Investor Presentation
February, 2014 Disclaimer
The following 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 are based upon information available to the Company on the date of this presentation. 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.
2 Our Business Today
Business transformation – Brokerage is our focus • Our brokerage segment is growing at a rapid pace • Market maker is a mature business in a challenging environment, yet highly complementary to brokerage
Highly diversified enterprise • Broad global reach and breadth of products • Serving multiple customer segments and geographies
Largest U.S. electronic broker by number of trades
Strong value proposition is fueling industry-leading growth
Financial Strength • $5.1B consolidated equity capital at 12/31/13 • IB LLC is rated 'A-/A-2'; Outlook Stable by Standard & Poor's
3 Business Transformation Our electronic brokerage segment, born 20 years ago, now the driving force of our business
Recent history of the business: • 2008 - Highest annual earnings ever • 2009 - Market activity slows substantially, HFT’s begin to compete • 2010 - Market making business bottoms amid intense HFT competition • 2011 - Market making stabilizes and brokerage continues to grow • 2012 – Trading volumes slowed, yet continued focus is on expanding the brokerage business 4
Diversified Enterprise We serve a broad array of customers across the globe
Customer Equity – by Segment Customer Accounts - by Region1 EQUITY
Introducing brokers Hedge and Other mutual funds 7% 10% 7% Individual Europe traders and Proprietary 28% investors trading groups 44% 15% U.S. 43%
Financial Asia advisors 19% 27% Our customers reside in 190+ 1Based on country of residence as of Dec. 31, 2013 countries
5 Diversified Enterprise Asia continues to drive our strongest growth abroad
Customer Customer Accounts Equity Commissions
157.9K 239.3K $22.1B $45.7B $386.8M $502.1M
47.4% 43.0% 45.6% 42.0% 55.6% 52.3%
24.2% 28.6% 21.3% 27.2% 15.1% 20.5% 15.3% 15.8% 21.8% 15.9% 18.6% 18.3% 17.8% 9.5% 9.8% 13.5% 8.9% 12.0%
Other Asia Europe U.S.
Based on country of legal residence 6 Diversified Enterprise Multi-product, country and currency
Our customers can trade on over 100 market centers in 23 countries and 20 currencies. Electronic market access to stocks, options, futures, forex, bonds, ETFs and CFDs from a single IB Universal Account™.
7 Recognized Industry Leader
IB’s multiple trading platforms, extensive suite of advanced trading tools, algos and order types continue to earn awards, year after year
. Winner 2013 "Best Broker-Dealer Options" . Winner 2013 "Best . Winner 2013 Stock Broker-Dealer Brokerage Futures" . Winner 2013 Futures Brokerage . Winner 2013 Forex Brokerage . 1st Runner Up 2013 Institutional Platform . 1st Runner Up 2013 Professional Platform . 1st Runner Up 2013 Options Analysis Software
* Supporting documentation for any claims and statistical information will be provided upon request. For additional information see www.interactivebrokers.com/compare. 8 Recognized Industry Leader We strive to offer the best price execution and lowest trading and financing costs so our customers can realize more profits
Forex – Our customers are more profitable
Data provided by forexmagnates.com, includes the impact of any commissions
Everybody says they provide best executions but only one can be best and only we can prove it. The same philosophy and technology that enables our clients to achieve superior forex trading results also drives our clients’ trading and investing of stocks, options, futures, and bonds worldwide on over 100 market centers. 9 Value Proposition: Low Costs Rated Lowest Margin Rates and Low Cost Broker 9 years in a row by Barron’s
US Margin Loan Rates Comparison US Commission Rates Comparison
1 Stock 1 E-mini S&P $25K $200K $1.5M $3.5M 100 Shares Option 500 Future Interactive Brokers 1.58% 1.33% 0.95% 0.73% $1.00 $1.00 $0.85 E-Trade 7.94% 6.14% 3.89% 3.89% $7.99 $8.74 $2.99 Fidelity 7.58% 6.58% 3.75% 3.75% $7.95 $8.70 N/A optionsXpress 8.25% 7.00% 6.00% 6.00% $8.95 $12.95 $3.50 Schwab 8.00% 6.88% 6.25% 6.00% $8.95 $9.70 N/A TD Ameritrade 8.50% 7.25% 6.25% 6.25% $9.99 $10.74 $2.25 thinkorswim 8.50% 7.25% 6.25% 6.25% $9.99 $10.74 $2.25
Interactive Brokers has lower commission rates for larger volumes and comparable rates worldwide. Services vary by firm.
* Supporting documentation for any claims and statistical information will be provided upon request. For additional information see www.interactivebrokers.com/compare. 10 Value Proposition: Low Costs Our industry low margin rates have increased our market share of total margin borrowing
Total Customer Margin of Industry (1) Dec. 2007 Dec. 2013 DecTotal 2007 - $29 - $29 Billion billion TotalDec 2013 - $42 - $42Billion billion IB 6% IB AMTD AMTD 29% ETFC 23% 32% 25%
SCHW ETFC SCHW 30% 15% 40%
In four years, IB’s margin balances have increased over 600%
11 Value Proposition: Best Execution The IB SmartRoutingSM Advantage
Unlike other routers, IB SmartRoutingSM dynamically routes and re-routes all or parts (1) Net Dollar Price Improvement vs. Best Bid/Offer – 1st Half 2013 of the order for optimal execution.
We do NOT sell order flow to internalizers.
Transaction Auditing Group, Inc., (TAG), a third-party provider of transaction analysis, has determined that Interactive Brokers’ U.S. stock and options price executions and European stock price executions were significantly better than the (1) Net $ Improvement per Share Definition: industry during 2013. ((# of Price Improved Shares * Price Improvement Amount) - (# of Price Disimproved Shares*Price Disimprovement Amount)) / Total Number of Executed Shares
*For more information visit www.interactivebrokers.com
12 Financial Strength Liquid balance sheet and low financial leverage
Highly Liquid Solid balance sheet . Dec. 31, 2013 - $38 billion total assets, 98.9% liquid . Low financial leverage
Distributing capital from market making segment . Quarterly dividend of $0.10/share started June 2011 (represents ~10% post-tax return of MM capital) . Special dividends paid: $1.00 in Dec. Low Financial Leverage 2012; $1.79 in Dec. 2010
S&P Credit Ratings Comparison1:
[1] Ratings were obtained on July 26 2013 from each firm's website. Supporting documentation for any 13 claims and statistical information will be provided upon request. #1 Strategic Priority: Brokerage Expansion
We will achieve this through:
Institutional . Targeted marketing to increase market share amongst Branding advisors, hedge funds, prop traders, introducing brokers . These institutional customers are our fastest growing segment
Technology . Continuously optimizing our platform and trading tools . 2013 improvements: Probability Lab, EmployeeTrack, Enhancements expanded mobile solutions, Mosaic trading workspace, market scanners, Money Manager Marketplace
Leader in . Building upon our nearly 4 decade history of options trading Options Trading . Strategic focus on developing innovative tools for options traders is the key to our continued success
Measuring success: . Maintain our lead as largest eBroker by number of trades . Strong progress towards goal to be largest eBroker by profits . Industry leading growth in all key metrics . Increase market share in options trading (currently 12% of US exchange-trade volume) 14 Brokerage Expansion Maintaining position as largest eBroker by number of DARTs
500,000 499,000 414,000 400,000
297,000 Very active customer base: 300,000 • Our customers trade on average ~500 times/year 200,000 160,000 • Daily average revenue 100,000 trades grew 23% YoY
Daily Average Revenue Trades (DARTs) Trades AverageRevenue Daily - AMTD ETFC IBKR SCHW
4Q13 Results
15 Brokerage Expansion Strong progress towards our goal to be the largest broker by profits— Rapidly gaining on the competition
Pretax Profits - Normalized to Q408 200% 162% 150%
100%
50%
0%
-50%
-100%
Interactive Brokers (1) Schwab TD Ameritrade
1Brokerage segment only 4Q13 excludes unusual item ($64M Singapore loss)
16 Brokerage Expansion Market leading growth in every key metric
140% 450% 400% Customer Equity 120% Customer Accounts 350% 100% 300% 80% 250% 200% 60% 100% 150% 40% 100% 20% Average Customer Equity/Account 80% 50% 0% 0%
-20% -50%
10 11 12 13 14 09
10 11 12 13 09 14
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- 60%
Jan Jan Jan Jan Jan Jan
Jan Jan Jan Jan Jan Jan 80% 160% Daily Average40%IB RevenueAMTD Trades (DARTs)ETFC SCHW 140% Average CustomerIB Equity/AccountAMTD ETFC SCHW 60% 120% 40% 20% 100% 20% 80%
0% 0% 60% 40% -20% 20% -20%
-40% 0%
10 09
09 10
10 09 11
09 10 11
09 10 10 11 09 11
- -
- -
- - -
- - -
- - -
- -
-60% - -20%
Jul Jul Jul
09 10 11 13 14 12
10 11 12 13 14 09
Jan Jan Jan
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Sep Sep
Nov Nov
Mar Mar Mar
May May May
Jan Jan Jan Jan Jan Jan
Jan Jan Jan Jan Jan Jan
Peer data only available through Dec 2013 17 IB AMTD ETFC IB SCHWAMTD ETFC SCHW IB AMTD ETFC SCHW Brokerage Expansion IB Brokerage Statistics
12 50 $200 240 11 45 Customer Equity $190 220 Customer Accounts 10 40 $180 35 $170 200 9 8 30 $160 180 7 25 $150 160 6 20 $140 5 15 $130
Accounts (000's) Accounts 140 Customer Equity $B Equity Customer
4 (000's) Adds Account 10 $120 120 3 5 $110 (000's) Account per Equity 100 2 0 $100
Accounts Accounts adds Equity Equity per account
700 40% 16 40% Margin 38% 600 DARTs 30% 14 36% 20% 12 500 34% 10% 10 400 32%
0% growth year
- 8 30% 300
-10% 6 28% over 200 - 26% -20% 4
24% Year 100 -30% ($B) Margin Customer 2 22% Total Customer DARTs (000's) DARTs Customer Total 0 -40%
0 20% Margin as % of Customer Equity Customer of % as Margin
Total Customer DARTs YoY Growth Margin Margin as % of Customer Equity
18 Institutional Branding Focused marketing and specialized institutional tools and services are driving the shift in customer segments
Customer Customer Accounts Equity Commissions
157.9K 231.3K $22.1B $45.7B $386.8M $502.1M 1.4% 3.7% 4.0% 5.9% 2.0% 0.5% 0.5% 7.3% 6.1% 6.5% 4.2% 3.9% Introducing brokers 5.6% 6.5% 15.3% 18.3% 20.2% 17.8% 15.7% 14.7%
Hedge and mutual funds 17.0% 17.7% 22.2% 27.3%
Proprietary trading groups
73.3% 71.4% 60.2% Financial advisors 56.0% 50.6% 44.2%
Individual traders and investors
Dec 2010 Dec 2013 Dec 2010 Dec 2013 2010 2013
19 Technology Enhancements Our latest developments
IB FYIs Free, customized portfolio event notifications and reminders . Upcoming Earnings Reminder one day prior to portfolio company earnings announcements . Option Expiry Reminder one day prior to option position expiry . M&A Event Notification of takeover involving a portfolio company . Borrow Locate Notification that IB stock loan desk has secured a borrow on shares for which you initiated a locate request . Exercise Advisory Notification that an option position’s value would be maximized through exercise prior to an upcoming dividend
Mosaic Market Scanners Allows customers to quickly and easily scan global markets for the top performing contracts, including stocks, options, futures, bonds, indexes and more, in numerous categories
. Scan multiple products around the world . Choose from popular scan parameters . Save your favorites . Create custom scans . Redefine a scan in two clicks . Run scans after market hours
20 Technology Enhancements Our latest developments cont.
The IB Investors’ Marketplace is an electronic forum where IB customers and IB service providers meet to form connections and conduct business with one another on Interactive Brokers’ platform
www.interactivebrokers.com/ marketplace
21 Technology Enhancements Our latest developments cont.
IB Traders’ Insight Our new blog tool provides market insights throughout the trading day direct from global market participants to the public at large
22 Leader in Options Trading
Options Tools: Our sophisticated option trading “Labs” make it easier than ever for clients to understand, price, and create profitable option and combination trades
- The Probability Lab – Provides a practical way to think about options without complicated mathematics - The Options Strategy Lab – Create strategies tailored specifically to your price or volatility forecast - The Volatility Lab – A suite of nine volatility and option activity tools that provides an in-depth snapshot across a variety of option analytics
23 Leader in Options Trading
Interactive Brokers Probability Lab℠ (Patent Pending)
The ultimate options trading tool: Encompasses the basic understanding and approach to options trading in a visual, interactive tool Customers can use Probability Lab to experiment with the shape of probability distributions and study the resulting best combination trades We introduced this tool in order to increase our customers’ profitability which remains our ultimate objective Subsequent releases of this tool will address buy writes, rebalancing for delta, multi-expiration combination trades, rolling forward of expiring positions and further refinements
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