Interactive Brokers Group Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Patrick Moley - Piper Sandler Companies - Analyst : Yeah, good afternoon. Thanks for taking the question. I just had one on the US election forecast contracts that you mentioned in your prepared remarks. Launched on October 3, about four days after launch issued a press release saying you'd already done about 1 million contracts. So I was hoping you could maybe just provide some color on how these contracts are being utilized, where the volumes have come from up to this point. Is it new accounts? Is it existing accounts? And then if you could maybe just help us understand how you're thinking about the opportunity from a new account acquisition standpoint, given you're, I think, one of the only brokers out there that currently offers these contracts. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 8:30PM, IBKR.OQ - Q3 2024 Interactive Brokers Group Inc Earnings Call

Question: Patrick Moley - Piper Sandler Companies - Analyst : Okay, thanks. And just to follow up on the competitive landscape in US retail trading, a large mobile-based competitor of yours plans to launch index options in the fourth quarter. They've said that they're planning to introduce those contracts at a lower price point than many of the incumbents. So understanding that nothing has been announced up to this point specifically on where they're going to be priced. Just wanted to get your thoughts on whether you think this is going to create any sort of pricing pressure on index options across the industry and how you think it might just impact the overall, I guess, competitive landscape for index options? Thanks.

Question: Patrick Moley - Piper Sandler Companies - Analyst : Okay, thanks, Milan. I'll hop back in queue.

Question: James Yaro - Goldman Sachs - Analyst : Good afternoon, and thanks for taking my questions. So I do think there's a lot of optimism among investors on the ForecastEx business. So maybe, Milan, if you could just speak to the time frame over which you expect this to reach scale and actually have a material impact on your results, and I'll let you define materiality, whoever you'd like. And then, just in terms of whether there's any market risk to your balance sheet from these contracts, obviously they're different than equities or options that we're all familiar with. And then, if so, how you might hedge them.

Question: James Yaro - Goldman Sachs - Analyst : Okay, that's very clear. Thank you so much, Thomas. Maybe just on the RIA channel, which I do think has taken a leg higher in terms of growth, and it appears you are adding larger RIAs than historically. Could you just speak to the growth trajectory in that channel and whether the client base you are adding is different than the past?

Question: James Yaro - Goldman Sachs - Analyst : That's excellent. Thanks, Milan.

Question: Dan Fannon - Jefferies - Analyst : Thanks. I think one of the comments you mentioned were that new accounts were coming out with more cash than previously. So I was hoping you could talk about the makeup of those accounts today versus, say, a year ago and what some of the different characteristics might be.

Question: Dan Fannon - Jefferies - Analyst : Understood. Okay. And then just as a follow-up, Paul, maybe just as you think about expenses, some one-time items in G&A, but maybe into the fourth quarter. And as you think about next year in budgeting, given the strength in account growth, how should we think about the flow-through from a marketing perspective or other more discretionary-type expenses on a more annual basis?

Question: Dan Fannon - Jefferies - Analyst : Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 8:30PM, IBKR.OQ - Q3 2024 Interactive Brokers Group Inc Earnings Call

Question: Chris Allen - Citi - Analyst : I wanted to talk a little bit about trading activity per account. When you look over the years, it's been consistently coming in, but this year it's stabilized and actually improved a little bit. And I'm guessing some of that's due to mix shift from a client perspective, as you alluded to, prop accounts are seeing positive inflows. or if that's a factor, and or increased hedge fund activity, and how you're thinking about that moving forward.

Question: Chris Allen - Citi - Analyst : We're thinking about just the revenue outlook moving forward. The big pushback on the stock is that NII will be declining in a lower rate environment. How are you thinking about the offsets here in terms of increased margin balances, trading activity, anything else that we should be conceptualizing in a lower-rate environment moving forward?

Question: Chris Allen - Citi - Analyst : Thank you.

Question: Brennan Hawken - UBS Equities - Analyst : Good afternoon. Thanks for taking my question. During the quarter, we saw a Chinese stimulus announced. I'm curious to hear what impacts you've seen on customers, either within China or whether or not there's been a broader impact across the region of Asia.

Question: Brennan Hawken - UBS Equities - Analyst : Okay. And then the legal and regulatory charges, is there any color that you can give on what that was related to?

Question: Brennan Hawken - UBS Equities - Analyst : The $9 million legal and regulatory charge that you took in G&A.

Question: Brennan Hawken - UBS Equities - Analyst : Thanks for taking my questions. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 8:30PM, IBKR.OQ - Q3 2024 Interactive Brokers Group Inc Earnings Call

Question: Benjamin Budish - Barclays - Analyst : Hi, good afternoon. Thanks for taking the question. I wanted to follow up on one of your earlier comments on ForecastEx. You mentioned that it's largely available in the US right now. It's maybe a two-parter, because what would the path be to making contracts like the election contracts available outside the US? And then I'm curious, what are your thoughts on providing a similar type of product locally in many of the countries in which you operate? I know the kind of value proposition which you talk about is the ability to access US markets in particular, but I imagine this is the sort of thing that a lot of investors would be potentially interested in for the local market. So curious what that path could look like if you see it as one that might be feasible.

Question: Benjamin Budish - Barclays - Analyst : Understood. Very helpful. Maybe one other follow-up on an earlier comment. You mentioned that you're opening up a new office in Dubai. Could you maybe talk a little bit about your plans for the region? Is this perhaps related to going after a broader interest in broker opportunity? Is it about seeking out large, wealthy traders, hedge funds in the region? What are your sort of plans for those there?

Question: Benjamin Budish - Barclays - Analyst : Okay, thanks for taking my questions.

Question: Macrae Sykes - GAMCO Investors Inc. - Analyst : I actually had just two, but I'll lump them together. We've been through a few election cycles with the platform. I was curious if you could talk about some of the dynamics in trading before and after major general elections. Would you expect anything different this cycle? And then, assuming REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 15, 2024 / 8:30PM, IBKR.OQ - Q3 2024 Interactive Brokers Group Inc Earnings Call after a four-year drought of IPOs, we do start to get a little more constructive capital markets activity in '25, how would that impact some of the segments in trading dynamics on the platform? Thank you.

Question: Macrae Sykes - GAMCO Investors Inc. - Analyst : Assuming we get a more constructive IPO market next year, how does that affect some of the trading dynamics with some of the different segments, institutional versus retail?

Question: Macrae Sykes - GAMCO Investors Inc. - Analyst : Thank you.

Question: James Yaro - Goldman Sachs - Analyst : Thanks for taking the follow-up. Thomas, the stock has appreciated very substantially this year, but I don't believe that you have returned to selling stock. Maybe you could just speak to the key considerations as you think about whether you might return to selling?

Question: James Yaro - Goldman Sachs - Analyst : Okay, very clear. Thank you.