Interactive Brokers (IBKR) Q2 2016 Earnings

Interactive Brokers (IBKR) CEO Thomas Petterfy said they were adequately prepared for the Brexit

The big news for the quarter was Brexit. We have begun preparing for the possible outcomes early in the year by adding the event to our evented scenarios, which are under regular evaluation by our risk committee. We started to adjust margin requirements and the relevant products first initial margins so as to prevent the establishment of risky new positions and later increased maintenance margins. Using this approach very few existing positions needed to be liquidated.”

Volume was elevated in the wake of the Brexit

“Accordingly for Interactive Brokers Brexit was business as usual, we experienced no credit losses and the increased volatility was a positive for our brokerage business. We heard that some of our brokers suffered outages in the first 2 market days following the vote. We had no such problems. Our volumes were up, but only about 40% over the usual. We generally plan for volumes max about 300% above normal run rates.”

Customer accounts are at an all time high

“During the quarter, we had again seen several new records for our brokerage business. We continue to hit all time highs in customer accounts, which were up 15% this quarter to 357,000, while margin loans were flat in the first quarter with customers reluctant to take a mortgage in the face of global economic uncertainty. Our customer equity continues to grow to a record of $74 billion.”

Their market making business had their worst performance in 8 years

“While we have been focusing on the brokerage business the world has changed and left us behind. Our profits from market making have been shrinking for several years now. 5 million profit for the quarter is the lowest number we have recorded in the past 96 quarters. This maybe an aberration the long-term trend is clear. We must undertake the project of transforming this business over the coming year and we will.”

Sales increases by geographic region

“So I can tell you that by region America is 12%, Europe is 11% and Asia is 29%.”

They are entering the business of helping investment advisors with compliance 

“For the moment it is bundled but when it’s in full force, we will charge for it but we will charge for it less than anybody else in this space, much less, just like we charge much less in commissions and provide better executions. So, the idea is that we have all this stuff automated already and we compete and we have all the data practically and we’re competing with people who has to piece the data together and so it’s going to be very-very easy for us and for other for it’s not so easy.”