debts and currency fluctuations as one time gain/losses. Excluding those, the earnings have been flat, which customer accounts grow by 17-20% a year. Does anyone know why?Their marketmaker business has historically been their golden goose, but not so much today. Earnings from MM have plummeted in recent years, dragging down overall profitability and somewhat masking the growth from brokerage. That might be it?
Another concern: Their class A share count grows by about 7% a year. That's quite a dilution.
I see total sharecount rising from 400m in 2007 to 408m in recent Q.
https://www.sec.gov/Archives/edgar/data/1381197/000104746916010549/a2227422z10-k.htm#da17001_item_1._business
Maybe I misunderstood this corp structure graph on page 4?
The real business is in IBG LLC at the bottom of the graph.
Public shareholders own 100% economic interest in IBG, the publicly traded holding company, whose primary asset is 15.7% of IBG LLC.
Thomas Peterffy owns 86.4% of IBG LLC.
Therefore when new shares are issued, only the public shareholders get diluted. :o
When valuing this thing I also think one has to keep in mind they could easily increase profitability by raising prices. I don't think it will happen, the CEO said it in a sarcastic way on a recent conference call; we don't want to be like Oracle. From the perspective of increasing shareholder value I suppose it's wise considering they almost doubled accounts organically in 3 years. I suppose those accounts are very sticky. Anyone actually know what the "churn" is? I still don't have a position but keep getting interested below 35/share. My concern is how much a bear market would impact operations (profitability) as well as overall valuation.
I don't think casinos are making money on the hotel roomsMost casinos most assuredly make money on the hotel rooms...
https://www.sec.gov/Archives/edgar/data/1381197/000104746916010549/a2227422z10-k.htm#da17001_item_1._business
Maybe I misunderstood this corp structure graph on page 4?
The real business is in IBG LLC at the bottom of the graph.
Public shareholders own 100% economic interest in IBG, the publicly traded holding company, whose primary asset is 15.7% of IBG LLC.
Thomas Peterffy owns 86.4% of IBG LLC.
Therefore when new shares are issued, only the public shareholders get diluted. :o
Are customers really "sticky"? People are choosing IBKR because it has the lowest prices in the industry, not because of some affinity for the brand. So they're only sticky to the extent that nobody else could possibly offer prices as low as IBKR.
KC, they probably have some margin losses here, maybe $5-15m (guessing) from general whatever... but I think net effect is more trading and higher spreads / commissions / MM margins.
So slightly net positive for them mid term. Just my feel.
Would you mind explaining how the loss from margin works? I'm envisioning that downward spiral of the markets left many people under their margin limits which would result in liquidations and forced sales. For heavily leveraged/highly volatile accounts, I can see how that might wipe out the equity value of the account and leave a deficiency that IBKR would carry as a liability, but is there no recourse to get that money back? No claims or courts or anything? That person just gets away without owing money to IBKR as long as they don't open another account with them?
I have seen so many pitches on IBKR, but I thought I would merely add my two cents on why I keep passing.
1. The market maker risk is much larger than people think. When the swiss franc crisis hit, I think IB lost 120m, if I recall. That's not a minor sum, and this happens at least once every two years.
2. This is a bigger point regarding growth profile. The TAM for IB is much smaller than people think. The platform disadvantages make it uniquely situated to pick up the 1m-50m traders/HFs, but anything below is retail going to TD or other retail arms, and above goes to a larger investment bank platform. I would like someone to show me 5 different funds with over 100m that use IB as their prime broker? If you can't, then I think you should estimate the TAM for the 1-50m crowd. How big is that and I wonder if IB already has almost that entire group already. Just my two cents.
KC, they probably have some margin losses here, maybe $5-15m (guessing) from general whatever... but I think net effect is more trading and higher spreads / commissions / MM margins.
So slightly net positive for them mid term. Just my feel.
Would you mind explaining how the loss from margin works? I'm envisioning that downward spiral of the markets left many people under their margin limits which would result in liquidations and forced sales. For heavily leveraged/highly volatile accounts, I can see how that might wipe out the equity value of the account and leave a deficiency that IBKR would carry as a liability, but is there no recourse to get that money back? No claims or courts or anything? That person just gets away without owing money to IBKR as long as they don't open another account with them?
Just bumping this question since it's 2 pages back already.
Just want to learn how they could be expected to lose any significant sum of money on margin losses if they really are that strict on immediate/automatic liquidations.
I think their TAM ten years from now will be a lot bigger than their current TAM.
Random Question - Is there a way to get email alerts on press releases and SEC filings via IBKR's website? They don't seem to have a subscription option, like many other IR sites.
That was pretty out of left field and definitely a risk now.
I think alot of investors were banking on them eventually special dividend-ing out the excess cash from MM unit and TP pretty much squelched that idea on the call, instead suggesting they might build MM into something totally different, ie Virtu-like.
While it doesn't look good optically with excess cash lying around I like it that way. It reduces the risk of a blowup.
Additionally i think that in the next big crisis when margin balances go down, earnings will take a big hit. (nearly 50% of normalized broker pretax earnings is interest income?)
Additionally i think that in the next big crisis when margin balances go down, earnings will take a big hit. (nearly 50% of normalized broker pretax earnings is interest income?)
Have you looked at historical correlations between margin balances and earnings?
Interest income is margin balances, securities lending, NIM on customer cash, interest on equity. In a crisis, margin might go down but shorting goes up, cash balances go up, trading volume goes up, MM volatilitiy goes up. To some extent, IBKR is self-hedged. It's also diversified geographically. Add in the growth trendline. It is not clear to me that earnings go down in a crisis.
IBKR will have volatile earnings and we just need to muddle along.
It's not exactly opportunistic M&A but keeping cash to support growth is capital allocation (they've also done a speciale divy). I also prefer 1y treasury bonds to usual capex. ROE isn't too shabby though it fluctuates like the results. I do however share your concern re capital allocation options since it's not clear how they can take advantage of a good crisis (no M&A, limited float for buybacks)While it doesn't look good optically with excess cash lying around I like it that way. It reduces the risk of a blowup.
As a client i agree and want to see more cash on the balance sheet.
As a shareholder i am still very unsure if this kind of capital allocation actually destroys a lot of shareholder value. When i look at other compounders capital allocation was always the most important part. Additionally i think that in the next big crisis when margin balances go down, earnings will take a big hit. (nearly 50% of normalized broker pretax earnings is interest income?)
You cannot recalculate the 12.4% from our income statement because net income attributable to common shareholders for 2013 was 12.4% of IBG LLC’s net income. However, you’re looking at a consolidated income statement which includes IBG LLC in addition to IBG, Inc.
Thanks. I will try to clarify with IR. It is important to know whether these corporate level expenses are variable (e.g. taxes) or fixed (public company expenses).
Did anyone ever figure this out? Looking through the 10Ks going back to the IPO, it seems like these "corporate" expenses are erratic.
Did anyone ever figure this out? Looking through the 10Ks going back to the IPO, it seems like these "corporate" expenses are erratic.
IR offered to clarify over the phone but I failed to follow-up.
Working from EBT it looks like the tax rate for public investors has been around 32%, 39%, 39% the past few years.
Thanks. Your implied rates seem close to the company's reconciliation in Footnote 12 (~38%).
I was actually hoping they could turn it into a HFT and spin it off to investors - a sort of option. But I think it makes sense just to sell it and keep focusing on brokerage. Anyway, don't expect a special dividend. He wants to retain the equity. Seems like he's a bit annoyed that they have some what of a hard time luring big accounts from prime brokers that are part of big banks and thus TBTF.
Selling the market maker could be a nice catalyst, if only because it removes a lot of noise from the results and removes a distraction for management. Not sure what they'd do with the capital. Special dividend maybe? Or just hold on to it because Peterffy likes to be overcapitalized.
Selling the market maker could be a nice catalyst, if only because it removes a lot of noise from the results and removes a distraction for management. Not sure what they'd do with the capital. Special dividend maybe? Or just hold on to it because Peterffy likes to be overcapitalized.
IIRC, they said on the conference call that they were keeping the capital in the company.
IB just announced the elimination of IRA account maintenance fees (were $7.50 / quarter for US custodied IRAs no matter account size).
They are taking IRA management duties in house and eliminating the fee pass through.
For those doing RIA work with small accounts, or those who value a broker who continues to lower fees instead of seeking to take more and more of your money, it's a good sign. ;)
Continued strong growth: https://investors.interactivebrokers.com/ir/main.php#
I'm mostly interested in number of accounts opened, and it was the highest so far this year (50 pct. higher than same Q last year). Darts (which fluctuates a lot) was also strong. I bought because of the long term growth potential, but I like the near term boost from higher rates and what I expect to be higher volatility following Trump (not sure on the last point, but I expect him to say a lot of crazy shit that will leave the market confused).
Adjusted P/E ratio around 30-35. Growth 20%. Seems too expensive to me.
Adjusted P/E ratio around 30-35. Growth 20%. Seems too expensive to me.
What assumptions are you using for adjusted P/E ratio?
One of the key questions is the value of the market maker business. I've assumed they can sell the market maker at a decent price, so the broker as a standalone business is probably closer to 25x. But it is pretty clear that Petterffy would keep the proceeds of any sale in the e-broker. So IBKR mightl be 30x if they sell market maker. But IBKR will also have excess cash, so would be cheaper if evaluated ex-cash or using enterprise value.
The market maker will never be sold, it will be liquidated. i think it will never be sold, because the MM trading platform is probably very similar to the brokerage platform, hence selling this business would also give away their competitive advantage for the brokerage platform. I think they will just slowly liquidate the MM business by pulling capital out of it.
The market maker will never be sold, it will be liquidated. i think it will never be sold, because the MM trading platform is probably very similar to the brokerage platform, hence selling this business would also give away their competitive advantage for the brokerage platform. I think they will just slowly liquidate the MM business by pulling capital out of it.
I agree. But Petterffy seems to disagree.
Peterffy: leery of selling market maker cuz spreads could widen out for clients. leaning towards JVing it
Adjusted P/E ratio around 30-35. Growth 20%. Seems too expensive to me.
What assumptions are you using for adjusted P/E ratio?
One of the key questions is the value of the market maker business. I've assumed they can sell the market maker at a decent price, so the broker as a standalone business is probably closer to 25x. But it is pretty clear that Petterffy would keep the proceeds of any sale in the e-broker. So IBKR mightl be 30x if they sell market maker. But IBKR will also have excess cash, so would be cheaper if evaluated ex-cash or using enterprise value.
Consumer bad debt 146 loss and Other income (loss) 122, which is mostly foreign currency fluctuations. Assume some random 20 bad debt per year for the long term, to be fair for the broker business.
So if I add these two back to earnings before tax, I got 458+122+146-20=706. The tax rate seems 10% so earnings after tax should be around 630.
First Schwab lowered rates, now Fidelity undercuts. What do you guys think of this dynamic from IBKR's perspective?
IB doesn't compete a ton with those guys so I doubt it matters much. With that being said, if the retail brokers cut their own margins (and thus profitability) that can only help IB. They already have the lowest prices and highest margins. If a small RIA or something is seriously considering IB vs Schwab, a $1 or $2 per trade decrease at Schwab isn't going to change anything.
But IB makes the vast majority of their money off active, professional traders who (should) care a lot more about pricing than customer service.
I can't understand why everyone thinks price cuts is good for IB. If your main advantage starts to disappear, that's is not good for your competitive position.
If the other brokers are going to maintain their customer service and simply accept structurally lower margins, how does that help IB?
professional traders who (should) care a lot more about pricing than customer service.
professional traders who (should) care a lot more about pricing than customer service.
We can all agree that IBKRs marketing, user interfaces, and customer service are terrible.
It seems like it is growing because there is virtually no choice other than IB for small funds. Do they split out retail vs professional growth?
Easy. Some retail investors care about prices, and in some countries the competition isn't like in the US where TD Ameritrade, Schwab and Fidelity are actually already pretty cheap. My parents who don't do more than a handful of trades have an IB account for that reason. At the same time, I do some of my trades at TD Ameritrade because IB is a lot more expensive for certain transactions...+1. Also the international side at IB and the FX. Savings on one FX trade at IB will pay the minimums for a whole year. Also low margin interest that smart retail investors can integrate into a larger strategy.
Spoke to ~$1bn mutual fund that said banks charging them an arm & leg for trading. So they use $IBKR for most trades, same execution.-- @LuisVSanchez777
But IB makes the vast majority of their money off active, professional traders who (should) care a lot more about pricing than customer service.
Not sure what you call active, professional traders. Day traders? People with 200-400% annual turnover?
In any case, as much as I can call myself "active" trader, I do care much more about customer service than I do about pricing.
The only reason I would consider IB at all is their access to markets Fido does not provide.
And yeah IB is probably the only viable smallish SMA platform. But the fact that most SMA advisors use it, doesn't mean I should fall in love with it. IB is crap.
But you are right: I was on Fido before and I will only be happier on Fido now.
If I decide to have someone manage my money, I'll weigh whether I want to endure the account on IB.
Just last week my girlfriend's Schwab account randomly showed a $0 balance. Couple phone calls got it sorted out. All technology companies have occasional glitches. Be careful not to extrapolate meaningless sample sizes.
On another note, I got my copy of Preqin's 2017 hedge fund report and was happy to see the entire back cover is an Interactive Brokers ad. Thought the ad was pretty solid...
Just last week my girlfriend's Schwab account randomly showed a $0 balance. Couple phone calls got it sorted out. All technology companies have occasional glitches. Be careful not to extrapolate meaningless sample sizes.
On another note, I got my copy of Preqin's 2017 hedge fund report and was happy to see the entire back cover is an Interactive Brokers ad. Thought the ad was pretty solid...
Edit: I haven't gotten to entering IB transactions into TurboTax yet. I'm gonna be way more snarky when I do.
You wouldn't have that problem if you lived in Canada :P 8)
Edit: I haven't gotten to entering IB transactions into TurboTax yet. I'm gonna be way more snarky when I do.
I've done mine. It is easy. If you are on a Mac don't use Safari, it won't work. You have to use Firefox.
Edit: I haven't gotten to entering IB transactions into TurboTax yet. I'm gonna be way more snarky when I do.
I've done mine. It is easy. If you are on a Mac don't use Safari, it won't work. You have to use Firefox.
Edit: I haven't gotten to entering IB transactions into TurboTax yet. I'm gonna be way more snarky when I do.
I've done mine. It is easy. If you are on a Mac don't use Safari, it won't work. You have to use Firefox.
Not sure what you mean. I haven't found any way to import IB taxe forms into TurboTax online. Are you saying there is a way? We can take it to private messages or other thread, since it's a bit OT here.
Edit: This https://ibkb.interactivebrokers.com/article/2030 I believe only works for importing into TurboTax standalone. Not into online. Also this says only standalone: http://ibkb.interactivebrokers.com/article/2042
Edit: I haven't gotten to entering IB transactions into TurboTax yet. I'm gonna be way more snarky when I do.
I've done mine. It is easy. If you are on a Mac don't use Safari, it won't work. You have to use Firefox.
Not sure what you mean. I haven't found any way to import IB taxe forms into TurboTax online. Are you saying there is a way? We can take it to private messages or other thread, since it's a bit OT here.
Edit: This https://ibkb.interactivebrokers.com/article/2030 I believe only works for importing into TurboTax standalone. Not into online. Also this says only standalone: http://ibkb.interactivebrokers.com/article/2042
Sorry, I'm not using online. I have Turbo Tax on my Mac so I download a txf file from IB and import to TurboTax.
What I found is the txf file is screwed up when downloaded with Safari but is OK when downloaded with Firefox. This has been the case for at least three years.
Interactive Brokers Group, Inc. (NASDAQ: IBKR) today announced that it will discontinue options market making activities globally, which are conducted through its Timber Hill companies. The Company expects to phase out these operations substantially over the coming months. The Company intends to continue conducting certain trading activities in stocks and related instruments.
Thomas Peterffy, Chairman and CEO, said, “Having initiated the first automated option market making operation in the mid ’80s, which grew into the largest such business on a global scale over the next 25 years, it’s been painful for me to see it deteriorating in the last few years. But we do not have a choice in this matter. Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity.
Just last week my girlfriend's Schwab account randomly showed a $0 balance. Couple phone calls got it sorted out. All technology companies have occasional glitches. Be careful not to extrapolate meaningless sample sizes.
On another note, I got my copy of Preqin's 2017 hedge fund report and was happy to see the entire back cover is an Interactive Brokers ad. Thought the ad was pretty solid...
https://www.streetinsider.com/dr/news.php?id=12647473QuoteInteractive Brokers Group, Inc. (NASDAQ: IBKR) today announced that it will discontinue options market making activities globally, which are conducted through its Timber Hill companies. The Company expects to phase out these operations substantially over the coming months. The Company intends to continue conducting certain trading activities in stocks and related instruments.
Thomas Peterffy, Chairman and CEO, said, “Having initiated the first automated option market making operation in the mid ’80s, which grew into the largest such business on a global scale over the next 25 years, it’s been painful for me to see it deteriorating in the last few years. But we do not have a choice in this matter. Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity.
Interesting
Any idea if they finally hired a REAL professional marketing firm, instead of trying to do everything in-house? Between this, their witty Barron's ad, and the increased number of ads I've seen at industry events, it recently seems Petterfy's finally loosening the marketing purse-strings?
This could be good for IB stock. One of the most common reasons I've heard of clients not wanting to sign up with IB was their Timber Hill operation. It remains to be seen if they'll change prices for options.https://www.streetinsider.com/dr/news.php?id=12647473QuoteInteractive Brokers Group, Inc. (NASDAQ: IBKR) today announced that it will discontinue options market making activities globally, which are conducted through its Timber Hill companies. The Company expects to phase out these operations substantially over the coming months. The Company intends to continue conducting certain trading activities in stocks and related instruments.
Thomas Peterffy, Chairman and CEO, said, “Having initiated the first automated option market making operation in the mid ’80s, which grew into the largest such business on a global scale over the next 25 years, it’s been painful for me to see it deteriorating in the last few years. But we do not have a choice in this matter. Today retail order-flow is purchased by large order internalizers and joining them would represent a conflict we do not wish to have. On the other hand, providing liquidity to sophisticated, professional synthesizers of short-term fundamental, technical and big data is not a profitable activity.
Interesting
This is unfortunate....
One of the things I loved most about IB has been how cheap their options trading was. I typically pay $1-$3 per trade on IB the other brokers I've tried would charge $10-15 for the same trade
I think you misinterpret the press release (or I do). AFAIK nothing changes for you at the brokerage businesses. Their market maker business just stops market making in options because 1) valuable retail flow is internalized and they don't want to do that and 2) they cannot make money providing liquidity to the remaining sharks out there. So after 30 years they shut down options market making and probably pull a large chunk of capital from the (underperforming) market making segment to deploy in the brokerage business. Or to return it to shareholders. I don't see why that would mean higher fees. They were not internalizing anyway as far as I know.
I am allergic to paying 20x earnings or whatever for a business (and I don't like the convoluted shareholder structure of IBKR) but the past few years I've been happy with IB as a customer and impressed with the things Peterffy has said and done. If I would ever pay up for a great company this would be high on my list.
The one thing I don't like about this Company is the convoluted shareholder structure. I can't really figure out if there's a potential tax risk.
If one backs out excess capital market cap is around 10b, so that's a valuation of 10xpretax 2018 brokerage income.
There's many ways to skin a cat, and one can definitely discuss whether the excess capital is truly excess or whether they'll achieve the stated growth (they're gaining more accounts but perhaps also less active/profitable) but I don't think it matters too much in the big scheme of things. It's okay for me that they retain most of the cash since it probably make hedgefunds etc. more comfortable doing business.
I don't think the excess capital is "excess" in any way, it can't be taken out of the business. They need that capital to grow, no hedge fund is going to use IB with the regulatory minimum.They could take some capital out of the business without any damage to the balance sheet. Peterffy WON'T take the capital out of the business, though. So, it is wrong to value this ex-cash. Even worse, Peterffy plans to take the capital from the market maker and put it in the brokerage. So you can't even add back any value for the MM either.
Even worse, Peterffy plans to take the capital from the market maker and put it in the brokerage. So you can't even add back any value for the MM either.
QuoteEven worse, Peterffy plans to take the capital from the market maker and put it in the brokerage. So you can't even add back any value for the MM either.
I haven't followed IBKR closely lately. Did he actually come out and say this about putting the MM capital in the brokerage, or is this more a theory that seems likely based on his actions so far? Thanks.
Rich Repetto
Got it. And just one last quick thing, would – it’s still the same position, that capital would be transitioned to the broker rather than have any return to the shareholders?
Thomas Peterffy
That is correct. We still – we do not only want to be the best and least expensive broker, we also want to be the safest.
KC, your assumption is they put the $$$ in the market maker but then don't use it to improve growth / returns etc? Or just that they try but invest poorly in those outcomes?The equity from market maker goes to brokerage. And I think the point is that it'll decrease ROE. I also think it means that one might be inclined to double count, ie say you get a 3,5 pct. free cash yield at current prices plus 17 pct. growth, but that 3,5 pct. cash isn't really free since most is needed to fund the growth (although small they do pay a small dividend and returned some 7,2 pct. of the marketcap in 2012, so it's not like Peterffy won't return cash. I figure he just think there's a real use for it).
Thx.
KC, your assumption is they put the $$$ in the market maker but then don't use it to improve growth / returns etc?
Or just that they try but invest poorly in those outcomes?
Our third group of customers are the hedge funds, which represent under 1% of our accounts and 9% of equity and commissions, which are also 9%, and they are our fastest growing commission generating groups. The big banks appear to be consolidating their prime brokerage operations and are happy to see their smaller and less profitable hedge fund clients leave. But this begs the question, if these clients find that they are happier on our more automated and less expensive platform, as they in fact do, will they be followed by their larger peers? We certainly hope so. As I have said many times before, our challenge is overcoming the perception of the end customer level that the larger banks are safer custodians.
Is someone informed enough to quantify these issues from a front line business perspective? I'm not sure I understand the math behind this low probability disastrous outcome? Where's the tipping point/threshold regarding these issues?
account growth seems to be accelerating.
BUT, I am surprised they do not have a tiered pricing model based on trading activity.
Yes, your broker determines commission to you, but that is influenced by how much the broker pays to custodian, assuming they are not integrated. See IB's comments on introducing broker pricing and bundling.
My point is that the custodian matters greatly to institutional investors, esp post-Lehman. As discussed at length above, while IB is not the household name of JP or GS, IB is most likely a safer custodian for your client capital.
That all said, and to KCLarkin's point, I would venture that the perception of IB's sub-par reporting functionality and customer service are a bigger hurdle for most HF/RIA clients than the balance sheet needing to be safer.
Thanks for that link. I had not paid any attention because the costs are so minimal to us usually buying 500-1000 shares per individual trade.
My point is that, even as a low vol trader, I would have to be doing trades of over 1400 shares at a time to be better off with Fidelity or Schwab. They could be charging me .0045 per share and I would not blink.
1400 shares isn't really that much, if you manage OP's money, is it?
I can live with IB's reporting, but the lack of support for something as widely used as TurboTax is unexcusable. Every other broker that I know of, supports Turbotax, IB does not.
Anyone else annoyed they raised the price of real-time data to $122/mo for professional users? Used to be free / waived as of last month. Are people paying for this, or are you finding a way around it? (I'm very cheap...)
That said, I still wouldn't think of leaving IB and guess that attests to their customer stickiness. I also agree that their prime desk is very good, and I've never had an issue with it. Longest I've been on hold is for a few minutes. Also their reporting and compliance tools are much much better that even some of the paid options out there, which you get for free.
Their automation is fantastic, and not given enough credit. Was just talking to someone who primes at one of the larger IB's the other day (he multi-primes at IB too), and he said has to pick up the phone for routine tasks that IB provides automatically. Described it like going from Google to back to Netscape...
Could be that the use of ETFs and passive management has lead to lower activity per account. Still believe that IBKR has a huge moat relative to the other brokers though.
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.
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...
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...
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.
For public shareholders, it's basically a full US corporate tax payer. Low 30s rate.
For public shareholders, it's basically a full US corporate tax payer. Low 30s rate.
Low 30s is the answer I've come to as well.
glory,
I responded to your email, but TwoCitiesCapital brought up another important aspect that I forgot to mention. Low volatility in the markets has also pushed down trades per day per client.
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.
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.
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.
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.
+2I 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
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
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.
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.
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
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 :P
Petterfy mentioned this video on the call. Thought it was interesting
http://video.cnbc.com/gallery/?video=3000608157&play=1
We joke but this is very difficult to model. For RIAs, changing custodians is a huge PITA because every client account has to be closed, re-opened and transferred, and at the risk of attrition. You could say there is a high switching cost involved and most RIAs generally do not switch custodians unless they feel especially compelled. (While RIAs can certainly use multiple custodians, for small advisers you can assume they will only use one to meet minimum AUM requirements.)
Petterfy mentioned this video on the call. Thought it was interesting
http://video.cnbc.com/gallery/?video=3000608157&play=1
Thanks for posting, I couldn't find the interview. He does a better job of explaining it there than on the call. Interesting stuff.We joke but this is very difficult to model. For RIAs, changing custodians is a huge PITA because every client account has to be closed, re-opened and transferred, and at the risk of attrition. You could say there is a high switching cost involved and most RIAs generally do not switch custodians unless they feel especially compelled. (While RIAs can certainly use multiple custodians, for small advisers you can assume they will only use one to meet minimum AUM requirements.)
RIAs should be extremely sticky customers. I only have 11 accounts and it pains me just to think about what that process would entail. Hedge fund clients are also sticky, but obviously switching is easier for them (a little over 50% of hedge funds only use one prime broker by the way). I met with a manager several months ago (mid-ten figure AUM hedge fund) who switched from IB to a mini-prime and he said it was a pretty meaningful disruption to his business for a couple weeks. He also admitted he's getting worse pricing now (which should probably be a concern for his clients but whatever).
Yeah I can't recall ever hearing of a discount broker-custodian referring clients to an RIA. With thousands of RIAs on their platform, how would they choose? Maybe if a client asks TD customer service and is in the same local area, but I can't imagine that happening often, and $10M AUM/year is not insubstantial to receive via referral.
Poland (stocks), Czech Republic (stocks), Hungary (CFDs).Hmm.... I got Poland and Hungary stocks and Czech CFDs but those have been available for years
Somewhat recently.... I think ~6-9 months ago.
Hmm.... I got Poland and Hungary stocks and Czech CFDs but those have been available for years
I'm pretty sure it's new (like added this year). I had to add the trading permissions to use those stock exchanges, and I used to have simply every country selected.QuoteHmm.... I got Poland and Hungary stocks and Czech CFDs but those have been available for years
Hmmm... really? Only showed up for me this year... but maybe I didn't notice the change before than...
In the long history of IB, they seem to keep chipping away at the "cons" list of reasons to use them.Agreed. A lot of the flaws can be viewed as options. November numbers just out and looking really good. Impressive how growth is speeding up but not sure why it has run up so much. By far my largest position now at around 25 pct. of portfolio but paying 27-42 pct. taxes I'll just let it ride. Will be interesting to see what margins look like in 5-10 years.
This year:
1) Fixed two factor login (IB Key) -- usability is amazingly simple, even with many accounts. Had a new client compliment the simplicity / sophistication of setup and login immediately after signing up. Haven't ever had IB interface be considered a "pro" from a client before.
2) Fixed basic interface / web interface. This just was upgraded yesterday across my accounts. Upon 15 minutes of playing seems a dramatic UI improvement to solidly middle of the pack for US retail brokers.
3) Added central European stock exchange trading.
4) I've noticed support getting better too...
chip chip chip... IB can be like other brokers through a clearly defined path (if they want to). Other brokers will never gain the advantages IB has (IMO).
Stock still expensive... I've been paring down again, still top 3 though.
Interactive Brokers said that it handled just over half of the bitcoin futures trading volume the day of their launch. Updated figures were not yet available as of Friday morning.
They are rolling out mastercards without forex fee, 0.50 cent atm withdrawal fees globally to Canada and Europe this year and available already for the US. Given their low cost structure, borrowing costs, you can see this as a kind of bank. I don't see why in the future brokers and banks can't be one and the same. Now in the past the government tried to separate banking and investing because of the very same reason bitcoin isn't used as a currency - volatility and risk. But what if the management of the company is so disciplined - as Peterffy's team is - that they voluntarily do a better job? I see big things for IB, especially if they start adding services beyond just taking commissions for investments.
Does that mean of I use it to withdraw euros in Europe it will debit my IB account in euros? If so, when combined with their very cheap currency exchange, this would make an IB account worthwhile for travel purposes alone for many people.I haven't looked too much at how they structure the cards. But there may be some issues with security. I just like many people have had cards duplicated. With a regular Visa worst case scenario is I get dinged to the limit of the card. If someone steals/duplicates the IB card and gets access to all my IB funds, then I'll gladly pay the usurious FX commissions charge by the banks.
I definitely seethed when I converted CAD to MXN for a trip to Mexico at a bogus retail exchange rate when I had pesos in my IB account already.
Am I looking at this wrong or did they make 1.07 in diluted eps in 2017 (vs. 1.25 in 2016) ?
Am I looking at this wrong or did they make 1.07 in diluted eps in 2017 (vs. 1.25 in 2016) ?
Most people would make a few adjustments to GAAP earnings to get a better view of the real earnings power. On a GAAP basis, diluted EPS is lower YoY. But on an adjusted basis, it is higher YoY. At first glance, the changes in the U.S. tax code seem to be the main culprit.
Most people would make a few adjustments to GAAP earnings to get a better view of the real earnings power.
I know, but then you would only arrive at around 1.4 pre-tax diluted eps. Even though it's a growing business and has high margins+operating leverage, can the valuation be justified at this point?
I know, but then you would only arrive at around 1.4 pre-tax diluted eps. Even though it's a growing business and has high margins+operating leverage, can the valuation be justified at this point?
I don't think your number is right but I'm going to wait for the 10k. Still, it is hard to justify the current valuation.
For me, it's a hold.
I know, but then you would only arrive at around 1.4 pre-tax diluted eps. Even though it's a growing business and has high margins+operating leverage, can the valuation be justified at this point?
Wow, IBKR really seems to have found its groove since dropping the market maker. January Stats:
903 thousand Daily Average Revenue Trades (DARTs), 40% higher than prior year and 29% higher than prior month.
Ending client equity of $133.9 billion, 50% higher than prior year and 7% higher than prior month.
Ending client margin loan balances of $30.1 billion, 61% higher than prior year and 2% higher than prior month.
Ending client credit balances of $48.1 billion, 13% higher than prior year and 2% higher than prior month.
497 thousand client accounts, 27% higher than prior year and 3% higher than prior month.
430 annualized average cleared DARTs per client account.
Wow, IBKR really seems to have found its groove since dropping the market maker. January Stats:
903 thousand Daily Average Revenue Trades (DARTs), 40% higher than prior year and 29% higher than prior month.
Ending client equity of $133.9 billion, 50% higher than prior year and 7% higher than prior month.
Ending client margin loan balances of $30.1 billion, 61% higher than prior year and 2% higher than prior month.
Ending client credit balances of $48.1 billion, 13% higher than prior year and 2% higher than prior month.
497 thousand client accounts, 27% higher than prior year and 3% higher than prior month.
430 annualized average cleared DARTs per client account.
Yeah, they're cooking. The market is a big tailwind, though.
Yeah, they're cooking. The market is a big tailwind, though.
Is the major decline this year primarily due to margin requirement concerns? I am not too familiar with the finer details of the company and simply noticed the large drop
Is the major decline this year primarily due to margin requirement concerns? I am not too familiar with the finer details of the company and simply noticed the large drop
Stock was probably overextended after a significant rise and there is a trend for brokerages to reduce or even eliminate fees (Fidelity, JPM) increasing the competition for IBKR.
IBKR's competitive advantage is low commissions but also the low margin rates and access to markets around the world. They still have the upper hand in #2,3 that say, Fidelity, doesn't focus on, right?
Clearly I am just beginning to look into this...
Muscleman,
for limit orders, you will (certainly) get better fills at IB. for small/medium market orders, I would guess you get better fills at retail brokers who sell to internalizers (you can think of internalizers as outside MM's basically paying Fido to share in making markets for their retail orders... why? Because retail orders are on average dumb(er) money, so you can afford as a MM to make a tighter market in those cases).
For large market orders, retail internalizers can dump your order to the NBBO and in that case you are likely out of luck. for limits, you can be front run by a retail internalizer (they outbid you by $0.001) if they so choose (I'm not sure if Fido or others can prevent your order from showing on the NBBO... I don't think so)... and they so choose (on average) when it is to your detriment.
My 2 cents (and my understanding may not be perfect here on the above). brokers do report average spread / market impact of their customers trading on their platform, and IB scores better across all metrics. YMMV.
IB’s commission structure intends to attract the kind of customers that trade a lot, using margin and trade options and futures. If u trade multiple times per day, IB is cheaper
IB’s commission structure intends to attract the kind of customers that trade a lot, using margin and trade options and futures. If u trade multiple times per day, IB is cheaper
I don't understand why IB is cheaper if you trade multiple times a day vs a single trade a day. Fido has $4.95 flat fee, and IB can easily run up to $20-100 for small priced stocks like a $1 stock. If one trade is expensive, multiple trades is more expensive.
For margin, I don't use margin, but my understanding is that if you buy and sell within one day, there is no margin charge? If you hold margin positions overnight, then of course there is margin charge, and IB has advantage here.
I agree that IB's option and future commissions are low.
I think you have a bit of a skewed view of the typical Interactive Brokers client. Average account equity is something like $250,000 which generates a bit more than one trade a month or something like that, and probably their clients as a group aren't significantly underperforming a relevant index. At least not like a typical day trader that throws a few hundred or a few thousand dollars on a site like plus500 to lose it all in a couple of months.IB’s commission structure intends to attract the kind of customers that trade a lot, using margin and trade options and futures. If u trade multiple times per day, IB is cheaper
I don't understand why IB is cheaper if you trade multiple times a day vs a single trade a day. Fido has $4.95 flat fee, and IB can easily run up to $20-100 for small priced stocks like a $1 stock. If one trade is expensive, multiple trades is more expensive.
For margin, I don't use margin, but my understanding is that if you buy and sell within one day, there is no margin charge? If you hold margin positions overnight, then of course there is margin charge, and IB has advantage here.
I agree that IB's option and future commissions are low.
If u just trade 1 dollar stock, I agree IB is not cheap. But most retail day traders trade Apple, Tesla , index futures and oil futures etc. I couldn’t make myself invest in IBKR, because I think a lot of it’s clients lose in stock market. They need to keep getting new suckers that trade a lot. Their margin rate is so low it attracts customers that use a lot of margin. But the good thing is their margin calls are much more automated than other brokers and will liquidate within minutes in real time (no phone calls etc), which is good for them
When i place small market orders at IB, I still get bad fills. MSON for example two weeks ago. Bid 18.95 ask 19.3. I tried to sell 400 shares at Fido and at bid, and got 19.16 fill. Then I tried to sell 500 shares at IB at bid. I was filled right at the bid.
When i place small market orders at IB, I still get bad fills. MSON for example two weeks ago. Bid 18.95 ask 19.3. I tried to sell 400 shares at Fido and at bid, and got 19.16 fill. Then I tried to sell 500 shares at IB at bid. I was filled right at the bid.
Have you tried reversing the order of trades? Sell on IB first then Fido? Market makers/HFT might be backing off after they see the first order.
Also, if you want to get filled between bid/ask, why don't you use one of IBKRs algos that are designed to do that? IBKR is very explicit in warning users to never use market orders.
When i place small market orders at IB, I still get bad fills. MSON for example two weeks ago. Bid 18.95 ask 19.3. I tried to sell 400 shares at Fido and at bid, and got 19.16 fill. Then I tried to sell 500 shares at IB at bid. I was filled right at the bid.
Have you tried reversing the order of trades? Sell on IB first then Fido? Market makers/HFT might be backing off after they see the first order.
Also, if you want to get filled between bid/ask, why don't you use one of IBKRs algos that are designed to do that? IBKR is very explicit in warning users to never use market orders.
Down big today, started a tiny position a minute before the close.
If you're not paying for the product then you are the product.Down big today, started a tiny position a minute before the close.
I think TD, IBKR etc. are all facing stiff competition from Robinhood and other 0 commission brokers.
I think TD, IBKR etc. are all facing stiff competition from Robinhood and other 0 commission brokers.
Down big today, started a tiny position a minute before the close.
I think TD, IBKR etc. are all facing stiff competition from Robinhood and other 0 commission brokers.
I think TD, IBKR etc. are all facing stiff competition from Robinhood and other 0 commission brokers.If you're not paying for the product then you are the product.
People hate payment for order flow, but really this is a failure of imagination. “We make big high-frequency trading firms bid to do your stock trades, and pass the benefit on to you” ought to be a good talking point. If you believe in the market structure that you’re using, why not brag about it?
I noticed some discussion of fills through IB compared to elsewhere.
Anyone here use IB's Adaptive algo?
https://www.interactivebrokers.co.uk/en/index.php?f=19091#
What do you think of it?
I just wish they'd hurry up and go global with their investment account linked Mastercard debit card besides US residents. That's a killer product.
What's so great about Mastercard debit card which offers no rewards or purchase protection?
I just wish they'd hurry up and go global with their investment account linked Mastercard debit card besides US residents. That's a killer product.
My dream is the ability to get a few different mastercard debits for different currencies. I happen to have Mexican pesos in my IBKR account, and when I went to mexico I converted CAD to MXN at a bogus retail rate, because I couldn't get it out. If I could take MXN, EUR, USD, CAD, JPY etc out of my IBKR account in cash I would LOVE that.
I can convert the pesos back to CAD, that's no problem. What I really want is access to spendable money at interbank rates.
Resorts in Mexico don't take CAD at the pool bar (and USD at a terrible rate) so it makes sense to take MXN. I can get MXN via IB at interbank rates, but I can't get it out and spend it, as far as I know.
I can convert the pesos back to CAD, that's no problem. What I really want is access to spendable money at interbank rates.
Resorts in Mexico don't take CAD at the pool bar (and USD at a terrible rate) so it makes sense to take MXN. I can get MXN via IB at interbank rates, but I can't get it out and spend it, as far as I know.
Do they not accept credit card? There are a number of good credit cards like the Chase Sapphire preferred/reserve that charges no foreign transaction fee. If you are in Canada, I am sure there will be something similar.
Chase Saphire is a Visa Infinite card. From what I remember when I looked at cards a few months back, the Visa Infinite cards from Scotia and TD were very similar to Chase Saphire.
Scotia passport visa infinite is probably the closest to the Sapphire Reserve card in Canada. It doesn't have some of the bigger perks ($300 in hotel credit, lounge passes are limited, etc) but it's a good card. Reward not as good as chase either, I don't think.
It is also one of the very few in Canada with no foreign fees, as per this comparison.
http://www.rewardscanada.ca/cccompare-all.html
I do think if IBKR can make its account a one stop shop for people that will increase their customer stickiness.
I would NEVER ever open a debit card that directly links to my stock account for security reasons. This account has the most of my net worth. If the debit card is stolen or hacked, I would be really worried. I would rather pay a tiny bit more in the foreign ex rate for no foreign fee credit cards.
Given this was previously traded on a registered exchange, is there a loophole that I can keep it? I don't want to sell IBKR, withdraw the shares from the RRSP (taxable!) or sell other assets to buy them back in non-registered form. I've emailed IEX to ask them to apply for registered status (and would encourage anyone else affected to do so as well)
Given this was previously traded on a registered exchange, is there a loophole that I can keep it?
Thanks! I'm pretty sure any Frankfurt listing qualifies, as exchanges where only certain tiers are allowed (TSX Venture, Jamaica) have the allowed tiers in brackets in the list I linked above.You think so? I'm not a Canadian, don't know anything about Canadian taxes, but would seem very logical to me that what counts is an official listing. Because you don't even have to go outside the US if you want to trade IBKR on something else than IEX itself. You can route your order to the NYSE, AMEX, BATS and a dozen other US exchanges/trading venues. Secondly, that would probably imply that you can just ignore the whole designated exchange rule, since especially in Frankfurt you can trade basically everything that is listed somewhere else in the world.
Thanks! I'm pretty sure any Frankfurt listing qualifies, as exchanges where only certain tiers are allowed (TSX Venture, Jamaica) have the allowed tiers in brackets in the list I linked above.You think so? I'm not a Canadian, don't know anything about Canadian taxes, but would seem very logical to me that what counts is an official listing. Because you don't even have to go outside the US if you want to trade IBKR on something else than IEX itself. You can route your order to the NYSE, AMEX, BATS and a dozen other US exchanges/trading venues. Secondly, that would probably imply that you can just ignore the whole designated exchange rule, since especially in Frankfurt you can trade basically everything that is listed somewhere else in the world.
Maybe it's against the spirit of the law - but by the same spirit it should be possible to own a large cap US company like IBKR regardless of whether its primary listing is NYSE or IEX. And according to the letter of the law it is listed in Frankfurt .. I'd be inclined to hold the position but I'm no expert on Canada either.
1.19 Many stock exchanges in the European Union (EU) operate two market segments, an official EU-regulated market and an unofficial market that is regulated by the exchange itself. The latter markets include the Alternative Investment Market (AIM) of the London Stock Exchange, Alternext operated by the various stock exchanges that comprise Euronext and the Open Market of the Frankfurt Stock Exchange. Only the official, EU-regulated markets qualify as a designated stock exchange provided the stock exchange is included on the Department of Finance list. The unofficial, exchange-regulated markets do not qualify as they are not recognized as an official market under European Union law, nor are they subject to stringent transparency requirements and investor protection regulations. It follows then that a listing on an unofficial, exchange-regulated market is not a basis for a registered plan trustee to confirm qualified investment status of a particular security.
Punch card trader! Nicely done! Sick write up!
It's always exciting seeing that what can be known is much greater than what is known.
Totally missed the I-broker NIM bit myself. Also, the analysis surrounding switching costs vs new clients in asia etc was quite nice.
https://valueinvestorsclub.com/idea/INTERACTIVE_BROKERS_GROUP/4701018140
Wow just saw the Peterffy 10b5-1 plan. Looks like will be selling ~8% of ADV (30 day) for longer than any of us will be alive. I'm gonna go out on a limb and guess this creates a ceiling on the shares...
"There is a lot of talk about this. People do not want to believe that I am not contemplating selling shares," he wrote in an email. "It occurs to me that if I create a plan to sell 20,000 shares every business day for the next 60 years or so, the issue will go away. So that is what I will do."
Sorry if I missed this in the thread, but why is he selling his shares at all?
;DSorry if I missed this in the thread, but why is he selling his shares at all?
Cause he can’t take them where he will be going eventually.
kab, how did you pull off getting paid to borrow?Welcome to Europe (Denmark) and ZIRP. There's basically (like very basic) two types of real estate loans here (both recourse).
Who knows which security the margin loss of $42m relates to?
https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR
As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had
taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans
against the security at a conservatively high collateral requirement. In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customers’ positions. For the quarter ended March 31, 2019, we have recognized an
aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend
upon market conditions and the outcome of the our debt collection efforts.
Who knows which security the margin loss of $42m relates to?
https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR
As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had
taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans
against the security at a conservatively high collateral requirement. In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customers’ positions. For the quarter ended March 31, 2019, we have recognized an
aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend
upon market conditions and the outcome of the our debt collection efforts.
I bet it was Apple, given the large decline in Apple in December, but I am just guessing.Who knows which security the margin loss of $42m relates to?
https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR
As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had
taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans
against the security at a conservatively high collateral requirement. In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customers’ positions. For the quarter ended March 31, 2019, we have recognized an
aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend
upon market conditions and the outcome of the our debt collection efforts.
yes, exactly. it's not Apple, lol.
and it had to be a pretty large company for them to have lost $40+M because:
1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!
2) assume IB customers didn't own more than a few percent of the company
the whole thing is very odd. it reads like IB is still long (or short?) the stock! why didn't they finish liquidating the position yet??? it all makes no sense.
yes, exactly. it's not Apple, lol.
and it had to be a pretty large company for them to have lost $40+M because:
1) that's only the amount lost by IB customers that cost IB to lose $40M after their accounts went to 0!
2) assume IB customers didn't own more than a few percent of the company
the whole thing is very odd. it reads like IB is still long (or short?) the stock! why didn't they finish liquidating the position yet??? it all makes no sense.
Would indicate low or no liquidity. Not clear how this was marginable, but I'm not an expert on marginability at IBKR.
Yes, they can and I'm sure did liquidate the entire portfolios ex the illiquid stock but clearly it was so big in each account it didn't matter.I'm pretty sure it must have been some kind of scam. Normal customers don't go long their whole account in one shady Chinese stock (I'm assuming it is YRIV). Not exactly sure how the scam worked, but think you see it sort of frequently with sketchy low float companies in Hong Kong were they just weird things keep happening with the stock price. Stock price of YRIV was also suspiciously stable in early 2018. My money is that that was connected to those accounts being massively long the stock at IB.
It's possible it was a scam but if that was true the stock would probably be a 0 now and they wouldn't have the language about "depending on market conditions" etc. Seems more likely a sketchy company w/ market cap 500m to 2b with a small float.
In the transcript snippet they explicitly say it was a stock that lost value. So it must have been a long.
It's not YRIV! That went from extremely illiquid TO extremely liquid as it collapsed! It's the opposite of what they are describing. Go look at volumes in Q4 vs Q1. SUPER LIQUID!According to this article it is: https://finance.yahoo.com/news/chinese-firm-apos-plunge-cost-080000161.html
The answer, it turns out, is shares of an obscure Chinese company with years of losses, no revenue and a U.S. headquarters located in a New York City apartment. Its name is Yangtze River Port and Logistics Ltd., according to a person with knowledge of the matter who requested anonymity because Greenwich, Connecticut-based Interactive Brokers hasn’t revealed the firm’s identity.
Long article from the WSJ on how Schwab's low fee model is taking market share, shaking up brokerage.
Not a single mention of Interactive Brokers... I don't know whether that's a good thing (IBKR remains under-followed), or a bad thing (no one thinks they are a serious contender)
https://www.wsj.com/articles/how-schwab-ate-wall-street-11556474103?mod=hp_lead_pos9
Based on latest 10-q it appears for 6 months they paid a tax rate of 5.3%. This seems extremely low. I understand they have some sort of partnership structure but looking at the profitability of the business from a shareholder perspective should one normalize the tax rate to say 20 or 30% to get an apple to apple comparison of the net profitability to shareholder?
Based on latest 10-q it appears for 6 months they paid a tax rate of 5.3%. This seems extremely low. I understand they have some sort of partnership structure but looking at the profitability of the business from a shareholder perspective should one normalize the tax rate to say 20 or 30% to get an apple to apple comparison of the net profitability to shareholder?
To help investors better understand our earnings, the split between public shareholders and the noncontrolling interest is as follows:
Starting with reported income before income taxes of $225 million, we removed $1 million net expense attributable only to the public company to get pretax income for the operating company. We then deduct $9 million for income taxes paid by our operating companies, which are mostly foreign taxes.
This leads $217 million, of which 82%, or that $178 million reported on our income statement, is attributable to noncontrolling interest. The remaining 18%, or $39 million, is available for the public company shareholders. But as this is a non-GAAP measure, it is not reported on our income statement.
9
After we add back the $1 million net expense attributable only to the public company and deduct taxes of $6 million owed on the remaining $38 million, net income available for common stockholders is the $32 million you see reported on our income statement. The income tax expense you see on our income statement of $15 million consists of the $6 million paid by the public company plus the $9 million paid by the operating company.
So...yep.from a shareholder perspective should one normalize the tax rate to say 20 or 30% to get an apple to apple comparison of the net profitability to shareholder?
yep
IBKR to robinhood (verb) robinhood (the business)
https://www.interactivebrokers.com/en/index.php?f=45196
It's nice to see Peterffy change his mind on this. It's always nice to see people act with how the world works vs. how it should work. If Robinhood is any guide, this should be a good customer acq. tool. Just hope the customer service to support it isn't ominous.
When will they pay us to trade? ::)
When will they pay us to trade? ::)If you provide liquidity on the right trading venue they do pay you already :)
Hmm.. looks like it is on the open market, which is specifically excluded. I think I may need to sell these if IEX doesn't get registered by the end of the year. Maybe I can generate similar exposure with options in my non-registered account, as I flat out can't buy the same amount of shares. This is not great...