Form 8-K Interactive Brokers Grou For: Oct 18

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October 18, 2016 4:01 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 18, 2016

INTERACTIVE BROKERS GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-33440	30-0390693
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

One Pickwick Plaza, Greenwich, CT 06830

(Address of Principal Executive Offices) (Zip Code)

(203) 618-5800

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On October 18, 2016, the Registrant issued a press release reporting its financial results for the third quarter ended September 30, 2016. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated herein by reference.

All of the information furnished in this report (including Exhibit 99.1 hereto) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and unless expressly set forth by specific reference in such filings, shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings.

Item 8.02. Other Events.

On October 18, 2016, Interactive Brokers Group, Inc. (the “Company”) declared a quarterly cash dividend of $0.10 per share on the Company’s common stock. The Company’s Board of Directors has declared that the dividend will be paid on December 14, 2016 to shareholders of record as of December 1, 2016.

Item 9.01. Financial Statements and Exhibits.

(d)	Exhibits.
99.1	Press Release dated October 18, 2016.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: October 18, 2016

	INTERACTIVE BROKERS GROUP, INC.


	By:	/s/ Paul J. Brody
	Name:	Paul J. Brody
	Title:	Chief Financial Officer, Treasurer and Secretary

EXHIBIT INDEX

99.1	Press Release dated October 18, 2016.

EXHIBIT 99.1

INTERACTIVE BROKERS GROUP ANNOUNCES 3Q2016 RESULTS

— — —

REPORTS COMPREHENSIVE EARNINGS PER SHARE OF $0.30,

INCOME BEFORE TAXES OF $183 MILLION ON $345 MILLION IN NET REVENUES,

AND EARNINGS PER SHARE ON NET INCOME OF $0.30.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, October 18, 2016 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share on a comprehensive basis of $0.30 for the quarter ended September 30, 2016, compared to diluted earnings per share on a comprehensive basis of $0.23 for the same period in 2015.

Excluding other comprehensive income, the Company reported diluted earnings per share of $0.30 for the quarter ended September 30, 2016, compared to diluted earnings per share of $0.35 for same period in 2015.

Net revenues were $345 million and income before income taxes was $183 million this quarter, compared to net revenues of $359 million and income before income taxes of $202 million for the same period in 2015.

The results for the quarter were positively impacted by strong growth in net interest income, which increased 28% from the same period in 2015. As compared to last summer’s unusually active trading environment, this summer’s unusually inactive trading led to lower commissions and execution fees and trading gains.

In addition, the results for the quarter include a $13 million gain on our currency diversification strategy due to the weakening of the U.S. dollar against other major currencies, compared to a $76 million loss recognized in the same period in 2015.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 14, 2016 to shareholders of record as of December 1, 2016.

Business Highlights

·	56% Electronic Brokerage pretax profit margin for this quarter, down from 61% in the year-ago quarter.

·	16% Market Making pretax profit margin for this quarter, down from 51% in the year-ago quarter.

·	Customer equity grew 33% from the year-ago quarter to $82.7 billion and customer debits increased 15% to $18.1 billion.

·	Customer accounts increased 15% from the year-ago quarter to 370 thousand.

·	Total DARTs decreased 11% from the year-ago quarter to 609 thousand.

·	Brokerage segment equity was $3.9 billion. Total equity was $5.9 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes decreased 12%, to $162 million in the quarter ended September 30, 2016, compared to the same period last year. Net revenues decreased 4% to $288 million on lower commissions and execution fees and mark-to-market losses on our U.S. government securities portfolio, partially offset by higher net interest income.

Commission and execution fees decreased 15% from the year-ago quarter driven by lower customer volumes in options, futures, and stocks, which decreased 24%, 17%, and 5%, respectively, from the same period last year. On a comparative basis, the prior year period exhibited unusually active trading and the current year period unusually inactive trading. Other income decreased 53% from the year-ago quarter driven by mark-to-market losses on investments in U.S. government securities, while net interest income increased 28% from the year-ago quarter. Pretax profit margin was 56% in the quarter ended September 30, 2016, down from 61% in the same period last year.

Customer accounts grew 15% to 370 thousand and customer equity increased 33% to $82.7 billion from the year-ago quarter. Total DARTs1 for cleared and execution-only customers decreased 11% to 609 thousand from the year-ago quarter. Cleared DARTs were 564 thousand, 9% lower than the same period last year.

Market Making

Market Making segment income before income taxes decreased 85% to $7 million in the quarter ended September 30, 2016, compared to the same period last year, due to lower trading volumes and decreases in volatility and in the actual-to-implied volatility ratio. Pretax profit margin decreased to 16% in the quarter ended September 30, 2016 from 51% in the same period last year.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 15 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $13 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.26%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the Corporate segment and (2) Other Comprehensive Income (“OCI”).

1 Daily average revenue trades (DARTs) are based on customer orders.

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, October 18, 2016, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the “Interactive Brokers Conference Call.”

The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.

About Interactive Brokers Group, Inc.:

Interactive Brokers Group, Inc., together with its subsidiaries, is an automated global electronic broker that specializes in catering to financial professionals by offering state-of-the-art trading technology, superior execution capabilities, worldwide electronic access, and sophisticated risk management tools at exceptionally low costs. The brokerage trading platform utilizes the same innovative technology as the Company’s market making business, which specializes in routing orders and executing and processing trades in securities, futures, foreign exchange instruments, bonds and funds on more than 100 electronic exchanges and trading venues around the world. As a market maker, we provide liquidity at these marketplaces and, as a broker, we provide professional traders and investors with electronic access to stocks, options, futures, forex, bonds and mutual funds from a single IB Universal AccountSM. Employing proprietary software on a global communications network, Interactive Brokers is continuously integrating its software with a growing number of exchanges and trading venues into one automatically functioning, computerized platform that requires minimal human intervention.

Cautionary Note Regarding Forward-Looking Statements:

The foregoing information contains certain forward-looking statements that reflect the Company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company’s operations and business environment which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the company on the date of this release. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company’s financial results may be found in the Company’s filings with the Securities and Exchange Commission.

For Interactive Brokers Group, Inc. Media: Caitlin Duffy, 203-913-1369 or Investors: Nancy Stuebe, 203-618-4070.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

TRADE VOLUMES:

(in 000's, except %)

					Brokerage
	Market		Brokerage		Non				Avg. Trades
	Making	%	Cleared	%	Cleared	%	Total	%	per U.S.
Period	Trades	Change	Trades	Change	Trades	Change	Trades	Change	Trading Day
2013	65,320		173,849		18,489		257,658		1,029
2014	64,530	-1%	206,759	19%	18,055	-2%	289,344	12%	1,155
2015	65,937	2%	242,846	17%	18,769	4%	327,553	13%	1,305

3Q2015	18,696		65,333		5,266		89,295		1,395
3Q2016	15,474	-17%	61,181	-6%	3,736	-29%	80,391	-10%	1,256

2Q2016	16,056		64,531		4,114		84,701		1,323
3Q2016	15,474	-4%	61,181	-5%	3,736	-9%	80,391	-5%	1,256

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

	Options	%	Futures*	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2013	659,673		121,776		95,479,739
2014	631,265	-4%	123,048	1%	153,613,174	61%
2015	634,388	0%	140,668	14%	172,742,520	12%

3Q2015	179,786		38,960		41,999,917
3Q2016	138,767	-23%	32,521	-17%	38,515,753	-8%

2Q2016	140,461		35,355		36,768,094
3Q2016	138,767	-1%	32,521	-8%	38,515,753	5%

MARKET MAKING

	Options	%	Futures*	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2013	404,490		18,184		12,849,729
2014	344,741	-15%	15,668	-14%	12,025,822	-6%
2015	335,406	-3%	14,975	-4%	15,376,076	28%

3Q2015	95,754		3,868		4,458,343
3Q2016	74,966	-22%	3,338	-14%	2,874,332	-36%

2Q2016	76,223		3,042		3,340,316
3Q2016	74,966	-2%	3,338	10%	2,874,332	-14%

BROKERAGE TOTAL

	Options	%	Futures*	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2013	255,183		103,592		82,630,010
2014	286,524	12%	107,380	4%	141,587,352	71%
2015	298,982	4%	125,693	17%	157,366,444	11%

3Q2015	84,032		35,092		37,541,574
3Q2016	63,801	-24%	29,183	-17%	35,641,421	-5%

2Q2016	64,238		32,313		33,427,778
3Q2016	63,801	-1%	29,183	-10%	35,641,421	7%

* Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

BROKERAGE CLEARED

	Options	%	Futures*	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2013	180,660		101,732		78,829,785
2014	225,662	25%	106,074	4%	137,153,132	74%
2015	244,356	8%	124,206	17%	153,443,988	12%

3Q2015	68,018		34,635		36,475,917
3Q2016	55,579	-18%	28,986	-16%	34,817,202	-5%

2Q2016	53,951		32,037		32,491,500
3Q2016	55,579	3%	28,986	-10%	34,817,202	7%

* Includes options on futures

BROKERAGE STATISTICS

(in 000's, except % and where noted)

Year over Year	3Q2016		3Q2015		% Change
Total Accounts		370		322	15%
Customer Equity (in billions) *	$	82.7	$	62.1	33%

Cleared DARTs		564		620	-9%
Total Customer DARTs		609		683	-11%

Cleared Customers (in $'s, except DART per account)
Commission per DART	$	3.91	$	4.10	-5%
DART per Avg. Account (Annualized)		390		493	-21%
Net Revenue per Avg. Account (Annualized)**	$	3,191	$	3,584	-11%

Consecutive Quarters	3Q2016		2Q2016		% Change
Total Accounts		370		357	4%
Customer Equity (in billions) *	$	82.7	$	73.7	12%

Cleared DARTs		564		597	-6%
Total Customer DARTs		609		648	-6%

Cleared Customers (in $'s, except DART per account)
Commission per DART	$	3.91	$	3.91	0%
DART per Avg. Account (Annualized)		390		428	-9%
Net Revenue per Avg. Account (Annualized)**	$	3,191	$	3,256	-2%

* Excludes non-customers.

** The calculation has been revised to exclude components of other income that are not direct revenues from customers. Prior period amounts have been recalculated to conform to the current methodology.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED)

		Three Months				Nine Months
		Ended September 30,				Ended September 30,
		2016		2015		2016		2015
		(in millions)

Electronic Brokerage	Net revenues	$	288	$	300	$	945	$	878
	Non-interest expenses		126		116		357		455

	Income before income taxes	$	162	$	184	$	588	$	423

	Pre-tax profit margin		56%		61%		62%		48%

Market Making	Net revenues	$	43	$	90	$	145	$	229
	Non-interest expenses		36		44		113		126

	Income before income taxes	$	7	$	46	$	32	$	103

	Pre-tax profit margin		16%		51%		22%		45%

Corporate (1)	Net revenues	$	14	$	(31)	$	113	$	(189)
	Non-interest expenses		-		(3)		-		6

	Income (loss) before income taxes	$	14	$	(28)	$	113	$	(195)


Total	Net revenues	$	345	$	359	$	1,203	$	918
	Non-interest expenses		162		157		470		587

	Income before income taxes	$	183	$	202	$	733	$	331

	Pre-tax profit margin		53%		56%		61%		36%

(1) Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

			Three Months				Nine Months
			Ended September 30,				Ended September 30,
			2016		2015		2016		2015
			(in millions, except share and per share data)
Revenues:
	Trading gains		$	38	$	87	$	124	$	216
	Commissions and execution fees			144		167		462		473
	Interest income			157		122		446		356
	Other income (loss)			27		(1)		228		(78)

		Total revenues		366		375		1,260		967

	Interest expense			21		16		57		49

		Total net revenues		345		359		1,203		918

Non-interest expenses:
	Execution and clearing			62		63		183		177
	Employee compensation and benefits			58		56		174		171
	Occupancy, depreciation and amortization			13		12		38		33
	Communications			7		6		23		19
	General and administrative			19		13		46		42
	Customer bad debt			3		7		6		145

		Total non-interest expenses		162		157		470		587

Income before income taxes				183		202		733		331

Income tax expense				15		20		55		37

Net income				168		182		678		294

Net income attributable to noncontrolling interests				148		160		598		262

Net income available for common stockholders			$	20	$	22	$	80	$	32

Earnings per share:
	Basic		$	0.30	$	0.35	$	1.22	$	0.53
	Diluted		$	0.30	$	0.35	$	1.20	$	0.52

Weighted average common shares outstanding:
	Basic			67,083,654		62,458,655		65,351,842		60,152,525
	Diluted			68,470,224		64,028,731		66,738,754		61,646,928

Comprehensive income:
	Net income available for common stockholders		$	20	$	22	$	80	$	32
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes		-		(8)		3		(5)
Income taxes related to items of other comprehensive income				-		-		-		-
	Other comprehensive income (loss), net of tax			-		(8)		3		(5)
Comprehensive income available for common stockholders			$	20	$	14	$	83	$	27

Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests			$	148	$	160	$	598	$	262
Other comprehensive income (loss) - cumulative translation adjustment				2		(44)		19		(29)
Comprehensive income attributable to noncontrolling interests			$	150	$	116	$	617	$	233

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

				September 30, 2016		December 31, 2015
				(in millions)

Assets
Cash and cash equivalents				$	1,550	$	1,601
Cash and securities - segregated for regulatory purposes					25,250		21,309
Securities borrowed					4,785		3,924
Securities purchased under agreements to resell					148		195
Financial instruments owned, at fair value					3,823		3,420
Receivables from customers, net of allowance for doubtful accounts					18,223		17,050
Receivables from brokers, dealers and clearing organizations					764		692
Other assets					521		543

	Total assets			$	55,064	$	48,734

Liabilities and equity

Liabilities
Short-term borrowings				$	24	$	-
Securities loaned					3,617		2,894
Financial instruments sold but not yet purchased, at fair value					2,459		2,617
Other payables:
	Customers				42,486		37,084
	Brokers, dealers and clearing organizations				210		423
	Other payables				398		372
					43,094		37,879

	Total liabilities				49,194		43,390

Equity
Stockholders' equity					981		863
Noncontrolling interests					4,889		4,481
	Total equity				5,870		5,344

	Total liabilities and equity			$	55,064	$	48,734



		September 30, 2016			December 31, 2015
Ownership of IBG LLC Membership Interests		Interests	%		Interests		%

IBG, Inc.		67,987,957	16.6%		63,991,705		15.7%
Noncontrolling interests (IBG Holdings LLC)		341,444,304	83.4%		343,040,504		84.3%

Total IBG LLC membership interests		409,432,261	100.0%		407,032,209		100.0%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

EARNINGS PER SHARE ON COMPREHENSIVE INCOME

(UNAUDITED)

		Three Months				Nine Months
		Ended September 30,				Ended September 30,
		2016		2015		2016		2015
		(in millions, except share and per share data)

Comprehensive income available for common stockholders, net of tax		$	20	$	14	$	83	$	27

Comprehensive earnings per share:
	Basic	$	0.31	$	0.23	$	1.27	$	0.45
	Diluted	$	0.30	$	0.23	$	1.25	$	0.44


Weighted average common shares outstanding:
	Basic		67,083,654		62,458,655		65,351,842		60,152,525
	Diluted		68,470,224		64,028,731		66,738,754		61,646,928

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Form 8-K Interactive Brokers Grou For: Oct 18

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