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What changed in Interactive Brokers Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Interactive Brokers Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+390 added−366 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-24)

Top changes in Interactive Brokers Group, Inc.'s 2023 10-K

390 paragraphs added · 366 removed · 290 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

90 edited+30 added−38 removed122 unchanged
Biggest changeUniversal account refers to the consolidation of these accounts for display purposes only, enabling clients the ability to use a single platform to conduct trading activity and view consolidated activity and position information for all products and services offered. 2 Debit Mastercard ® and Prepaid Mastercard ® are trademarks registered to Mastercard International Incorporated Corporation, Delaware, 2000 Purchase Street, Purchase, New York 10577-2405. ‎ 5 Table of Contents Cryptocurrency – Customers, including both individuals and advisors, can trade Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH) through Paxos Trust Company, which executes, clears and custodies the cryptocurrencies, alongside other asset classes on a single unified platform. ‎ Fractional Trading – Fractional Trading allows customers to buy and sell any eligible U.S. or European stock (or ETF, where available), using either a specified cash amount or fractional shares, which are stock units that amount to less than one full share.
Biggest changeUniversal Account SM refers to the consolidation of these accounts for display purposes only, enabling customers the ability to use a single platform to conduct trading activity and view consolidated activity and position information for all products and services offered. 2 American Express ® is a trademark registered to the American Express Company, 200 Vesey Street, New York, New York 10285. ‎ 5 Table of Contents U.S.
We have built automated systems to handle wide - ranging compliance issues such as trade and audit trail reporting, financial operations reporting, enforcement of short sale rules, enforcement of margin rules and pattern day trading restrictions, review of employee correspondence, archival of required records, execution quality and order routing reports, approval and documentation of new customer accounts, surveillance of customer trading for market manipulation or abuse or violations of exchange rules, and anti - money laundering and anti - fraud surveillance in line with our anti - money laundering policies.
We have built automated systems to handle wide - ranging compliance issues such as trade and audit trail reporting, financial operations reporting, enforcement of short sale rules, enforcement of margin rules and pattern day trading restrictions, recording and review of employee correspondence, archival of required records, execution quality and order routing reports, approval and documentation of new customer accounts, surveillance of customer trading for market manipulation or abuse or violations of exchange rules, and anti - money laundering and anti - fraud surveillance in line with our anti - money laundering policies.
In 1977, after purchasing a seat on the American Stock Exchange and trading as an individual marker maker in equity options, Mr. Peterffy was among the first to apply a computerized mathematical model to continuously value equity option prices. By 1986, Mr. Peterffy developed and employed a fully integrated, automated market making system for stocks, options and futures.
In 1977, after purchasing a seat on the American Stock Exchange and trading as an individual market maker in equity options, Mr. Peterffy was among the first to apply a computerized mathematical model to continuously value equity option prices. By 1986, Mr. Peterffy developed and employed a fully integrated, automated market making system for stocks, options and futures.
Spot Gold alongside other asset classes from a single unified platform. In addition, our customers have access to efficient pricing in quantities as small as one ounce and can request physical delivery of their U.S.
Spot Gold – Customers can trade U.S. Spot Gold alongside other asset classes from a single unified platform. In addition, our customers have access to efficient pricing in quantities as small as one ounce and can request physical delivery of their U.S.
Staff members in the Compliance department and in other departments are also registered with FINRA, NFA or other regulatory organizations. ‎ 16 Table of Contents Patriot Act and Increased Anti-Money Laundering (“AML”) and “Know Your Customer” Obligations Registered broker - dealers traditionally have been subject to a variety of rules that require that they “know their customers” and monitor their customers’ transactions for suspicious activities.
Staff members in the Compliance department and in other departments are also registered with FINRA, NFA or other regulatory organizations. ‎ 17 Table of Contents Patriot Act and Increased Anti-Money Laundering (“AML”) and “Know Your Customer” Obligations Registered broker - dealers traditionally have been subject to a variety of rules that require that they “know their customers” and monitor their customers’ transactions for suspicious activities.
We also provide a real - time option analytics window that displays values reflecting the rate of change of an option’s price with respect to a unit change in each of several risk dimensions. Probability Lab ® (Patent Pending) – The Probability Lab ® provides customers with an intuitive, visual method to analyze market participants’ future stock price forecasts based on current option prices.
We also provide a real - time option analytics window that displays values reflecting the rate of change of an option’s price with respect to a unit change in each of several risk dimensions. Probability Lab ® – The Probability Lab ® provides customers with an intuitive, visual method to analyze market participants’ future stock price forecasts based on current option prices.
We offer our products and services through a global communications network that is designed to provide secure, reliable and timely access to the most current market information. We provide our customers with a variety of means to connect to our brokerage systems, including cross connects, dedicated point - to - point data lines, extranets, virtual private networks and the Internet.
We offer our products and services through a global communications network that is designed to provide secure, reliable and timely access to the most current market information. We provide our customers with a variety of means to connect to our brokerage systems, including cross connects, dedicated point - to - point data circuits, extranets, virtual private networks and the Internet.
The ever-growing complexity of multiple market centers has provided us with opportunities to build and continuously adapt our order routing software to secure excellent execution prices. Since the launching of our electronic brokerage business in 1993, we have grown to approximately 2.1 million institutional and individual brokerage customers.
The ever-growing complexity of multiple market centers has provided us with opportunities to build and continuously adapt our order routing software to secure excellent execution prices. Since the launching of our electronic brokerage business in 1993, we have grown to approximately 2.6 million institutional and individual brokerage customers.
The TWS Mosaic interface provides intuitive out-of-the-box usability with quick and easy access to comprehensive trading, order management, chart, watchlist and portfolio tools all in a single, customizable workspace. IBKR Mobile – The IBKR Mobile app provides powerful trading tools and the same market-moving information as our desktop TWS trading platform.
The TWS Mosaic interface provides intuitive out-of-the-box usability with quick and easy access to comprehensive trading, order management, chart, watchlist and portfolio tools all in a single, customizable workspace. IBKR Mobile – The IBKR Mobile app provides experienced traders powerful trading tools and the same market-moving information as our desktop TWS trading platform.
The speed of communicating with exchanges and market centers is maximized through continuous software and network engineering maintenance, thereby allowing us to achieve real - time controls over market exposure. ‎ 11 Table of Contents Transaction Processing Our transaction processing is automated over the full life cycle of a trade.
The speed of communicating with exchanges and market centers is maximized through continuous software and network engineering maintenance, thereby allowing us to achieve real - time controls over market exposure. ‎ 12 Table of Contents Transaction Processing Our transaction processing is automated over the full life cycle of a trade.
IBKR Lite SM was designed to meet the needs of investors who are seeking a simple, commission-free way to trade U.S. exchange-listed stocks and ETFs and do not wish to consider our efforts to obtain greater price improvement through our IB SmartRouting SM system . IBKR Universal account SM – From a single point of entry in their IBKR Universal 1 account SM , our customers are able to transact in 26 currencies, across multiple classes of tradable, primarily exchange - listed products traded on more than 150 electronic exchanges and market centers in 33 countries around the world seamlessly.
IBKR Lite SM was designed to meet the needs of investors who are seeking a simple, commission-free way to trade U.S. exchange-listed stocks and ETFs and do not wish to consider our efforts to obtain greater price improvement through our IB SmartRouting SM system . IBKR Universal Account SM – From a single point of entry in their IBKR Universal 1 Account SM , our customers are able to transact in 27 currencies, across multiple classes of tradable, primarily exchange - listed products traded on more than 150 electronic exchanges and market centers in 34 countries around the world seamlessly.
The IBG LLC membership interests held by Holdings will be subject to purchase by us over time in connection with offerings by us of shares of our common stock. The table below presents the amount of IBG LLC membership interests held by IBG, Inc. and Holdings as of December 31, 2022. IBG, Inc.
The IBG LLC membership interests held by Holdings will be subject to purchase by us over time in connection with offerings by us of shares of our common stock. The table below presents the amount of IBG LLC membership interests held by IBG, Inc. and Holdings as of December 31, 2023. IBG, Inc.
In addition, we have strengthened our technical infrastructure and have built redundancy of systems so that most operations can be handled from multiple offices or remotely. In light of the COVID-19 pandemic, we have substantially enhanced this infrastructure and our remote access capabilities so that most employees, including all with critical job functions, can work remotely.
In addition, we have strengthened our technical infrastructure and have built redundancy of systems so that most operations can be handled from multiple offices or remotely. Spurred by the COVID-19 pandemic, we have substantially enhanced this infrastructure and our remote access capabilities so that most employees, including all with critical job functions, can work remotely.
These tools and real - time margining aid our customers in understanding their trading risk at any moment of the day and help us maintain low commissions. We actively manage our global currency exposure on a continuous basis by maintaining our equity in a basket of currencies we call the GLOBAL.
These tools and real - time margining aid our customers in understanding their trading risk at any moment of the day and help us maintain low commissions. 11 Table of Contents We actively manage our global currency exposure on a continuous basis by maintaining our equity in a basket of currencies we call the GLOBAL.
Our foreign subsidiaries are similarly regulated under the laws and institutional frameworks of the countries in which they operate. ‎ 14 Table of Contents U.S. broker - dealers and futures commission merchants are subject to laws, rules and regulations that cover all aspects of the securities and derivatives business, including: sales methods; “know your customer” requirements; trade practices; use and safekeeping of customers’ funds and securities; capital structure; risk management; record - keeping; financing of customers’ purchases; and conduct of directors, officers and employees.
Our foreign subsidiaries are similarly regulated under the laws and institutional frameworks of the countries in which they operate. ‎ 15 Table of Contents U.S. broker - dealers and futures commission merchants are subject to laws, rules and regulations that cover all aspects of the securities and derivatives business, including: sales methods; “know your customer” requirements; anti-money laundering requirements; trade practices; use and safekeeping of customers’ funds and securities; capital structure; risk management; record - keeping; financing of customers’ purchases; and conduct of directors, officers and employees.
This is done to protect us, as well as the customer, from excessive losses. Flexible and Customizable System – Our platform is designed to provide an efficient customer experience, beginning with a highly automated account opening process and ending with fast trade execution and reporting.
This is done to protect us, as well as the customer, from excessive losses. Flexible and Customizable System – Our platform is designed to provide an efficient customer experience, beginning with a highly automated account opening process and continuing through fast trade execution and reporting.
Overview As registered U.S. broker - dealers, Interactive Brokers LLC (“IB LLC”), IBKR Securities Services LLC (formerly, Timber Hill LLC) (“IBKRSS”) and Interactive Brokers Corp. are subject to the rules and regulations of the Exchange Act, and as members of various exchanges, we are also subject to such exchanges’ rules and requirements.
Overview As registered U.S. broker - dealers, Interactive Brokers LLC (“IB LLC”), IBKR Securities Services LLC (“IBKRSS”) and Interactive Brokers Corp. are subject to the rules and regulations of the Exchange Act, and as members of various exchanges, we are also subject to such exchanges’ rules and requirements.
We offer our customers access to all tradable classes of primarily exchange - listed products, including stocks, options, futures, forex, bonds, mutual funds, ETFs, precious metals and cryptocurrencies traded on more than 150 electronic exchanges and market centers in 33 countries and in 26 currencies seamlessly around the world.
We offer our customers access to all tradable classes of primarily exchange - listed products, including stocks, options, futures, forex, bonds, mutual funds, ETFs, precious metals and cryptocurrencies traded on more than 150 electronic exchanges and market centers in 34 countries and in 27 currencies seamlessly around the world.
The relative value of global stocks by region, country, industry or individually can be compared, and metrics displayed in one of 26 currencies.
The relative value of global stocks by region, country, industry or individually can be compared, and metrics displayed in one of 31 currencies.
The proliferation of electronic exchanges and market centers since the early 1990s has allowed us to integrate our software with an increasing number of trading venues, creating automatically functioning, computerized platforms that require minimal human intervention.
The proliferation of electronic exchanges and market centers has allowed us to integrate our software with an increasing number of trading venues, creating automatically functioning, computerized platforms that require minimal human intervention.
As the system continues to gain more users, IB Smart Routing SM and the IBKR ATS facilities become more important for customers in a world of multiple exchanges, market centers and penny-priced orders because it increases the possibility of best executions for our customers ahead of customers of other brokers.
As the system continues to gain more users, IB SmartRouting SM and the IBKR ATS facilities become more important for customers in a world of multiple exchanges, market centers and penny-priced orders because it increases the possibility of best possible executions for our customers ahead of customers of other brokers.
Progress on programming initiatives is generally tracked on a bi-weekly basis by the Steering Committee and other committees consisting of senior executives. This enables us to prioritize key initiatives and achieve rapid results. All new business involves a software development project.
The development queue is prioritized and highly disciplined. Progress on programming initiatives is generally tracked on a bi-weekly basis by the Steering Committee and other committees consisting of senior executives. This enables us to prioritize key initiatives and achieve rapid results. All new business involves a software development project.
See the “Net Capital” section above in this Item 1, for regulatory requirements related to our foreign subsidiaries. ‎ 17 Table of Contents Executive Officers and Directors of Interactive Brokers Group, Inc. The table below presents the names, ages and positions of our current directors and executive officers as of December 31, 2022.
See the “Net Capital” section above in this Item 1, for regulatory requirements related to our foreign subsidiaries. ‎ 18 Table of Contents Executive Officers and Directors of Interactive Brokers Group, Inc. The table below presents the names, ages and positions of our current directors and executive officers as of December 31, 2023.
When a trade is executed, our systems capture and deliver this information back to the source, either to the customer via the brokerage system or to the market making system, generally within a fraction of a second.
When an order is executed, our systems capture and deliver this information back to the source, either to the customer via the brokerage system or to the market making system, generally within a fraction of a second.
IBG, Inc. is a holding company whose primary asset is the ownership of approximately 24.5% of the membership interests of IBG LLC, the current holding company for our businesses. IBG, Inc. is the sole managing member of IBG LLC. When we use the terms “we,” “us,” “our,” and “IBKR,” we mean IBG, Inc. and its subsidiaries (including IBG LLC).
IBG, Inc. is a holding company whose primary asset is the ownership of approximately 25.4% of the membership interests of IBG LLC, the current holding company for our businesses. IBG, Inc. is the sole managing member of IBG LLC. When we use the terms “we,” “us,” “our,” and “IBKR,” we mean IBG, Inc. and its subsidiaries (including IBG LLC).
We specialize in routing orders and executing and processing trades in stocks, options, futures, foreign exchange instruments (“forex”), bonds, mutual funds, ETFs and precious metals on more than 150 electronic exchanges and market centers in 33 countries and 26 currencies seamlessly around the world.
We specialize in routing orders and executing and processing trades in stocks, options, futures, foreign exchange instruments (“forex”), bonds, mutual funds, ETFs and precious metals on more than 150 electronic exchanges and market centers in 34 countries and 27 currencies seamlessly around the world.
The remaining approximately 75.5% of IBG LLC membership interests are held by IBG Holdings LLC (“Holdings”), a holding company that is owned directly and indirectly by our founder and Chairman, Mr. Thomas Peterffy and his affiliates, management and other employees of IBG LLC, and certain other members.
The remaining approximately 74.6% of IBG LLC membership interests are held by IBG Holdings LLC (“Holdings”), a holding company that is owned directly and indirectly by our founder and Chairman, Mr. Thomas Peterffy and his affiliates, management and other employees of IBG LLC, and certain other members.
Galik served as Senior Vice President, Software Development of IBG LLC from October 2003 to October 2014. In addition, Mr. Galik has served as Vice President of IBKR Securities Services LLC since April 1998 and serves as a member of the board of directors of the Boston Options Exchange. Mr.
Galik served as Senior Vice President, Software Development of IBG LLC from October 2003 to October 2014. In addition, Mr. Galik has served as Vice President of IBKR Securities Services LLC since April 1998 and served as a member of the board of directors of the Boston Options Exchange from October 2013 to May 2023. Mr.
She has served as Chief Administrative Officer for LionTree LLC as well as for Condé Nast , led Human Resources & Administration for Sotheby’s and spent over five years in Human Resources at American Express.
Bright has served as Chief Administrative Officer for LionTree LLC as well as for Condé Nast , led Human Resources & Administration for Sotheby’s and spent over five years in Human Resources at American Express. Ms.
The liquidation halt function is highly restricted. Our customer interfaces include color coding on the account screen and pop - up warning messages to notify customers that they are approaching their margin limits. This feature allows customers to take action, such as entering margin reducing trades, to avoid having their positions liquidated under our automated liquidation algorithm.
Our customer interfaces include color coding on the account screen and pop - up warning messages to notify customers that they are approaching their margin limits. This feature allows customers to take action, such as entering margin reducing trades, to avoid having their positions liquidated under our automated liquidation algorithm.
The desks source liquidity, bring SPX color from the pit, offer price discovery services, and help customers calibrate and execute complex algo trading strategies. IBKR Campus – IBKR Campus helps customers learn about the markets, products, and tools available through our platforms.
The desks source liquidity, bring SPX color from the pit, offer price discovery services, and help customers calibrate and execute complex algo trading strategies. ‎ 6 Table of Contents IBKR Campus – IBKR Campus helps customers learn about the markets, products, and tools available through our platforms.
Abroad, we conduct our business through offices located in Canada, the United Kingdom, Ireland, Switzerland, Hungary, India, China (Hong Kong and Shanghai), Japan, Singapore and Australia . As of December 31, 2022, we had 2,820 employees worldwide.
Abroad, we conduct our business through offices located in Canada, the United Kingdom, Ireland, Switzerland, Hungary, India, China (Hong Kong and Shanghai), Japan, Singapore and Australia . As of December 31, 2023, we had 2,932 employees worldwide.
The graphic below does not display the subsidiaries of IBG LLC. Our primary assets are our ownership of approximately 24.5% of the membership interests of IBG LLC, the current holding company for our businesses, and our controlling interest and related contractual rights as the sole managing member of IBG LLC.
The graphic below does not display the subsidiaries of IBG LLC. Our primary assets are our ownership of approximately 25.4% of the membership interests of IBG LLC, the current holding company for our businesses, and our controlling interest and related contractual rights as the sole managing member of IBG LLC.
As required by the USA Patriot Act and other rules, we have established comprehensive AML and customer identification procedures; designated AML Compliance Officers for each electronic brokerage subsidiary; provided formal AML training to our AML, client facing, and other relevant employees; and conducted regular independent audits of our AML programs.
As required by the USA Patriot Act and other rules, we have established comprehensive AML and customer identification procedures, and designated AML Compliance Officers for each electronic brokerage subsidiary; and we provide formal AML training to our AML, customer facing, and other relevant employees, and conduct regular independent audits of our AML programs.
Specifically, our customers receive worldwide electronic access through our Trader Workstation SM (our real - time Java - based trading platform), our proprietary Application Programming Interface (“API”), our IBKR Mobile app, our customer-portal-based Quick Trade or industry standard Financial Information Exchange (“FIX”) connectivity.
Specifically, our customers receive electronic access worldwide via our Trader Workstation SM (real - time Java - based trading platform), our proprietary Application Programming Interface (“API”), our IBKR Mobile app, our Client Portal-based Quick Trade feature or industry standard Financial Information Exchange (“FIX”) connectivity.
As of December 31, 2022, aggregate excess regulatory capital for all of the operating subsidiaries was $8.7 billion. IB LLC is subject to the Uniform Net Capital Rule (Rule 15c3 - 1) under the Exchange Act and to the CFTC’s minimum financial requirements (Regulation 1.17) under the Commodities Exchange Act. Additionally, Interactive Brokers Canada Inc.
As of December 31, 2023, aggregate excess regulatory capital for all of the operating subsidiaries was $10.2 billion. IB LLC is subject to the Uniform Net Capital Rule (Rule 15c3 - 1) under the Exchange Act and to the CFTC’s minimum financial requirements (Regulation 1.17) under the Commodities Exchange Act. Additionally, Interactive Brokers Canada Inc.
The table below summarizes capital, capital requirements and excess regulatory capital as of December 31, 2022.
The table below summarizes capital, capital requirements and excess regulatory capital as of December 31, 2023.
We collect required information through our new account opening process and screen accounts against databases for the purposes of identity verification and for review of potential negative information and appearance on government sanction lists, including the Office of Foreign Assets and Control, Specially Designated Nationals and Blocked Persons lists and several other global, U.N., EU and other non-U.S. sanction lists.
We collect required information through our new account opening process and screen accounts against databases for the purposes of identity verification and for review of potential negative information and appearance on government sanction lists, including the Office of Foreign Assets and Control, Specially Designated Nationals and Blocked Persons lists and several other global, United Nations, European Union (“EU”) and other non-U.S. sanction lists.
In addition, our risk management staff uses these displays to monitor the 10 Table of Contents performance of our risk systems at all times across all open markets around the world. Should our systems absorb erroneous market data from exchanges that prompt liquidations, our risk specialists have the capability to temporarily halt liquidations that meet specific criteria.
In addition, our risk management staff uses these displays to monitor the performance of our risk systems at all times across all open markets around the world. Should our systems absorb erroneous market data from exchanges that prompt liquidations, our risk specialists have the capability to temporarily halt liquidations that meet specific criteria. The liquidation halt function is highly restricted.
From 2011 through 2022, the Company issued 37,478,697 shares of common stock (with a fair value of $1.7 billion) to Holdings in exchange for an equivalent number of shares of member interests in IBG LLC. Nature of Operations As an electronic broker, we execute, clear and settle trades globally for both institutional and individual customers.
From 2011 through 2023, the Company issued 40,111,445 shares of common stock (with a fair value of $1.9 billion) to Holdings in exchange for an equivalent number of shares of member interests in IBG LLC. Nature of Operations As an electronic broker, we execute, clear and settle trades globally for both institutional and individual customers.
In addition, our customers can use our trading platform to trade certain cryptocurrencies through a third-party cryptocurrency service provider that executes, clears and custodies the cryptocurrencies. In the United States of America (“U.S.”), we conduct our business primarily from our headquarters in Greenwich, Connecticut and from Chicago, Illinois.
In addition, our customers can use our trading platform to trade certain cryptocurrencies through third-party cryptocurrency service providers that execute, clear and custody the cryptocurrencies. In the United States of America (“U.S.”), we conduct our business primarily from our headquarters in Greenwich, Connecticut and from Chicago, Illinois.
Morgan Chase and, over time, other banks will be added. Insured Bank Deposit Sweep Program – Our Insured Bank Deposit Sweep Program provides eligible customers with up to $2,500,000 of Federal Deposit Insurance Corporation (“FDIC”) insurance on their eligible cash balances in addition to the existing $250,000 Securities Investor Protection Corporation (“SIPC”) coverage for total coverage of $2,750,000.
The service is available to customers with accounts at several major U.S. banks and, over time, other banks will be added. Insured Bank Deposit Sweep Program – Our Insured Bank Deposit Sweep Program provides eligible customers with up to $2,500,000 of Federal Deposit Insurance Corporation (“FDIC”) insurance on their eligible cash balances in addition to the existing $250,000 Securities Investor Protection Corporation (“SIPC”) coverage for total coverage of $2,750,000.
These exchanges and market centers are all partially or fully electronic, meaning that customers can buy or sell a product traded on that exchange via an electronic link from their computer or mobile device through our system to the exchange.
Our customers can trade on more than 150 electronic exchanges and market centers in 34 countries around the world. These exchanges and market centers are all partially or fully electronic, meaning that customers can buy or sell a product traded on that exchange via an electronic link from their computer or mobile device through our system to the exchange.
IBKR EventTrader SM allows customers to trade their opinion about a specific question with a "yes" or "no" outcome. Overnight Trading Hours – Customers can trade select U.S. ETFs 23½ hours a day, five days a week, enabling them to react immediately to market-moving news and conveniently trade at almost any time.
IBKR EventTrader SM allows customers to trade their opinion about a specific question with a “yes” or “no” outcome. Overnight Trading Hours – Customers can trade over 10,000 U.S. stocks and ETFs nearly 24 hours a day, five days a week, enabling them to react immediately to market-moving news and conveniently trade at almost any time.
Name Age Position Thomas Peterffy 78 Chairman of the Board of Directors Earl H. Nemser 76 Vice Chairman and Director Milan Galik 56 Chief Executive Officer, President and Director Paul J. Brody 62 Chief Financial Officer, Treasurer, Secretary and Director Thomas A. Frank 67 Executive Vice President and Chief Information Officer Lawrence E.
Name Age Position Thomas Peterffy 79 Chairman of the Board of Directors Earl H. Nemser 77 Vice Chairman and Director Milan Galik 57 Chief Executive Officer, President and Director Paul J. Brody 63 Chief Financial Officer, Treasurer, Secretary and Director Thomas A. Frank 68 Executive Vice President and Chief Information Officer Lawrence E.
With fractional shares, there is no minimum for European shares and customers can invest in U.S. shares with as little as $1.00. This functionality allows customers to experiment with trading and investing without committing substantial sums of money and learn about building and rebalancing diversified portfolios. U.S. Spot Gold – Customers can trade U.S.
With fractional shares, there is no minimum for European shares and customers can invest in U.S. shares with as little as $1.00. This functionality allows customers to experiment with trading and investing without committing substantial sums of money and learn about building and rebalancing diversified portfolios. 1 U.S. regulations require securities and commodities activities to be conducted in separate accounts.
Harris 66 Director Gary Katz 62 Director Philip Uhde 37 Director William Peterffy 33 Director Nicole Yuen 60 Director Jill Bright 60 Director Thomas Peterffy – Mr. Peterffy, our founder, has been at the forefront of applying computer technology to automate trading and brokerage functions since he emigrated from Hungary to the United States in 1965.
Harris 67 Director (Independent) Philip Uhde 38 Director (Independent) William Peterffy 34 Director Nicole Yuen 61 Director (Independent) Jill Bright 61 Director (Independent) Thomas Peterffy – Mr. Peterffy, our founder, has been at the forefront of applying computer technology to automate trading and brokerage functions since he emigrated from Hungary to the United States in 1965.
IBKR Campus offers self-directed courses at the Traders’ Academy; live and recorded webinars; our Traders’ Insight market commentary blog; IBKR Podcasts, a new podcast series that interviews thought leaders from across the financial industry; the IBKR Quant Blog; and our Student Trading Lab, in which educators bring real-world trading experiences to their classroom.
IBKR Campus offers self-directed courses at the Traders’ Academy; live and recorded webinars; our Traders’ Insight market commentary blog; IBKR Podcasts, a podcast series featuring interviews with financial industry thought leaders; the IBKR Quant Blog; IBKR-API, the source for all IBKR API documentation; and the Student Trading Lab, which allows educators to bring real-world trading experiences to their classroom.
While many brokerages, including some online brokerages, rely on manual procedures to execute many day - to - day functions, we employ proprietary technology to automate, or otherwise facilitate, many of the following functions: account opening process; order routing and best execution; seamless trading across all types of securities, futures and currencies around the world from one account; order types and analytical tools offered to customers; securities lending and short stock availability; delivery of customer information, such as confirmations, customizable real - time account statements, audit trails and regulatory trade reporting; ‎ 9 Table of Contents compliance; customer service; and risk management through automated real - time credit management of all new orders and margin monitoring.
While many brokerages, including some online brokerages, rely on employees performing manual procedures to execute many day - to - day functions, we employ proprietary technology to automate, or otherwise facilitate, many of the following functions: account opening and funding; smart order routing resulting in industry-leading execution quality; seamless trading across all types of securities, futures and currencies around the world from one account; diverse order types and analytical tools offered to customers; securities lending and short stock availability; delivery of customer information, such as confirmations, customizable real - time account statements, audit trails and regulatory trade reporting; compliance; customer service; and risk management through automated real - time credit management of all new orders and margin monitoring. ‎ 10 Table of Contents Research and Development One of our core strengths is our expertise in the rapid development and deployment of automated technology for the financial markets.
Technology Our proprietary technology is the key to our success. We believe that integrating our system with electronic exchanges and market centers worldwide results in transparency, liquidity and efficiencies of scale.
We believe that integrating our system with electronic exchanges and market centers worldwide results in transparency, liquidity and efficiencies of scale.
The involvement of our developers in each of these processes enables us to add features and further refine our software rapidly. Our internally - developed, fully integrated trading and risk management systems are unique and transact across all product classes. These systems have the flexibility to assimilate new exchanges and new product classes without compromising transaction speed or fault tolerance.
The involvement of our developers in each of these processes enables us to add features and further refine our software rapidly. Our internally - developed, fully integrated trading and risk management systems are unique and transact across all product classes.
Our proprietary technology infrastructure enables us to provide our customers with the ability to execute trades at among the lowest execution costs in the industry for comparable services. Customer trades are both automatically captured and reported in real time in our system. Our customers trade on more than 150 electronic exchanges and market centers in 33 countries around the world.
Our proprietary technology infrastructure enables us to provide our customers with the ability to execute trades at among the lowest execution costs in the industry for comparable services. Customer trades are both automatically captured and reported in real time in our system.
William Peterffy joined IBG LLC in 2019 to lead its Environmental, Social and Governance (ESG) efforts. Mr. William Peterffy joined the Company’s Board of Directors as an observer in 2019. Mr. William Peterffy is also a member of the Board of Trustees of the Collective Heritage Institute (commonly known as Bioneers) and focuses his efforts on sustainability issues.
William Peterffy joined the Company’s Board of Directors as an observer in 2019. Mr. William Peterffy is also a member of the Board of Trustees of the Collective Heritage Institute (commonly known as Bioneers) and focuses his efforts on sustainability issues. Prior to joining IBG LLC, Mr. William Peterffy worked as an investment analyst within the hedge fund industry. Mr.
Holdings Total Ownership % 24.5% 75.5% 100.0% Membership interests 102,927,703 316,609,102 419,536,805 3 Table of Contents Purchases of IBG LLC membership interests, held by Holdings, by the Company are governed by the exchange agreement among us, IBG LLC, Holdings and the historical members of IBG LLC, (the “Exchange Agreement”), a copy of which was filed as an exhibit to our Quarterly Report on Form 10 - Q for the quarter ended September 30, 2009 and filed with the SEC on November 9, 2009.
Holdings Total Ownership % 25.4% 74.6% 100.0% Membership interests 107,049,483 313,976,354 421,025,837 3 Table of Contents Purchases of IBG LLC membership interests, held by Holdings, by the Company are governed by the exchange agreement among us, IBG LLC, Holdings and the historical members of IBG LLC, (the “Exchange Agreement”), a copy of which was filed as an exhibit to our Quarterly Report on Form 10 - Q for the quarter ended September 30, 2009 and filed with the SEC on November 9, 2009.
This program is the first electronic meeting place that brings together individual investors, financial advisors, money managers, fund managers, research analysts, technology providers, business developers and administrators, allowing them to interact to form connections and conduct business. Mutual Fund Marketplace – The Mutual Fund Marketplace offers our customers access to more than 45,000 mutual funds worldwide, including more than 18,000 no-transaction-fee funds from more than 540 fund families . Bond Marketplace – The Bond Marketplace allows customers to search for the best yields from a vast universe of bonds from issuers in the Americas, Europe and Asia.
Cash balances above $2,750,000 remain subject to safeguarding under the SEC's Customer Protection Rule 15c3-3. Investors’ Marketplace SM – The Investors’ Marketplace SM is the first electronic meeting place that brings together individual investors, financial advisors, money managers, fund managers, research analysts, technology providers, business developers and administrators, allowing them to interact to form connections and conduct business. Mutual Fund Marketplace – The Mutual Fund Marketplace offers our customers access to more than 48,000 mutual funds worldwide, including more than 19,000 no-transaction-fee funds from more than 550 fund families . Bond Marketplace – The Bond Marketplace allows customers to search for the best yields from a vast universe of over one million bonds from issuers in the Americas, Europe and Asia.
Investors can assign their accounts to be traded by one or more advisors. Interactive Advisors also offers our customers Smart Beta Portfolios which combine the benefits of actively managed fund stock selection techniques with passive ETFs low-cost automation to provide broad market exposure and potentially higher returns, as well as Socially Responsible Investing.
Interactive Advisors also offers our customers Smart Beta Portfolios which combine the benefits of actively managed fund stock selection techniques with passive ETFs low-cost automation to provide broad market exposure and potentially higher returns, as well as Socially Responsible Investing. ‎ 9 Table of Contents Technology Our proprietary technology is the key to our success.
The tool consolidates data from a customer’s investment, checking, savings, annuity, incentive plans and credit card accounts, calculates GIPS ® verified time-weighted and money-weighted returns, and offers robust reporting and benchmarking capabilities. IB Risk Navigator SM – We offer to all customers our real - time market risk management platform that unifies exposure across multiple asset classes around the globe.
PortfolioAnalyst ® can consolidate data from a customer’s investment, checking, savings and annuity accounts, as well as incentive plans, credit card accounts, mortgages and student loans. IB Risk Navigator SM – We offer to all customers our real - time market risk management platform that unifies exposure across multiple asset classes around the globe.
Financial Conduct Authority (“FCA”) financial resources requirement; Interactive Brokers Ireland Limited (“IBIE”) is subject to the Central Bank of Ireland (“CBI”) financial resources requirement; IBKR 15 Table of Contents Financial Services AG (“IBKRFS”) is subject to the Swiss Financial Market Supervisory Authority (“FINMA”) eligible equity requirement; Interactive Brokers Central Europe Zrt.
(“IBC”) is subject to the Canadian Investment Regulatory Organization (“CIRO”) risk adjusted capital requirement; Interactive Brokers (U.K.) 16 Table of Contents Limited (“IBUK”) is subject to the United Kingdom’s (“U.K.”) Financial Conduct Authority (“FCA”) financial resources requirement; Interactive Brokers Ireland Limited (“IBIE”) is subject to the Central Bank of Ireland (“CBI”) financial resources requirement; IBKR Financial Services AG (“IBKRFS”) is subject to the Swiss Financial Market Supervisory Authority (“FINMA”) eligible equity requirement; Interactive Brokers Central Europe Zrt.
Broker-dealer customers can also select from among our modular functionalities, such as order routing, trade reporting or clearing, on specific products or exchanges where they may not have up - to - date technology to offer to their customers a complete global range of services and products.
Broker-dealer customers can also select from among our modular functionalities, such as order routing, trade reporting or clearing, on specific products or exchanges where they may not have up - to - date technology to offer to their customers a complete global range of services and products. Streamlined Client Service Program – The Streamlined Client Service Program offers a new level of service for brokers and advisors who want to handle tasks for their customers, with a simplified process for approving funding requests and signing agreements.
In addition, U.S. customers can use our Mobile Check Deposit to directly deposit checks drawn on a U.S. bank. Request for Payment Service – Through this new banking service, U.S. customers can make instant deposits, 24 hours a day, from their mobile banking app or other bank portal to fund their brokerage account with us.
Currently available for eligible customers in Latin America and the Caribbean (excluding Puerto Rico and the U.S. Virgin Islands). Request for Payment Service – Through this new banking service, U.S. customers can make instant deposits, 24 hours a day, from their mobile banking app or other bank portal to fund their brokerage account with us.
To achieve optimal performance from our systems and in response to changing market conditions, we continuously rewrite and upgrade our software. Use of the best available technology not only improves our performance but also helps us attract and retain talented developers.
Use of the best available technology not only improves our performance but also helps us attract and retain talented developers.
The system also offers customers the ability to modify positions through “what - if” scenarios that show hypothetical changes to the risk profile. Mutual Fund/ETF Parser – The Parser categorizes the individual component stocks within mutual funds and ETFs, giving an accurate, granular picture of the overall exposure to asset classes, industry sectors and companies. Portfolio Builder – Portfolio Builder supports our customers in setting up an investment strategy based on research and rankings from top buy-side providers and fundamental data; use filters to define the universe of equities that will comprise their strategy and back-test their strategy using up to three years of historical performance; work in hypothetical mode to adjust the strategy until the historical performance meets their standards; and with the click of a button let the system create the orders to invest in a strategy and track its performance in their portfolio. Environmental, Social and Governance (“ESG”) Tools IMPACT by Interactive Brokers SM – IMPACT by Interactive Brokers SM (“IMPACT App”) is a unique, simple and intuitive mobile app that helps customers easily align their portfolio with their values, with a goal to help shape the future they wish to see.
The system also offers customers the ability to modify positions through “what - if” scenarios that show hypothetical changes to the risk profile. Portfolio Builder – Portfolio Builder supports our customers in setting up an investment strategy based on research and rankings from top buy-side providers and fundamental data; use filters to define the universe of equities that will comprise their strategy and back-test their strategy using up to three years of historical performance; work in hypothetical mode to adjust the strategy until the historical performance meets their standards; and with the click of a button let the system create the orders to invest in a strategy and track its performance in their portfolio. Securities Lending Dashboard – The Securities Lending Dashboard is designed to help customers assess the short-selling activity for specific securities and inform trading decisions.
We continue to implement sustainable practices that help protect the environment. Most of our offices have completed an environmental review to assess current and best practices for energy, water and waste management. We also procured renewable power sources for 23 of our offices and data centers, representing about 46% of our operational footprint.
We continue to implement sustainable practices that help protect the environment. All of our offices have completed an environmental review to assess current and best practices for energy, water and waste management, and in 2023, we developed our Environmental Standards, a framework for managing our GHG, waste, water and recycling.
The service can be configured for one-time or recurring payments and permits customers to schedule future payments. Direct Deposit and Mobile Check Deposit – Our Direct Deposit program allows customers to automatically deposit paychecks, pension distributions and other recurring payments to their (non-retirement) brokerage account with us.
Our offering features a suite of cash management services, including: Direct Deposit and Mobile Check Deposit – Our Direct Deposit program allows customers to automatically deposit paychecks, pension distributions and other recurring payments to their (non-retirement) brokerage account with us.
As a result of our advanced electronic brokerage platform, we are especially attractive to sophisticated and active investors. Our customers can access IBKR’s premier technology through the following trading platforms: Trader Workstation SM (TWS) – The TWS is our flagship desktop trading platform, designed for active traders and investors who trade multiple products and require power and flexibility.
Our customers can choose the following trading platforms to match their trading style and expertise: IBKR Trader Workstation SM (TWS) – The TWS is our flagship desktop trading platform, designed for seasoned, active traders who trade multiple products and require power and flexibility.
Using a comprehensive directory of U.S. charities and non-profit organizations from GuideStar TM by Candid, IBKR GIVE SM lets customers easily donate to a charity matching their values, or search for a non-profit of their choice . Carbon Offsets – Using the IMPACT App, U.S. customers can offset their carbon emissions by purchasing carbon offsets and can use the Carbon Offsets tool to select from either greenhouse-gas emitting activities related to household, transportation and food, or enter a specific amount of carbon to offset.
Using a comprehensive directory of U.S. charities and non-profit organizations from GuideStar TM by Candid, IBKR GIVE SM lets customers easily donate to a charity matching their values, or search for a non-profit organization of their choice . Impact Dashboard – The Impact Dashboard helps customers to evaluate and invest in companies that align with their values.
We are a clearing member of OCC (formerly known as the Options Clearing Corporation), The Depository Trust and Clearing Corporation, the Chicago Mercantile Exchange Clearing House, and ICE Clear U.S. In addition, we are fully or partially self - cleared in Canada, the United Kingdom, Switzerland, France, Germany, Belgium, Austria, the Netherlands, Norway, India, Hong Kong, Japan and Australia.
We are a clearing member of OCC (formerly known as the Options Clearing Corporation), The Depository Trust and Clearing Corporation, the Chicago Mercantile Exchange Clearing House, and ICE Clear U.S.
Our mobile app provides the functionality needed to trade and manage accounts from anywhere. Client Portal – Client Portal is a streamlined web-based platform. It gives the customer access to every resource they need to trade, monitor and manage their account. IBKR GlobalTrader – IBKR GlobalTrader is a simple mobile trading app to trade stocks and options worldwide.
It gives customers access to every resource they need to view, trade and manage their account all with a single login. IBKR GlobalTrader – The IBKR GlobalTrader is a streamlined mobile trading app to trade stocks, EFTs, options and cryptocurrencies worldwide.
Our company is technology - focused, and our management team is hands - on and technology - savvy. Most members of the management team participate in algorithm design and supervise the creation of detailed specifications for new applications. The development queue is prioritized and highly disciplined.
Our systems are designed to detect trading venue malfunctions and quickly take corrective actions by re - routing pending orders when possible. Our company is technology - focused, and our management team is hands - on and technology - savvy. Most members of the management team participate in algorithm design and supervise the creation of detailed specifications for new applications.
She is currently a Board Director and Chair of the Compensation Committee for WOW Internet & Cable and also serves on the boards of two private companies, NYC-based Simulmedia and Grand Rapids-based Service Express. Ms.
Bright is currently a Board Director and Chair of the Compensation Committee for WOW Internet & Cable and serves on the board of Service Express, a Michigan-based private company. Ms. Bright completed her MBA at New York University's Stern School of Business.
This allows customers holding fully - paid long stock positions to enhance their returns. ‎ 6 Table of Contents Block Trade Desk – We offer broker - assisted trading through our Corporate Bond and Stock and Option block order desks. The desks help traders execute large or complex orders and monitor trades when customers are unable to do so.
We pay our customers interest on the collateral value generally equal to 50% of a market-based rate for lending the shares. This allows customers holding fully - paid long stock positions to enhance their returns. Block Trade Desk – We offer broker - assisted trading through our Corporate Bond and Stock and Option block order desks.
Customers Our customers primarily fall into two groups based on services provided, both of which take advantage of our low commissions as well as our best price execution. Cleared customers, the large majority of our customers, use our trade execution and clearing services, low financing rates, high interest paid (when available) and, under our IBKR Lite SM offering, commission-free trades.
Cleared customers, the large majority of our customers, use our trade execution and clearing services, low financing rates, high interest paid (when available) and, under our IBKR Lite SM offering, commission-free trades. Non-cleared customers use our trade execution services while choosing to clear with another prime broker or a custodian bank.
Yuen is a non-executive director of Aberdeen New Dawn Investment Trust PLC. Jill Bright – Ms. Bright has over three decades of experience in human resources management and administration.
Yuen’s 6-year tenure, she led the build-out of Credit Suisse’s brokerage business in mainland China and oversaw the bank’s equities business in North Asia. Ms. Yuen is a non-executive director of Asia Dragon Trust PLC. Jill Bright – Ms. Bright has over three decades of experience in human resources management and administration. Ms.
Funds deposited via Request for Payment are immediately available for trading. The service is available to customers with an account at J.P.
Funds deposited via Request for Payment are immediately available for trading.
Since our inception, we have been driven to transforming the electronic brokerage business through automation and innovation, with software development, product improvement, expansion of products and geographies, and management focus dedicated to this mission. We believe these are significant differentiators that set us apart from our competitors. We experience competition in hiring and retaining qualified employees.
We compete based on numerous factors, including quality of transaction execution, customer experience, products and services, technological excellence and innovation, reputation, global access, and price. Since our inception, we have been transforming the electronic brokerage business through automation and innovation, with software development, product improvement, expansion of products and geographies, and management focus dedicated to this mission.
Research and Development One of our core strengths is our expertise in the rapid development and deployment of automated technology for the financial markets. Our core software technology is developed internally, and we do not generally rely on outside vendors for software development or maintenance.
Our core software technology is developed internally, and we do not generally rely on outside vendors for software development or maintenance. To achieve optimal performance from our systems and in response to changing market conditions, we continuously rewrite and upgrade our software.
Fault tolerance, or the ability to maintain system performance despite exchange malfunctions or hardware failures, is crucial to ensuring best executions for our customers. Our systems are designed to detect exchange malfunctions and quickly take corrective actions by re - routing pending orders when possible.
These systems have the flexibility to assimilate new trading venues and new product classes without compromising transaction speed or fault tolerance. Fault tolerance, or the ability to maintain system performance despite trading venue malfunctions or hardware failures, is crucial to ensuring best possible executions for our customers.
IBKR GlobalAnalyst SM can search across business sectors and allows for filtering by region, country and market capitalization. PortfolioAnalyst ® – Our PortfolioAnalyst ® reporting tool is designed to allow customers to evaluate the performance of their complete financial portfolio.
IBKR GlobalAnalyst SM can search across business sectors and allows for filtering by region, country and market capitalization. PortfolioAnalyst ® – Our PortfolioAnalyst ® reporting tool allows customers to consolidate, track and analyze their portfolios, offering multi-custody solutions, advanced reporting, global support, benchmarks, risk metrics, GIPS® verified returns and powerful on-the-go analytics.
Prior to joining IBG LLC, Mr. William Peterffy worked as an investment analyst within the hedge fund industry. Mr. William Peterffy is the son of our Chairman, Mr. Thomas Peterffy. Nicole Yuen – Ms. Yuen is a seasoned investment banker with more than 20 years of experience. Ms.
William Peterffy is the son of our Chairman, Mr. Thomas Peterffy. Nicole Yuen – Ms. Yuen is a seasoned investment banker with more than 20 years of experience. Ms. Yuen most recently served as Managing Director, Head of Equities – North Asia and Vice Chairman – Greater China for Credit Suisse. During Ms.
Advisors can view the scores through the Advisor Portal and create custom pre-trade allocation groups and profiles in Trader Workstation SM to place orders and allocate trades for customers with similar risk profiles. ‎ 8 Table of Contents For introducing brokers and advisors, we offer: White Branding – Our large financial advisor and broker - dealer customers may “white brand” our trading interface, account management and reports with their firm’s identity.
Advisors can view the scores through the Advisor Portal and create custom pre-trade allocation groups and profiles in Trader Workstation SM to place orders and allocate trades for customers with similar risk profiles. Custom Indexing – Custom Indexing allows advisors to create custom portfolios for their customers that directly hold the underlying securities of an index, rather than purchasing a traditional index fund.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf periods of decreased performance, outages or delays on the Internet occur frequently or other critical issues concerning the Internet are not resolved, overall Internet usage or usage of our web-based products could increase more slowly or decline, which could have a material adverse effect on our business, financial condition and results of operations.
Biggest changeIf periods of decreased performance, outages or delays on the Internet occur frequently, growth in the usage of our web-based products could be delayed or decline, which could have a material adverse effect on our business, financial condition and results of operations. 32 Table of Contents We could be the target of a cyber-attack or experience a cybersecurity incident that impairs internal systems, degrades services we provide to customers, or results in a data compromise, causing reputational or monetary damages as a consequence.
Because, under the guidance, the measurement of the safeguarding asset shall take into account any potential loss events, if the CSP were to suffer a loss event that impacted our customers’ crypto-assets held by the CSP, then (subject to consultation with the SEC’s Office of the Chief Accountant) we may be required to recognize a reduction in the value of the safeguarding asset at the time of the CSP’s loss event, without recognizing a corresponding reduction in the value of the safeguarding liability, even though we have no legal obligation to our customers with respect to the crypto-assets held by the CSP.
Because, under the guidance, the measurement of the safeguarding asset shall take into account any potential loss events, if a CSP were to suffer a loss event that impacted our customers’ crypto-assets held by that CSP, then (subject to consultation with the SEC’s Office of the Chief Accountant) we may be required to recognize a reduction in the value of the safeguarding asset at the time of the CSP’s loss event, without recognizing a corresponding reduction in the value of the safeguarding liability, even though we have no legal obligation to our customers with respect to the crypto-assets held by the CSPs.
Future regulatory developments, including the treatment of certain cryptocurrency assets for U.S. federal income tax and foreign tax purposes, could have an adverse effect on our cryptocurrency offering through the CSP and on our business. A loss event incurred by the CSP may adversely impact our operating results.
Future regulatory developments, including the treatment of certain cryptocurrency assets for U.S. federal income tax and foreign tax purposes, could have an adverse effect on our cryptocurrency offering through CSPs and on our business. A loss event incurred by a CSP may adversely impact our operating results.
A disruption in our partnership with the CSP or in the Exchange Services provided by the CSP could have adverse effects on our customers’ confidence in our cryptocurrency offering through the CSP and on our business. A data breach at the CSP may result in irreversible losses, which would adversely affect our customers and our business.
A disruption in our partnership with a CSP or in the Exchange Services provided by a CSP could have adverse effects on our customers’ confidence in our cryptocurrency offering through CSPs and on our business. A data breach at the CSPs may result in irreversible losses, which would adversely affect our customers and our business.
Regulatory bodies include, in the U.S., the SEC, FINRA, the Board of Governors of the Federal Reserve System, the Chicago Board Options Exchange, the CME, the CFTC, and the NFA; in Canada, the IIROC and various Canadian securities commissions; in the United Kingdom, the FCA; in Ireland, the CBI; in Switzerland, the FINMA; in Hungary; the MNB; in India, the Securities and Exchange Board of India; in Hong Kong, the SFC; in Japan, the Financial Supervisory Agency and the Japan Securities Dealers Association; in Singapore, the MAS; and in Australia, the Australian Securities and Investment Commission.
Regulatory bodies include, in the U.S., the SEC, FINRA, the Board of Governors of the Federal Reserve System, the Chicago Board Options Exchange, the CME, the CFTC, and the NFA; in Canada, the CIRO and various Canadian securities commissions; in the United Kingdom, the FCA; in Ireland, the CBI; in Switzerland, the FINMA; in Hungary, the MNB; in India, the Securities and Exchange Board of India; in Hong Kong, the SFC; in Japan, the Financial Supervisory Agency and the Japan Securities Dealers Association; in Singapore, the MAS; and in Australia, the Australian Securities and Investment Commission.
Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee. ‎ 26 Table of Contents Any future acquisitions may result in significant transaction expenses, integration and consolidation risks and risks associated with entering new markets, and we may be unable to profitably operate our consolidated company.
Although we regularly review our credit exposures, default risk may arise from events or circumstances that are difficult to detect or foresee. 27 Table of Contents Any future acquisitions may result in significant transaction expenses, integration and consolidation risks and risks associated with entering new markets, and we may be unable to profitably operate our consolidated company.
In the event of a flaw in our pricing model and/or a failure in the related software, our pricing model may lead to unexpected and/or unprofitable trades, which may result in material trading losses. 27 Table of Contents The valuation of the financial instruments we hold may result in large and occasionally anomalous swings in the value of our positions and in our earnings in any period.
In the event of a flaw in our pricing model and/or a failure in the related software, our pricing model may lead to unexpected and/or unprofitable trades, which may result in material trading losses. 28 Table of Contents The valuation of the financial instruments we hold may result in large and occasionally anomalous swings in the value of our positions and in our earnings in any period.
The tax savings that we would actually realize as a result of this increase in tax basis likely would be significantly less than this amount multiplied by our effective tax rate due to a number of factors, including the allocation of a portion of the increase in tax 20 Table of Contents basis to foreign or non - depreciable fixed assets, the impact of the increase in the tax basis on our ability to use foreign tax credits and the rules relating to the amortization of intangible assets, for example.
The tax savings that we would actually realize as a result of this increase in tax basis likely would be significantly less than this amount multiplied by our effective tax rate due to a number of factors, including the allocation of a portion of the increase in tax basis to foreign or non - depreciable fixed assets, the impact of the increase in the tax basis on our ability to use foreign tax credits and the rules relating to the amortization of intangible assets, for example.
We cannot assure you that we will be able to compete effectively or efficiently with current or future competitors. These increasing levels of competition in the online trading industry could significantly harm this aspect of our business. We are subject to potential losses as a result of our clearing and execution activities.
We cannot assure you that we will be able to compete effectively or efficiently with current or future competitors. These increasing levels of competition in the online trading industry could significantly harm this aspect of our business. ‎ 26 Table of Contents We are subject to potential losses as a result of our clearing and execution activities.
As a result of these regulations, our future efforts to sell shares or raise additional capital may be delayed or prohibited. We may be subject to similar restrictions in other jurisdictions in which we operate. Regulatory and legal uncertainties could harm our business. The securities and derivatives businesses are heavily regulated.
As a result of these regulations, our future efforts to sell shares or raise additional capital may be delayed or prohibited. We may be subject to similar restrictions in other jurisdictions in which we operate. ‎ 29 Table of Contents Regulatory and legal uncertainties could harm our business. The securities and derivatives businesses are heavily regulated.
The size and occurrence of these offerings may be affected by market conditions. We may also issue additional shares of common stock or convertible debt securities to finance future acquisitions or business combinations. We currently have approximately 103 million outstanding shares of common stock.
The size and occurrence of these offerings may be affected by market conditions. We may also issue additional shares of common stock or convertible debt securities to finance future acquisitions or business combinations. We currently have approximately 107.0 million outstanding shares of common stock.
As a result of the IPO and the Redemptions by Holdings, the increase in the tax basis attributable to our interest in IBG LLC is $1.9 billion.
As a result of the IPO and the Redemptions by Holdings, the increase in the tax basis attributable to our interest in IBG LLC is $2.1 billion.
The tax basis increase of $11.4 billion assumes that (a) all remaining IBG LLC membership interests held by Holdings are purchased by us in one or more taxable transactions and (b) such purchases in the future are made at prices that reflect the closing share price as of December 31, 2022.
The tax basis increase of $12.4 billion assumes that (a) all remaining IBG LLC membership interests held by Holdings are purchased by us in one or more taxable transactions and (b) such purchases in the future are made at prices that reflect the closing share price as of December 31, 2023.
To continue to operate and to 23 Table of Contents expand our services internationally, we may have to comply with the regulatory controls of each country in which we conduct, or intend to conduct business, the requirements of which may not be clearly defined.
To continue to operate and to expand our services internationally, we may have to comply with the regulatory controls of each country in which we conduct, or intend to conduct business, the requirements of which may not be clearly defined.
Based on facts and assumptions as of December 31, 2022, including that subsequent purchases of IBG LLC interests will occur in fully taxable transactions, the potential tax basis increase resulting from the historical and future purchases of the IBG LLC interests held by Holdings could be as much as $11.4 billion.
Based on facts and assumptions as of December 31, 2023, including that subsequent purchases of IBG LLC interests will occur in fully taxable transactions, the potential tax basis increase resulting from the historical and future purchases of the IBG LLC interests held by Holdings could be as much as $12.4 billion.
We are a holding company and our primary assets are our approximately 24.5% equity interest in IBG LLC and our controlling interest and related rights as the sole managing member of IBG LLC and, as such, we operate and control all of the business and affairs of IBG LLC and are able to consolidate IBG LLC’s financial results into our financial statements.
We are a holding company and our primary assets are our approximately 25.4% equity interest in IBG LLC and our controlling interest and related rights as the sole managing member of IBG LLC and, as such, we operate and control all of the business and affairs of IBG LLC and are able to consolidate IBG LLC’s financial results into our financial statements.
In addition, neither the CSP nor any cryptocurrency custodian can provide absolute assurance that any or all of the CSP’s wallets will not be hacked or compromised such that the private keys are obtained by a third-party or otherwise compromised in a manner such that Cryptocurrency Assets are sent to one or more addresses that the CSP does not control, which could result in the loss of some or all of the Cryptocurrency Assets that the CSP holds in custody on behalf of our customers.
In addition, neither the CSPs nor any cryptocurrency custodian can provide absolute assurance that any or all of the CSPs’ wallets will not be hacked or compromised such that the private keys are obtained by a third party or otherwise compromised in a manner such that Cryptocurrency Assets are sent to one or more addresses that the CSPs do not control, which could result in the loss of some or all of the Cryptocurrency Assets that the CSPs hold in custody on behalf of our customers.
We have taken measures to maintain the health and safety of our employees, but widespread illness could negatively affect staffing levels within certain functions or locations. In addition, our ability to recruit, hire and onboard employees could be negatively impacted by new COVID-19 restrictions or another public health emergency.
We have taken measures to maintain the health and safety of our employees, but widespread illness could negatively affect staffing levels within certain functions or locations. In addition, our ability to recruit, hire and onboard employees could be negatively impacted by a public health emergency.
We are dependent on IBG LLC to distribute cash to us in amounts sufficient to pay our tax liabilities and other expenses.
We depend on IBG LLC to distribute cash to us in amounts sufficient to pay our tax liabilities and other expenses.
Thomas Peterffy, our founder and Chairman, and his affiliates beneficially own approximately 90.5% of the economic interests and all of the voting interests in Holdings, which owns all of our Class B common stock, representing approximately 75.5% of the combined voting power of all classes of our voting stock. As a result, Mr.
Thomas Peterffy, our founder and Chairman, and his affiliates beneficially own approximately 91.3% of the economic interests and all of the voting interests in Holdings , which owns all of our Class B common stock, representing approximately 74.6% of the combined voting power of all classes of our voting stock. As a result, Mr.
Regulation of the cryptocurrency industry continues to evolve and is subject to change. Securities and commodities laws and regulations and other bodies of laws can apply to certain cryptocurrency assets. These laws and regulations are complex and the interpretations of them may be subject to challenge by the relevant regulators.
Securities and commodities laws and regulations and other bodies of laws can apply to certain cryptocurrency assets. These laws and regulations are complex and the interpretations of them may be subject to challenge by the relevant regulators.
To the extent any of the CSP’s private keys are lost, destroyed, unable to be accessed by the CSP, or otherwise compromised and no backup of such private key is accessible, the CSP will be unable to access the Cryptocurrency Assets held in the respective wallets.
To the extent any of the CSPs’ private keys are lost, destroyed, unable to be accessed by the CSPs, or otherwise compromised and no backup of such private key(s) is accessible, the CSPs may be unable to access the Cryptocurrency Assets held in the respective wallets.
Any failure on our part to anticipate or respond adequately to technological advancements, customer requirements or changing industry standards, or any significant delays in the development, introduction or availability of new services, products or enhancements could have a material adverse effect on our business, financial condition and results of operations.
Any failure on our part to anticipate or respond adequately to technological advancements, customer requirements or changing industry standards, or any significant delays in the development, introduction or availability of new services, products or enhancements could have a material adverse effect on our business, financial condition and results of operations. 25 Table of Contents The loss of our key employees would materially adversely affect our business.
Even though the Company is not responsible for the custody or safeguarding of crypto-assets, the Company is deemed to be in scope of SAB 121. Pursuant to SAB 121, we measure the crypto-asset safeguarding liability and the corresponding safeguarding asset at the fair value of the crypto-assets held by the CSP for our customers.
Even though we are not responsible for the safeguarding of crypto-assets at the CSPs, our customers’ crypto-assets held at the CSPs are deemed to be in scope of SAB 121. Pursuant to SAB 121, we measure the crypto-asset safeguarding liability and the corresponding safeguarding asset at the fair value of the crypto-assets held by the CSPs for our customers.
These measures may have negatively impacted businesses, market participants, our counterparties and customers, and the global economy and could continue to do so for a prolonged period of time.
These measures may negatively impact businesses, market participants, our counterparties and customers, and the global economy and could continue for a prolonged period of time.
The impact of the COVID-19 pandemic, including from subsequent outbreaks or new variants, or from another public health emergency, on our future financial results could be significant but currently cannot be quantified, as it will depend on numerous evolving factors that cannot be accurately predicted, including, but not limited to, the duration and spread of the pandemic; its impact on our customers, employees and vendors; governmental regulations in response to the pandemic; and the overall impact of the pandemic on the economy and society, among other factors.
The impact of a public health emergency on our future financial results could be significant but currently cannot be quantified, as it would depend on numerous evolving factors that cannot be accurately predicted, including, but not limited to, the duration and spread of the public health emergency; its impact on our customers, employees and vendors; governmental regulations in response to the public health emergency; and the overall impact of the public health emergency on the economy and society, among other factors.
The response of governments and societies to the COVID-19 pandemic, which included temporary closures of certain businesses; social distancing; travel restrictions, “shelter in place” and other governmental regulations; and reduced consumer spending due to job losses, significantly impacted volatility in the financial, commodities and energy markets, and general economic conditions.
The response of governments and societies to a public health emergency, which could include temporary closures of certain businesses; social distancing; travel restrictions, “shelter in place” and other governmental regulations; and reduced consumer spending due to job losses, may significantly impact volatility in the financial, commodities and energy markets, and general economic conditions.
IBC, IBUK, IBIE, IBKRFS, IBCE, IBHK, and IBSG are subject to similar change in control regulations promulgated by the IIROC in Canada, the FCA in the United Kingdom, the CBI in Ireland, the CSSF in Luxembourg, the FINMA in Switzerland, the MNB in Hungary, the SFC in Hong Kong, and the MAS in Singapore, respectively.
Ltd. are subject to similar change in control regulations promulgated by the CIRO in Canada, the FCA in the United Kingdom, the CBI in Ireland, the FINMA in Switzerland, the MNB in Hungary, the SFC in Hong Kong, and the MAS in Singapore, respectively.
After such restrictions were lifted, we reopened our offices to all employees and adopted a hybrid work model for our offices globally. As a result, any disruption to our 21 Table of Contents information technology systems, including from cyber incidents, could have a material adverse effect on our business.
As a result of our hybrid work model, which we adopted for our offices globally, any disruption to our information technology systems, including from cyber incidents, could have a material adverse effect on our business.
Our net interest income and profitability could be negatively affected by lower benchmark interest rates caused by central banks lowering target benchmark rates in an attempt to buffer their economies from new COVID-19 outbreaks or another public health emergency. A substantial portion of our employees were impacted by local COVID-19 restrictions.
Our net interest income and profitability could be negatively affected by lower benchmark interest rates caused by central banks lowering target benchmark rates in an attempt to buffer their economies from a public health emergency .
We have entered into an agreement with a Cryptocurrency Service Provider (“CSP”), which provides (i) a cryptocurrency exchange platform and services whereby investors can buy and sell certain cryptocurrencies from or to other customers of the CSP or liquidity providers and (ii) custody services for certain cryptocurrencies (collectively, the “Exchange Services”), enabling our customers to trade and custody Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH) and potentially other cryptocurrencies, (collectively, "Cryptocurrency Assets") via the CSP.
We have entered into agreements with third-party CSPs, which provide (i) cryptocurrency exchange platforms and services whereby investors can buy and sell certain cryptocurrencies and (ii) custody services for certain cryptocurrencies (collectively, the “Exchange Services”), enabling some of our customers to trade and custody Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Bitcoin Cash (BCH) and potentially other cryptocurrencies, (collectively, "Cryptocurrency Assets") via CSPs.
Although our larger institutional customers use leased data lines to communicate with us, our ability to increase the speed with which we provide services to consumers and to increase the scope and quality of such services is limited by and dependent upon the speed and reliability of our customers’ access to the Internet, which is beyond our control.
Our ability to provide services to consumers and increase the scope and quality of such services is limited by and dependent upon the speed and reliability of our customers’ unrestricted access to the Internet, which is beyond our control.
Assuming no anti - dilution adjustments based on combinations or divisions of our common stock, the offerings referred to above could result in the issuance by us of up to an additional approximately 317 million shares of common stock.
Assuming no anti - dilution adjustments based on combinations or divisions of our common stock, the offerings referred to above could result in the issuance by us of up to an additional approximately 314.0 million shares of common stock. It is possible, however, that such shares could be issued in one or a few large transactions.
In addition, changes in current laws or regulations or in governmental policies could adversely affect our business, financial condition and results of operations. We are subject to regulatory oversight and examination by numerous governmental and self-regulatory authorities.
In addition, changes in current laws or regulations or in governmental policies could adversely affect our business, financial condition and results of operations.
Access to the Cryptocurrency Assets is controllable only by the possessor of the unique private key relating to the digital wallet in which such Cryptocurrency Assets are held.
The CSPs are responsible for securing the customers’ Cryptocurrency Assets and protecting them from loss or theft. Access to the Cryptocurrency Assets is controllable only by the possessor of the unique private key(s) relating to the digital wallet in which such Cryptocurrency Assets are held.
We do not provide execution, custody or safeguarding services for the customers’ crypto-assets and do not maintain (or have access to) the cryptographic key information and wallets necessary to access the crypto-assets, nor do we have any legal title or claim to those crypto-assets. The CSP is responsible for securing the customers’ crypto-assets and protecting them from loss or theft.
IB LLC does not provide execution, custody or safeguarding services for the customers’ Cryptocurrency Assets and does not maintain (or have access to) the cryptographic key information and wallets necessary to access the Cryptocurrency Assets, nor does IB LLC have any legal title or claim to those Cryptocurrency Assets.
In addition to the risks identified elsewhere in this Annual Report on Form 10 - K, the following risk factors apply to our business results of operations and financial condition: Risks Related to Our Company Structure Future sales of our common stock in the public market could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
Risks Related to Our Company Structure Future sales of our common stock in the public market could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us . Control by Mr.
Both we and the CSP rely on computer software, hardware and telecommunications infrastructure and networking to provide the respective services to our customers with respect to trading and custody of the Cryptocurrency Assets.
We may encounter technical issues which would result in disruption or interruption of our customers’ access to their CSP accounts. Both we and the CSPs rely on computer software, hardware and telecommunications infrastructure and networking to provide the respective services to our customers with respect to trading and custody of the Cryptocurrency Assets.
Although we have been at the forefront of many of these developments in the past, we may not be able to keep up with these rapid changes in the future, develop new technology, realize a return on amounts invested in developing new technologies or remain competitive in the future. 22 Table of Contents The loss of our key employees would materially adversely affect our business.
Although we have been at the forefront of many of these developments in the past, we may not be able to keep up with these rapid changes in the future, develop new technology, realize a return on amounts invested in developing new technologies or remain competitive in the future. ‎ 31 Table of Contents New developments in the field of Artificial Intelligence (“AI”) could enable competitors to offer new products or services never before seen in the marketplace.
These computer-based systems and services are inherently vulnerable to disruption, delay, or failure, which may cause our customers to lose access to our trading platform and the Exchange Services provided by the CSP.
These computer-based systems and services are inherently vulnerable to disruption, delay, or failure, which may cause our customers to lose access to our trading platform and the Exchange Services provided by the CSPs. Any such disruption could have an adverse effect on our customers’ confidence in our cryptocurrency offering through the CSPs and an adverse effect on our business.
Any of these events, particularly if they (individually or in the aggregate) result in a loss of confidence in our company or electronic brokerage firms in general, could have a material adverse effect on our business, financial condition and results of operations. 25 Table of Contents We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business.
Any of these events, particularly if they (individually or in the aggregate) result in a loss of confidence in our company or electronic brokerage firms in general, could have a material adverse effect on our business, financial condition and results of operations. We are subject to stringent and complex data privacy rules.
FINRA defines control as ownership of 25% or more of the firm’s equity by a single entity or person and would include a change in control of a parent company.
FINRA Rule 1017 generally provides that FINRA approval must be obtained in connection with any transaction resulting in a change in control of a member firm. FINRA defines control as ownership of 25% or more of the firm’s equity by a single entity or person and would include a change in control of a parent company.
The varying compliance requirements of these different regulatory jurisdictions, which are often unclear, may limit our ability to continue existing international operations and further expand internationally. Our direct market access clearing and non - clearing brokerage operations face intense competition.
The varying compliance requirements of these different regulatory jurisdictions, which are often unclear, may limit our ability to continue existing international operations and further expand internationally. We are subject to risks relating to litigation and potential securities laws liability.
Since the second quarter of 2011, we have declared and paid a quarterly cash dividend of $0.10 per share. Although not required, we currently intend to pay quarterly dividends of $0.10 per share to our common stockholders for the foreseeable future. Our future efforts to sell shares or raise additional capital may be delayed or prohibited by regulations.
Since the second quarter of 2011, we have declared and paid a quarterly cash dividend of $0.10 per share. Although not required, we currently intend to pay quarterly dividends of $0.10 per share to our common stockholders for the foreseeable future. Our direct market access clearing and non - clearing brokerage operations face intense competition.
We are required to pay Holdings for the benefit relating to additional tax depreciation or amortization deductions we claim as a result of the tax basis step - up our subsidiaries received in connection with our initial public offering (“IPO”) and certain subsequent redemptions of Holdings membership interests.
To the extent we need funds to pay such taxes, or for any other purpose, and IBG LLC is unable to provide such funds, it could have a material adverse effect on our business, financial condition and results of operations. 23 Table of Contents We are required to pay Holdings for the benefit relating to additional tax depreciation or amortization deductions we claim as a result of the tax basis step - up our subsidiaries received in connection with our initial public offering (“IPO”) and certain subsequent redemptions of Holdings membership interests.
It is possible, however, that such shares could be issued in one or a few large transactions. 19 Table of Contents We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock.
Our systems and operations are also potentially vulnerable to damage or interruption from human error, cyber-attacks, natural disasters, power loss, telecommunication failures, break - ins, sabotage, computer viruses, intentional acts of vandalism and similar events. We do not have fully redundant systems, and our formal business continuity plan does not include restoration of all services.
Our service has experienced periodic system interruptions, which we believe will continue to occur from time to time. Our systems and operations are also potentially vulnerable to damage or interruption from human error, cyber-attacks, natural disasters, power loss, telecommunication failures, break - ins, sabotage, computer viruses, intentional acts of vandalism and similar events.
Our reliance on our computer software could cause us great financial harm in the event of any disruption or corruption of our computer software. We may experience technology failures while developing our software. We rely on our computer software to receive and properly process internal and external data.
We may experience technology failures while developing our software. We rely on our computer software to receive and properly process internal and external data.
We may also face claims of infringement that could interfere with our ability to use technology that is material to our business operations.
It is possible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe on our rights. We may also face claims of infringement that could interfere with our ability to use technology that is material to our business operations.
Our backup services are currently limited to U.S. and major European markets. We currently have limited separate backup facilities dedicated to our non - U.S. operations. It is our intention to provide for and progressively deploy backup facilities for our global facilities over time.
We do not have fully redundant systems, and our formal business continuity plan does not include restoration of all services. We currently have limited separate backup facilities dedicated to our non - U.S. operations. It is our intention to provide for and progressively deploy backup facilities for all facilities and infrastructure globally over time.
We are exposed to risks and uncertainties inherent in doing business in international markets, particularly in the heavily regulated brokerage industry.
During 2023, approximately 30% of our net revenues were generated by our operating subsidiaries outside the U.S. We are exposed to risks and uncertainties inherent in doing business in international markets, particularly in the heavily regulated brokerage industry.
We operate a trading platform that allows our customers to access a digital asset exchange and custody services provided by a third-party CSP to buy, sell and hold crypto-assets in an account in the customer’s name at the CSP.
Eligible customers of IB LLC can enroll to access a digital asset exchange and custody services provided by one or more CSPs to buy, sell and hold Cryptocurrency Assets in an account in the customer’s name at the CSP.
Any such litigation, whether successful or unsuccessful, could result in substantial costs and the diversion of resources and the attention of management, any of which could negatively affect our business. We are subject to risks relating to litigation and potential securities laws liability.
Any such litigation, whether successful or unsuccessful, could result in substantial costs and the diversion of resources and the attention of management, any of which could negatively affect our business. Our reliance on our computer software could cause us great financial harm in the event of any disruption or corruption of our computer software.
Many clearing houses of which we are members also have the authority to assess their members for additional funds if the clearing fund is depleted.
Many clearing houses of which we are members also have the authority to assess their members for additional funds if the clearing fund is depleted. A large clearing member default could result in a substantial cost to us if we are required to pay such assessments. We are exposed to risks associated with our international operations.
Any such disruption could have an adverse effect on our customers’ confidence in our cryptocurrency offering through the CSP and an adverse effect on our business. ‎ 28 Table of Contents Changes in laws and regulations regarding cryptocurrency may negatively impact our ability to enable our customers to buy, hold and sell cryptocurrencies in the future and may adversely affect our business.
Changes in laws and regulations regarding cryptocurrency may negatively impact our ability to enable our customers to buy, hold and sell cryptocurrencies in the future and may adversely affect our business. Regulation of the cryptocurrency industry continues to evolve and is subject to change.
Our ability to facilitate transactions successfully and provide high quality customer service also depends on the efficient and uninterrupted operation of our computer and communications hardware and software systems. Our service has experienced periodic system interruptions, which we believe will continue to occur from time to time.
If our systems fail to perform, we could experience unanticipated disruptions in operations, slower response times or decreased customer service and customer satisfaction. Our ability to facilitate transactions successfully and provide high quality customer service also depends on the efficient and uninterrupted operation of our computer and communications hardware and software systems.
A weakness in securities markets, such as a slowdown causing reduction in trading volume in U.S. or foreign securities and derivatives, has historically resulted in reduced transaction revenues and would have a material adverse effect on our business, financial condition and results of operations. Our business could be harmed by a systemic market event. Some market participants could be overleveraged.
These risks could have a material adverse effect on our business, financial condition and results of operations. ‎ 24 Table of Contents Our business could be harmed by a systemic market event. Some market participants could be overleveraged.
To the extent we need funds to pay such taxes, or for any other purpose, and IBG LLC is unable to provide such funds, it could have a material adverse effect on our business, financial condition and results of operations.
If our tax expense were to increase, or if the ultimate determination of our taxes owed is for an amount in excess of the amounts previously accrued, it could have a material adverse effect on our business, financial condition, cash flows, and results of operations.
We rely primarily on trade secret, contract, copyright, patent and trademark laws to protect our proprietary technology. It is possible that third parties may copy or otherwise obtain and use our proprietary technology without authorization or otherwise infringe on our rights.
Risks Related to Our Intellectual Property, Technology, Cybersecurity and Data Privacy We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business. We rely primarily on trade secret, contract, copyright, patent and trademark laws to protect our proprietary technology.
If these rules are made more stringent, our trading revenues and profits as a designated market maker could be adversely affected. We rely on a third party to provide our customers the ability to access cryptocurrency trading and custody services .
If these rules are made more stringent, our trading revenues and profits as a designated market maker could be adversely affected. Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risks.
Removed
Risks Related to Our Business Our business may be harmed by global events beyond our control, including overall slowdowns in securities trading.
Added
In addition to the risks identified elsewhere in this Annual Report on Form 10 - K, the following is a summary of the risk factors that apply to our business results of operations and financial condition. Please read the detailed discussion of these risks following the summary.
Removed
Like other brokerage and financial services firms, our business and profitability are directly affected by elements that are beyond our control, such as economic and political conditions, broad trends in business and finance, changes in volume of securities and futures transactions, changes in the markets in which such transactions occur and changes in how such transactions are processed.
Added
Thomas Peterffy of a majority of the combined voting power of our common stock may give rise to conflicts of interests and could discourage a change of control that other stockholders may favor, which could negatively affect our stock price, and adversely affect stockholders in other ways.  We depend on IBG LLC to distribute cash to us in amounts sufficient to pay our tax liabilities and other expenses.  We are required to pay Holdings for the benefit relating to additional tax depreciation or amortization deductions we claim as a result of the tax basis step - up our subsidiaries received in connection with our initial public offering (“IPO”) and certain subsequent redemptions of Holdings membership interests.  Certain provisions in our amended and restated certificate of incorporation may prevent efforts by our stockholders to change our direction or management.
Removed
The impact of the COVID-19 pandemic or another public health emergency may have a material adverse impact on our business and results of operations. In March 2020, the World Health Organization recognized the outbreak of COVID-19 caused by a novel strain of the coronavirus as a pandemic. The pandemic has affected all countries in which we operate.
Added
Risks Related to Our Business  Macroeconomic, geopolitical and other challenges and uncertainties could have a negative impact on our business.  Our business could be harmed by a systemic market event.  Damage to our reputation could harm our business .  The impact of a public health emergency may have a material adverse impact on our business and results of operations. 20 Table of Contents  Our future success will depend on our response to the demand for new services, products and technologies.  The loss of our key employees would materially adversely affect our business.  We may not pay dividends on our common stock at any time in the foreseeable future.  Our direct market access clearing and non - clearing brokerage operations face intense competition.  We are subject to potential losses as a result of our clearing and execution activities.  We are exposed to risks associated with our international operations.  We are subject to counterparty risk whereby defaults by parties with whom we do business can have an adverse effect on our business, financial condition and results of operations.  Any future acquisitions may result in significant transaction expenses, integration and consolidation risks and risks associated with entering new markets, and we may be unable to profitably operate our consolidated company.  Because our revenues and profitability depend on trading volume and interest rate levels, they are prone to significant fluctuations and are difficult to predict.  We may incur material trading losses from our market making activities.  Reduced spreads in securities pricing, levels of trading activity and trading through market makers could harm our business.  We may incur losses in our market making activities in the event of failures of our proprietary pricing model.  The valuation of the financial instruments we hold may result in large and occasionally anomalous swings in the value of our positions and in our earnings in any period.  We are exposed to losses due to lack of perfect information.  Rules governing designated market makers may require us to make unprofitable trades or prevent us from making profitable trades.  Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risks.
Removed
As certain of our subsidiaries are members of FINRA, we are subject to certain regulations regarding changes in control of our ownership. FINRA Rule 1017 generally provides that FINRA approval must be obtained in connection with any transaction resulting in a change in control of a member firm.
Added
Risks Related to Laws, Regulations and Litigation  Our future efforts to sell shares or raise additional capital may be delayed or prohibited by regulations.  Regulatory and legal uncertainties could harm our business.  We are subject to risks relating to litigation and potential securities laws liability.  Heightened regulatory and legislative requirements and changes in the U.S. and globally have increased our compliance, regulatory and other risks and costs .  We may incur additional tax expense or become subject to additional tax liabilities . ‎ 21 Table of Contents Risks Related to Our Intellectual Property, Technology, Cybersecurity and Data Privacy  We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business.  Our reliance on our computer software could cause us great financial harm in the event of any disruption or corruption of our computer software.
Removed
As announced on August 10, 2020, we agreed to settle certain matters related to our historical anti-money laundering and Bank Secrecy Act practices and procedures with FINRA, the SEC and the CFTC.
Added
We may experience technology failures while developing our software.  We depend on our proprietary technology, and our future results may be impacted if we cannot maintain technological superiority in our industry.  We do not have fully redundant systems.
Removed
As part of the settlements, we agreed to pay penalties of $15 million to FINRA, $11.5 million to the SEC and $11.5 million to the CFTC, plus approximately $700,000 in disgorgement. In addition, we agreed to continue the retention of an independent consultant to review the implementation of our enhanced compliance practices and procedures.
Added
System failures could harm our business.  Failure of third-party systems on which we rely could adversely affect our business.  Internet - related issues may reduce or slow the growth in the use of our services in the future.  We could be the target of a cyber-attack or experience a cybersecurity incident that impairs internal systems, degrades services we provide to customers, or results in a data compromise, causing reputational or monetary damages as a consequence.  We are subject to stringent and complex data privacy rules.
Removed
We are also cooperating with a United States Department of Justice inquiry concerning these matters, and while its outcome cannot be predicted, we do not believe that the resolution of this inquiry is likely to have a materially adverse effect on our financial results.
Added
Failure to comply with these rules could have an adverse effect on our business, financial condition, and results of operation.
Removed
A large clearing member default could result in a substantial cost to us if we are required to pay such assessments. ‎ 24 Table of Contents We are exposed to risks associated with our international operations. During 2022, approximately 31% of our net revenues were generated by our operating subsidiaries outside the U.S.
Added
Risks Related t o Cryptocurrency  We rely on third-party Cryptocurrency Service Providers (“CSPs”) to provide our customers the ability to access cryptocurrency trading and custody services.  A data breach at the CSP may result in irreversible losses, which would adversely affect our customers and our business.  We may encounter technical issues which would result in disruption or interruption of our customers’ access to their CSP accounts.  Changes in laws and regulations regarding cryptocurrency may negatively impact our ability to enable our customers to buy, hold and sell cryptocurrencies in the future and may adversely affect our business.  A loss event incurred by the CSP may adversely impact our operating results. ‎ 22 Table of Contents Risks Related to Our Company Structure Future sales of our common stock in the public market could lower our stock price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
Removed
We do not have fully redundant systems. System failures could harm our business. If our systems fail to perform, we could experience unanticipated disruptions in operations, slower response times or decreased customer service and customer satisfaction.
Added
Risks Related to Our Business Macroeconomic, geopolitical and other challenges and uncertainties could have a negative impact on our business. We are affected by domestic and international macroeconomic and political conditions, as well as, the level of interest rates, inflation, and by fiscal and monetary policy.
Removed
Critical issues concerning the commercial use of the Internet, such as ease of access, security, privacy, reliability, cost, and quality of service, remain unresolved and may adversely impact the growth of Internet use.
Added
Our business depends in part on the level of global trading volumes and volatility, which are affected by factors beyond our control. These factors may cause a weakness in securities markets, leading to a slowdown in trading volumes, which would result in reduced transaction revenues.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeLocation Space (sq. feet) Principal Usage North America Greenwich, CT 163,510 Headquarters Chicago, IL 100,871 Office space and data center New York, NY 16,940 Office space Other (9 locations) 39,262 Office space and data center Europe Zug, Switzerland 39,240 Office space and data center Budapest, Hungary 36,202 Office space Dublin, Ireland 17,982 Office space London, United Kingdom 12,969 Office space Tallinn, Estonia 12,731 Office space Other (2 locations) 10,610 Office space Asia - Pacific Mumbai, India 81,553 Office space Hong Kong 26,020 Office space and data center Other (6 locations) 18,974 Office space ‎ 30 Table of Contents
Biggest changeLocation Space (sq. feet) Principal Usage North America Greenwich, CT 163,510 Headquarters Chicago, IL 100,871 Office space and data center New York, NY 16,940 Office space Other (9 locations) 39,328 Office space and data center Europe Budapest, Hungary 36,782 Office space Zug, Switzerland 36,635 Office space and data center Dublin, Ireland 17,982 Office space London, United Kingdom 17,457 Office space Tallinn, Estonia 12,731 Office space Other (2 locations) 2,769 Office space Asia - Pacific Mumbai, India 81,553 Office space Hong Kong 26,020 Office space and data center Other (6 locations) 20,444 Office space ‎ 37 Table of Contents
The table below presents certain information with respect to our leased facilities as of December 31, 2022.
The table below presents certain information with respect to our leased facilities as of December 31, 2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed12 unchanged
Biggest changeWe are generally the subject of regulatory inquiries regarding subjects including, but not limited to: audit trail reporting, trade reporting, best execution and order execution procedures, display of market data, short sales, margin lending, exchange fees charged to customers, anti - money laundering or potentially manipulative trading by customers, procedures for accounts managed by independent financial advisors or referred by third parties, technology development practices, record-keeping, business continuity planning and other topics of recent regulatory interest.
Biggest changeWe are generally the subject of regulatory inquiries regarding subjects including, but not limited to: audit trail reporting, trade reporting, best execution and order execution procedures, display of market data, short sales, margin lending, exchange fees charged to customers, anti - money laundering or potentially manipulative trading by customers, sanctions compliance, procedures for accounts managed by independent financial advisors or referred by third parties, technology development practices, registration, record-keeping, business continuity planning, cybersecurity and other topics of recent regulatory interest.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+1 added−1 removed3 unchanged
Biggest changeFrom 2019 through 2022, the Company issued 320,000 shares to IBG LLC for distribution to eligible customers of certain of its subsidiaries.
Biggest changeFrom 2019 through 2023, the Company issued 420,000 shares and an additional 50,000 shares in January 2024 to IBG LLC for distribution to eligible customers of certain of its subsidiaries.
The comparison assumes $100 was invested on December 31, 2017 in our common stock and each of the foregoing indices and assumes reinvestment of dividends before consideration of income taxes. ___________________________ The Nasdaq Financial - 100 Index includes 100 of the largest domestic and international financial securities listed on The Nasdaq Stock Market based on market capitalization.
The comparison assumes $100 was invested on December 31, 2018 in our common stock and each of the foregoing indices and assumes reinvestment of dividends before consideration of income taxes. ___________________________ The Nasdaq Financial - 100 Index includes 100 of the largest domestic and international financial securities listed on The Nasdaq Stock Market based on market capitalization.
Securities Authorized for Issuance under Equity Compensation Plans The table below presents information about shares of common stock available for future awards under all the Company’s equity compensation plans as of December 31, 2022 . The Company has not made grants of common stock outside of its equity compensation plans.
Securities Authorized for Issuance under Equity Compensation Plans The table below presents information about shares of common stock available for future awards under all the Company’s equity compensation plans as of December 31, 2023 . The Company has not made grants of common stock outside of its equity compensation plans.
Dividends and Other Restrictions We currently intend to pay quarterly dividends of $0.10 per share to our common stockholders for the foreseeable future. Stockholder Return Performance Graph The graph below compares cumulative total stockholder return on our common stock, the S&P 500 Index and the Nasdaq Financial - 100 Index from December 31, 2017 to December 31, 2022.
Dividends and Other Restrictions We currently intend to pay quarterly dividends of $0.10 per share to our common stockholders for the foreseeable future. Stockholder Return Performance Graph The graph below compares cumulative total stockholder return on our common stock, the S&P 500 Index and the Nasdaq Financial - 100 Index from December 31, 2018 to December 31, 2023.
The stock performance graph shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate the same by reference, nor shall it be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Exchange Act. 32 Table of Contents Use of Proceeds On July 27, 2020, the Company filed a Prospectus Supplement on Form 424B (File Number 333-240121) with the SEC to re-register up to 990,000 shares of common stock, offering the opportunity for eligible persons to receive awards in the form of an offer to receive such shares by participating in one or more promotions that are designed to attract new customers to the Company’s brokerage platform, increase assets held with the Company’s brokerage business and enhance customer loyalty.
The stock performance graph shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate the same by reference, nor shall it be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the Exchange Act. 39 Table of Contents Use of Proceeds On July 26, 2023, the Company filed a Prospectus Supplement on Form 424B (File Number 333-273451) with the SEC to re-register up to 630,000 shares of common stock, offering the opportunity for eligible persons to receive awards in the form of an offer to receive such shares by participating in one or more promotions that are designed to attract new customers to the Company’s brokerage platform, increase assets held with the Company’s brokerage business and enhance customer loyalty.
Number of securities to be Number of securities issued upon exercise of Weighted-average exercise remaining available for outstanding options, price of outstanding options future awards under warrants and rights warrants and rights equity compensation plans (1) Equity compensation plans approved by security holders N/A N/A 1,235,009 Total — — 1,235,009 ___________________________ (1) Amount represents restricted stock units available for future issuance of grants under the Company’s amended 2007 Stock Incentive Plan.
Number of securities to be Number of securities issued upon exercise of Weighted-average exercise remaining available for outstanding options, price of outstanding options future awards under warrants and rights warrants and rights equity compensation plans (1) Equity compensation plans approved by security holders N/A N/A 9,996,406 Total — — 9,996,406 ___________________________ (1) Amount represents restricted stock units available for future issuance of grants under the Company’s amended 2007 Stock Incentive Plan (the “Plan”).
Thomas Peterffy and his affiliates from approximately 84.6% at the IPO to approximately 90.5% as of December 31 , 2022. See Note 4 – “Equity and Earnings per Share” and Note 10 – “Employee Incentive Plans” to the financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
Thomas Peterffy and his affiliates from approximately 84.6% at the IPO to approximately 91.3% as of December 31 , 2023. See Note 4 – “Equity and Earnings per Share” and Note 10 – “Employee Incentive Plans” to the financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
As of February 16, 2023, there were 26 holders of record, which does not reflect those shares held beneficially or those shares held in “street” name. Accordingly, the number of beneficial owners of our common stock exceeds this number.
As of February 20, 2024, there were 35 holders of record, which does not reflect those shares held beneficially or those shares held in “street” name. Accordingly, the number of beneficial owners of our common stock exceeds this number.
As a consequence of these redemption transactions, and distribution of shares to employees , IBG, Inc.’s interest in IBG LLC has increased to approximately 24.5%, with Holdings owning the remaining 75.5% as of December 31 , 2022. The redemptions also resulted in an increase in the Holdings interest held by Mr.
As a consequence of these redemption transactions, and distribution of shares to employees , IBG, Inc.’s interest in IBG LLC has increased to approximately 25.4%, with Holdings owning the remaining 74.6% as of December 31 , 2023. The redemptions also resulted in an increase in the Holdings interest held by Mr.
On August 1, 2022, the Company filed a Prospectus Supplement on Form 424B5 (File Number 333-240121) with the SEC to issue 3,271,390 shares of common stock (with a fair value of $192 million) in exchange for an equivalent number of shares of member interests in IBG LLC.
On July 27, 2023, the Company filed a Prospectus Supplement on Form 424B5 (File Number 333-273451) with the SEC to issue 2,632,748 shares of common stock (with a fair value of $229 million) in exchange for an equivalent number of shares of member interests in IBG LLC.
Removed
The Company intends to submit for shareholder approval to authorize additional restricted stock units in the future as needed to maintain its equity compensation plans. ‎ ‎ ‎ 33 Table of Contents
Added
On April 20, 2023, the Company’s stockholders approved an additional 10,000,000 shares to be distributed under the Plan. This increased the total number of shares available to be distributed under the Plan to 40,000,000 shares, from 30,000,000 shares. ‎ ‎ ‎ 40 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear-Ended December 31, 2022 2021 2020 (in dollars, except share amounts) Adjusted diluted EPS Diluted EPS - GAAP $ 3.75 $ 3.24 $ 2.42 Non-GAAP adjustments Currency diversification strategy, net 0.24 0.09 0.05 Mark-to-market on investments 0.12 0.07 (0.08) Remeasurement of TRA liability (0.06) (0.01) 0.04 Customer compensation expense - - 0.24 Bad debt expense - - 0.00 Income tax effect of above adjustments 1 (0.07) (0.03) (0.04) Remeasurement of deferred income taxes 0.07 0.01 (0.14) Total non-GAAP adjustments 0.30 0.13 0.08 Adjusted diluted EPS $ 4.05 $ 3.37 $ 2.49 Diluted weighted average common shares outstanding 101,299,609 95,009,880 80,638,908 Note: Amounts may not add due to rounding. _________________________ 1 The income tax effect is estimated using the statutory income tax rates applicable to the Company. ‎ 49 Table of Contents Liquidity and Capital Resources We maintain a highly liquid balance sheet.
Biggest changeYear-Ended December 31, 2023 2022 2021 Adjusted net revenues (in millions) Net revenues - GAAP $ 4,340 $ 3,067 $ 2,714 Non-GAAP adjustments Currency diversification strategy, net 80 100 37 Mark-to-market on investments (46) 52 30 Remeasurement of TRA liability (7) (6) (1) Total non-GAAP adjustments 27 146 66 Adjusted net revenues $ 4,367 $ 3,213 $ 2,780 Adjusted income before income taxes (in millions) Income before income taxes - GAAP $ 3,069 $ 1,998 $ 1,787 Non-GAAP adjustments Currency diversification strategy, net 80 100 37 Mark-to-market on investments (46) 52 30 Remeasurement of TRA liability (7) (6) (1) Bad debt expense 5 - - Total non-GAAP adjustments 32 146 66 Adjusted income before income taxes $ 3,101 $ 2,144 $ 1,853 Adjusted pre-tax profit margin 71% 67% 67% Adjusted net income available for common stockholders (in millions) Net income available for common stockholders - GAAP $ 600 $ 380 $ 308 Non-GAAP adjustments Currency diversification strategy, net 20 24 8 Mark-to-market on investments (12) 13 7 Remeasurement of TRA liability (7) (6) (1) Bad debt expense 1 - - Income tax effect of above adjustments 1 (2) (7) (3) Remeasurement of deferred income taxes 7 7 1 Total non-GAAP adjustments 8 30 12 Adjusted net income available for common stockholders $ 608 $ 410 $ 320 Adjusted diluted EPS (in dollars, except share amounts) Diluted EPS - GAAP $ 5.67 $ 3.75 $ 3.24 Non-GAAP adjustments Currency diversification strategy, net 0.19 0.24 0.09 Mark-to-market on investments (0.11) 0.12 0.07 Remeasurement of TRA liability (0.07) (0.06) (0.01) Bad debt expense 0.01 0.00 0.00 Income tax effect of above adjustments 1 (0.01) (0.07) (0.03) Remeasurement of deferred income taxes 0.07 0.07 0.01 Total non-GAAP adjustments 0.08 0.30 0.13 Adjusted diluted EPS $ 5.75 $ 4.05 $ 3.37 Diluted weighted average common shares outstanding 105,846,877 101,299,609 95,009,880 Note: Amounts may not add due to rounding. _________________________ 1 The income tax effect is estimated using the statutory income tax rates applicable to the Company. ‎ 55 Table of Contents Liquidity and Capital Resources We maintain a highly liquid balance sheet.
As a percentage of total net revenues, execution, clearing and distribution fees were 11% for the current year and 9% for the prior year. Employee Compensation and Benefits Employee compensation and benefits include salaries, bonuses and other incentive compensation plans, group insurance, contributions to benefit programs and other related employee costs.
As a percentage of total net revenues, execution, clearing and distribution fees were 9% for the current year and 11% for the prior year. Employee Compensation and Benefits Employee compensation and benefits include salaries, bonuses and other incentive compensation plans, group insurance, contributions to benefit programs and other related employee costs.
A tax position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. 53 Table of Contents Accounting Pronouncements Issued but Not Yet Adopted For additional information regarding FASB Accounting Standards Updates (“ASU”s) that have been issued but not yet adopted and that may impact the Company, refer to Note 2 – “Significant Accounting Policies” to the audited consolidated financial statements in Part II, Item 8 of this annual Report on form 10-K.
A tax position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized on settlement. 59 Table of Contents Accounting Pronouncements Issued but Not Yet Adopted For additional information regarding FASB Accounting Standards Updates (“ASU”s) that have been issued but not yet adopted and that may impact the Company, refer to Note 2 – “Significant Accounting Policies” to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on form 10-K.
Income derived from program deposits is reported in other net interest income in the table above. ‎ ‎ 43 Table of Contents (2) Interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within each customer’s account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments). ‎ (3) Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company’s consolidated statements of comprehensive income.
Income derived from program deposits is reported in other net interest income in the table above. ‎ 50 Table of Contents (2) Interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within each customer’s account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments). ‎ (3) Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company’s consolidated statements of comprehensive income.
Securities lending generates (1) net interest earned on lending a security, which is based on supply and demand for that security, and (2) interest earned on the cash collateral deposited for the loan of that security, which is based on benchmark interest rates.
A securities lending transaction generates (1) net interest earned on lending a security, which is based on supply and demand for that security, and (2) interest earned on the cash collateral deposited for the loan of that security, which is based on benchmark interest rates.
The full effect of the GLOBAL is captured in comprehensive income. ‎ 36 Table of Contents Certain Trends and Uncertainties We believe that our current operations may be favorably or unfavorably impacted by the following trends that may affect our financial condition and results of operations: Retail participation in the equity markets has fluctuated in the past due to investor sentiment, market conditions and a variety of other factors.
The full effect of the GLOBAL is captured in comprehensive income. ‎ 43 Table of Contents Certain Trends and Uncertainties We believe that our current operations may be favorably or unfavorably impacted by the following trends and uncertainties that may affect our financial condition and results of operations: Retail participation in the equity markets has fluctuated in the past due to investor sentiment, market conditions and a variety of other factors.
We believe these non-GAAP financial measures are useful to investors and analysts in evaluating the operating performance of the business. We define adjusted net revenues as net revenues adjusted to remove the effect of our currency diversification strategy, our net mark-to-market gains (losses) on investments, and the remeasurement of our Tax Receivable Agreement (“TRA”) liability. We define adjusted income before income taxes as income before income taxes adjusted to remove the effect of our currency diversification strategy, our net mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, customer compensation expenses, and unusual bad debt expense. We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects attributable to IBG, Inc. of our currency diversification strategy, our net mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, customer compensation expenses, unusual bad debt expense, and the remeasurement of certain deferred tax assets. We define adjusted diluted EPS as adjusted net income available for common stockholders divided by the diluted weighted average number of shares outstanding for the period.
We believe these non-GAAP financial measures are useful to investors and analysts in evaluating the operating performance of the business. We define adjusted net revenues as net revenues adjusted to remove the effect of our currency diversification strategy, our net mark-to-market gains (losses) on investments, and the remeasurement of our Tax Receivable Agreement (“TRA”) liability. We define adjusted income before income taxes as income before income taxes adjusted to remove the effect of our currency diversification strategy, our net mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, and unusual bad debt expense. We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects attributable to IBG, Inc. of our currency diversification strategy, our net mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, unusual bad debt expense, and the remeasurement of certain deferred tax assets. We define adjusted diluted EPS as adjusted net income available for common stockholders divided by the diluted weighted average number of shares outstanding for the period.
These funds are primarily intended to finance each individual operating subsidiary ’s local operations, and thus would not be available to fund U.S. domestic operations unless repatriated through payment of dividends to IBG LLC. As of December 31, 2022, we had no intention to repatriate any amounts from non - U.S. operating subsidiaries . With the enactment of the U.S.
These funds are primarily intended to finance each individual operating subsidiary ’s local operations, and thus would not be available to fund U.S. domestic operations unless repatriated through payment of dividends to IBG LLC. As of December 31, 2023, we had no intention to repatriate any amounts from non - U.S. operating subsidiaries . With the enactment of the U.S.
See “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10 - K for a discussion of other risks that may affect our financial condition and results of operations. ‎ 37 Table of Contents Trading Volumes and Customer Statistics The tables below present historical trading volumes and customer statistics for our business.
See “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10 - K for a discussion of other risks that may affect our financial condition and results of operations. ‎ 44 Table of Contents Trading Volumes and Customer Statistics The tables below present historical trading volumes and customer statistics for our business.
Our cash flows from investing activities are primarily related to other investments, capitalized internal software development, purchases and sales of memberships, trading rights and shares at exchanges where we trade, and strategic investments where such investments may 50 Table of Contents enable us to offer better execution alternatives to our current and prospective customers, allow us to influence exchanges to provide competing products at better prices using sophisticated technology, or enable us to acquire either technology or customers faster than we could develop them on our own.
Our cash flows from investing activities are primarily related to other investments, capitalized internal software development, purchases and sales of memberships, trading rights and shares at exchanges where we trade, and strategic investments where such investments may enable us to offer better execution alternatives to our current and prospective customers, allow us to influence exchanges to provide competing products at better prices using sophisticated technology, or enable us to acquire either technology or customers faster than we could develop them on our own.
Interest Income and Interest Expense We earn interest on margin lending to customers secured by marketable securities these customers hold with us; from our investments in U.S. and foreign government securities; from borrowing and lending securities; on deposits (in positive interest rate currencies) with banks; and on certain customers’ cash balances in negative rate currencies.
Interest Income and Interest Expense We earn interest on margin lending to customers that is secured by marketable securities these customers hold with us; from our investments in U.S. and foreign government securities; from borrowing and lending securities; on deposits (in positive interest rate currencies) with banks; and on certain customers’ cash balances in negative rate currencies.
As a percentage of total net revenues, non-interest expenses were 35% for the current year and 34% for the prior year. Execution, Clearing and Distribution Fees Execution, clearing and distribution fees include the costs of executing and clearing trades, net of liquidity rebates received from various exchanges and market centers, as well as regulatory fees and market data fees.
As a percentage of total net revenues, non-interest expenses were 29% for the current year and 35% for the prior year. Execution, Clearing and Distribution Fees Execution, clearing and distribution fees include the costs of executing and clearing trades, net of liquidity rebates received from various exchanges and market centers, as well as regulatory fees and market data fees.
As a percentage of total net revenues, general and administrative expenses were 5% for the current year and 6% for the prior year. Customer Bad Debt Customer bad debt expense consists primarily of losses incurred by customers in excess of their assets with us, net of amounts recovered by us.
As a percentage of total net revenues, general and administrative expenses were 5% for both the current year and the prior year. Customer Bad Debt Customer bad debt expense consists primarily of losses incurred by customers in excess of their assets with us, net of amounts recovered by us.
Employee compensation and benefits expenses as a percentage of adjusted net revenues were 14% for both the current year and the prior year. Occupancy, Depreciation and Amortization Occupancy expenses consist primarily of rental payments on office and data center leases and related occupancy costs, such as utilities.
Employee compensation and benefits expenses as a percentage of adjusted net revenues were 12% for the current year and 14% for the prior year. Occupancy, Depreciation and Amortization Occupancy expenses consist primarily of rental payments on office and data center leases and related occupancy costs, such as utilities.
Because cash collateral from securities lending is held in specially designated bank accounts for the benefit of customers, in accordance with the U.S. customer protection rules, interest on this collateral is reported as net interest on segregated cash.
Interest on this collateral is reported as net interest on segregated cash, since cash collateral from securities lending is held in specially-designated bank accounts for the benefit of customers, in accordance with U.S. customer protection rules.
This increase is attributable to total comprehensive income, partially offset by distributions and dividends paid during 2022. Cash Flows The table below presents our cash flows from operating activities, investing activities and financing activities for the periods indicated.
This increase is attributable to total comprehensive income, partially offset by distributions and dividends paid during 2023. Cash Flows The table below presents our cash flows from operating activities, investing activities and financing activities for the periods indicated.
Year Ended December 31, 2020: For a discussion of changes in cash flows for the year ended December 31, 2020 refer to our Annual Report on Form 10-K filed with the SEC on February 26, 2021. Senior Notes In 2020, IBG LLC initiated a program to offer senior notes in private placements to certain qualified customers of IB LLC.
Year Ended December 31, 2021: For a discussion of changes in cash flows for the year ended December 31, 2021 refer to our Annual Report on Form 10-K filed with the SEC on February 25, 2022. Senior Notes In 2020, IBG LLC initiated a program to offer senior notes in private placements to certain qualified customers of IB LLC.
During the year ended December 31, 2022, the Company did not issue any senior notes. Regulatory Capital Requirements As of December 31, 2022, all operating subsidiaries were in compliance with their respective regulatory capital requirements.
During the year ended December 31, 2023, the Company did not issue any senior notes. Regulatory Capital Requirements As of December 31, 2023, all operating subsidiaries were in compliance with their respective regulatory capital requirements.
The proliferation of electronic exchanges and market centers since the early 1990s has allowed us to integrate our software with an increasing number of trading venues, creating one automatically functioning, computerized platform that requires minimal human intervention. Our customer base is diverse with respect to geography and type.
The proliferation of electronic exchanges and market centers has allowed us to integrate our software with an increasing number of trading venues, creating one automatically functioning, computerized platform that requires minimal human intervention. Our customer base is diverse with respect to geography and type.
Through December 31, 2022, approximately $243 million of cumulative cash payments have been made. (2) The Tax Act implemented a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries to be paid over an eight-year period starting in 2018. We believe this tax will not have a material impact on our liquidity.
Through December 31, 2023, approximately $268 million of cumulative cash payments have been made. (2) The Tax Act implemented a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries to be paid over an eight-year period starting in 2018. We believe this tax will not have a material impact on our liquidity.
As of December 31, 2022, there were no other definitive agreements with respect to any material acquisition. 52 Table of Contents Certain Information Concerning Off - Balance - Sheet Arrangements We may be exposed to a risk of loss not reflected in our consolidated financial statements for futures products, which represent our obligations to settle at contracted prices, and which may require us to repurchase or sell in the market at prevailing prices.
As of December 31, 2023, there were no definitive agreements with respect to any material acquisition. 58 Table of Contents Certain Information Concerning Off - Balance - Sheet Arrangements We may be exposed to a risk of loss not reflected in our consolidated financial statements for futures products, which represent our obligations to settle at contracted prices, and which may require us to repurchase or sell in the market at prevailing prices.
As a percentage of total net revenues, occupancy, depreciation and amortization expenses were 3% for both the current year and the prior year. ‎ 44 Table of Contents Communications Communications expenses consist primarily of the cost of voice and data telecommunications lines supporting our business, including connectivity to exchanges and market centers around the world.
As a percentage of total net revenues, occupancy, depreciation and amortization expenses were 2% for the current year and 3% for the prior year. ‎ 51 Table of Contents Communications Communications expenses consist primarily of the cost of voice and data telecommunications lines supporting our business, including connectivity to exchanges and market centers around the world.
Interest-bearing liabilities consist of customer credit balances, securities loaned, and other interest-bearing liabilities. 42 Table of Contents Yields are generally a reflection of benchmark interest rates in each currency in which the Company and its customers hold cash balances.
Interest-bearing liabilities consist of customer credit balances, securities loaned, and other interest-bearing liabilities. Yields are generally a reflection of benchmark interest rates in each currency in which the Company and its customers hold cash balances.
The impact of the COVID-19 or another public health emergency going forward will depend on numerous evolving factors that cannot be accurately predicted, including the duration and spread of the pandemic, governmental regulations in response to the pandemic, and the effectiveness of vaccinations and other medical advancements. We continue to be exposed to the risks and uncertainties of doing business in international markets, particularly in the heavily regulated brokerage industry.
The impact of a public health emergency going forward will depend on numerous evolving factors that cannot be accurately predicted, including the duration and spread of the pandemic, governmental regulations in response to the pandemic, and the effectiveness of vaccinations and other medical advancements. We continue to be exposed to the risks and uncertainties of doing business in international markets, particularly in the heavily regulated brokerage industry.
We specialize in routing orders and executing and processing trades in stocks, options, futures, forex, bonds, mutual funds, ETFs and precious metals on more than 150 electronic exchanges and market centers in 33 countries and 26 currencies seamlessly around the world.
We specialize in routing orders and executing and processing trades in stocks, options, futures, forex, bonds, mutual funds, ETFs and precious metals on more than 150 electronic exchanges and market centers in 34 countries and 27 currencies seamlessly around the world.
DARTs per Account (Annualized) 206 339 (39%) ___________________________ (1) Excludes non - customers. (2) Daily average revenue trades ("DARTs") are based on customer orders. (3) Commissionable order – a customer order that generates commissions. 39 Table of Contents Results of Operations The table below presents our consolidated results of operations for the periods indicated.
DARTs per Account (Annualized) 172 206 (17%) ___________________________ (1) Excludes non - customers. (2) Daily average revenue trades ("DARTs") are based on customer orders. (3) Commissionable order – a customer order that generates commissions. 46 Table of Contents Results of Operations The table below presents our consolidated results of operations for the periods indicated.
Occupancy, depreciation and amortization expenses, for the current year, increased $10 million, or 13%, compared to the prior year, to $90 million, mainly due to higher costs related to the expansion of our physical space for both offices and data centers.
Occupancy, depreciation and amortization expenses, for the current year, increased $9 million, or 10%, compared to the prior year, to $99 million, mainly due to higher costs related to the expansion of our physical space for both offices and data centers.
If we pursue any additional strategic acquisitions, we may incur additional capital expenditures. ‎ 51 Table of Contents Contractual Obligations Summary Our contractual obligations principally include obligations associated with our outstanding indebtedness and interest payments as of December 31, 2022.
If we pursue any additional strategic acquisitions, we may incur additional capital expenditures. ‎ 57 Table of Contents Contractual Obligations Summary Our contractual obligations principally include obligations associated with our outstanding indebtedness and interest payments as of December 31, 2023.
Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for the current year was approximately 24.0%, compared to approximately 22.6% for the prior year.
Our share of IBG LLC’s net income, excluding Holdings’ noncontrolling interest, for the current year was approximately 25.0%, compared to approximately 24.0% for the prior year.
A discussion of our approach to managing foreign currency exposure is contained in Part II, Item 7A of this Annual Report on Form 10-K entitled “Quantitative and Qualitative Disclosures about Market Risk.” Other income, for the current year, decreased $105 million, compared to the prior year, to a loss of $107 million.
A discussion of our approach to managing foreign currency exposure is contained in Part II, Item 7A of this Annual Report on Form 10-K entitled “Quantitative and Qualitative Disclosures about Market Risk.” Other income, for the current year, increased $96 million, compared to the prior year, to a loss of $11 million.
Year Ended December 31 , 2021 : For a discussion of changes in cash flows for the year ended December 31, 2021 refer to our Annual Report on Form 10-K filed with the SEC on February 25, 2022.
Year Ended December 31 , 2022 : For a discussion of changes in cash flows for the year ended December 31, 2022 refer to our Annual Report on Form 10-K filed with the SEC on February 24, 2023.
Instead of commission revenue, IBKR Lite SM trades generate payments from market makers and others to whom we route these orders, which are reported in commissions . Our commissions are geographically diversified. In 2022, 2021, and 2020 we generated 37%, 39% and 29%, respectively, of commissions from operations conducted by our subsidiaries outside the U.S.
IBKR Lite SM trades generate payments from market makers and others to whom we route these orders, which are reported in commissions . Our commissions are geographically diversified. In 2023, 2022, and 2021 we generated 37%, 37% and 39%, respectively, of commissions from operations conducted by our subsidiaries outside the U.S.
Year Ended December 31, 2021 compared to the Year Ended December 31, 2020 For a discussion of changes for the year ended December 31, 2021 compared to the Year Ended December 31, 2020 refer to the Annual Report on Form 10-K filed with the SEC on February 25, 2022. ‎ 46 Table of Contents Non-GAAP Financial Measures We use certain non-GAAP financial measures as additional measures to enhance the understanding of our financial results.
Year Ended December 31, 2022 compared to the Year Ended December 31, 2021 For a discussion of changes for the year ended December 31, 2022 compared to the Year Ended December 31, 2021 refer to the Annual Report on Form 10-K filed with the SEC on February 24, 2023. ‎ 53 Table of Contents Non-GAAP Financial Measures We use certain non-GAAP financial measures as additional measures to enhance the understanding of our financial results.
See the “Non-GAAP Financial Measures” section below in this Item 7 for additional details. Diluted earnings per share were $3.75 for the year ended December 31, 2022 (“current year”), compared to $3.24 for the year ended December 31, 2021 (“prior year”). Adjusted diluted earnings per share were $4.05 for the current year, compared to $3.37 for the prior year.
See the “Non-GAAP Financial Measures” section below in this Item 7 for additional details. Diluted earnings per share were $5.67 for the year ended December 31, 2023 (“current year”), compared to $3.75 for the year ended December 31, 2022 (“prior year”). Adjusted diluted earnings per share were $5.75 for the current year, compared to $4.05 for the prior year.
Pretax profit margin was 65% for the current year and 66% for the prior year.
Pretax profit margin was 71% for the current year and 65% for the prior year.
Capital expenditures for property, equipment, and intangible assets were approximately $69 million , $77 million and $50 million for the three years ended December 31, 2022, 2021, and 2020, respectively.
Capital expenditures for property, equipment, and intangible assets were approximately $49 million , $69 million and $77 million for the three years ended December 31, 2023, 2022, and 2021, respectively.
We pay interest on customer cash balances (in sufficiently positive interest rate currencies); for borrowing and lending securities; on deposits (in negative interest rate currencies) with banks; and on our borrowings. Net interest income (interest income less interest expense), for the current year, increased $520 million, or 45%, compared to the prior year, to $1,668 million.
We pay interest on customer cash balances (in sufficiently positive interest rate currencies); for borrowing and lending securities; on deposits (in negative interest rate currencies) with banks; and on our borrowings. Net interest income (interest income less interest expense), for the current year, increased $1,126 million, or 68%, compared to the prior year, to $2,794 million.
The effects of our currency diversification strategy are reported as (1) a component of other income (loss of $100 million) in the consolidated statements of comprehensive income and (2) other comprehensive income (“OCI”) (loss of $111 million) in the consolidated statements of financial condition and the consolidated statements of comprehensive income.
The effects of our currency diversification strategy are reported as (1) a component of other income (loss of $80 million) in the consolidated statements of comprehensive income and (2) other comprehensive income (“OCI”) (gain of $122 million) in the consolidated statements of financial condition and the consolidated statements of comprehensive income.
Historically, our consolidated equity has consisted primarily of accumulated retained earnings, which to date have been sufficient to fund our operations and growth. Our consolidated equity increased 14% to $11.6 billion as of December 31, 2022, from $10.2 billion as of December 31, 2021.
Historically, our consolidated equity has consisted primarily of accumulated retained earnings, which to date have been sufficient to fund our operations and growth. Our consolidated equity increased 21% to $14.1 billion as of December 31, 2023, from $11.6 billion as of December 31, 2022.
For example, in U.S. dollars we pay interest to customers when the federal funds effective rate is above 0.50%, which it has been since May 2022. Central banks in many other countries have also increased their interest rates in recent months.
Rising rates also increase our interest expense. For example, in U.S. dollars we pay interest to customers on their qualified cash balances when the federal funds effective rate is above 0.50%, which it has been since May 2022. Central banks in many other countries have also increased their interest rates in recent months.
As of December 31, 2022, total assets were $115.1 billion of which approximately $114.2 billion, or 99.2%, were considered liquid. Decisions on the allocation of capital are based upon, among other things, prudent risk management guidelines, potential liquidity and cash flow needs for current and future business activities, regulatory capital requirements, and projected profitability.
As of December 31, 2023, total assets were $128.4 billion of which approximately $127.2 billion, or 99.0%, were considered liquid. Decisions on the allocation of capital are based upon, among other things, prudent risk management guidelines, potential liquidity and cash flow needs for current and future business activities, regulatory capital requirements, and projected profitability.
In addition, our customers can use our trading platform to trade certain cryptocurrencies through a third-party cryptocurrency service provider that executes, clears and custodies the cryptocurrencies. As an electronic broker, we execute, clear and settle trades globally for both institutional and individual customers.
In addition, our customers can use our trading platform to trade certain cryptocurrencies through third-party cryptocurrency service providers that execute, clear and custody the cryptocurrencies. As an electronic broker, we execute, clear and settle trades globally for both institutional and individual customers.
Average commission per commissionable order for cleared customers, for the current year, increased 19% to $2.83, compared to $2.37 for the prior year, as our customers’ trading volume mix resulted in higher per order commissions in options, stocks and forex. 41 Table of Contents Other Fees and Services We earn fee income on services provided to customers, which includes market data fees, risk exposure fees, payments for order flow from exchange-mandated programs, minimum activity fees, and other fees and services charged to customers.
Average commission per commissionable order for cleared customers, for the current year, increased 11% to $3.14, compared to $2.83 for the prior year, as our customers’ trading volume mix resulted in higher per order commissions across options, futures and stocks. 48 Table of Contents Other Fees and Services We earn fee income on services provided to customers, which includes market data fees, risk exposure fees, payments for order flow from exchange-mandated programs, FDIC sweep fees, minimum activity fees, and other fees and services charged to customers.
Currently, approximately 79% of our customers reside outside the U.S. in over 200 countries and territories, and over 50% of new customers come from outside the U.S . Approximately 59% of our customers’ equity is in institutional accounts such as hedge funds, financial advisors, proprietary trading desks and introducing brokers.
Currently, approximately 81% of our customers reside outside the U.S. in over 200 countries and territories, and over 80% of new customers come from outside the U.S . Approximately 57% of our customers’ equity is in institutional accounts such as hedge funds, financial advisors, proprietary trading firms and introducing brokers.
Retail transaction volumes may not be sustainable and are not predictable. Consolidation among market centers may adversely affect the value of our IB SmartRouting SM software. Price competition among broker-dealers may continue to intensify. Benchmark interest rates have fluctuated over the past years due to economic conditions.
Retail transaction volumes may not be sustainable and are not predictable. Consolidation among market centers may adversely affect the value of our IB SmartRouting SM software. Price competition among broker-dealers may continue to intensify. Benchmark interest rates tend to fluctuate with economic conditions.
Year Ended December 31, 2022 2021 2020 Revenues Commissions 43% 50% 50% Other fees and services 6% 8% 8% Other income (loss) (3%) 0% 3% Total non-interest income 46% 58% 61% Interest income 88% 51% 51% Interest expense (33%) (8%) (12%) Total net interest income 54% 42% 39% Total net revenues 100% 100% 100% Non-interest expenses Execution, clearing and distribution fees 11% 9% 13% Employee compensation and benefits 15% 15% 15% Occupancy, depreciation and amortization 3% 3% 3% Communications 1% 1% 1% General and administrative 5% 6% 11% Customer bad debt 0% 0% 1% Total non-interest expenses 35% 34% 43% Income before income taxes 65% 66% 57% Income tax expense 5% 6% 3% Net income 60% 60% 53% Less net income attributable to noncontrolling interests 48% 49% 44% Net income available for common stockholders 12% 11% 9% Year Ended December 31 , 2022 (“current year”) compared to the Year Ended December 31, 2021 (“prior year”) Net Revenues Total net revenues, for the current year, increased $353 million, or 13%, compared to the prior year, to $3,067 million.
Year Ended December 31, 2023 2022 2021 Revenues Commissions 31% 43% 50% Other fees and services 5% 6% 8% Other income (loss) (0%) (3%) 0% Total non-interest income 36% 46% 58% Interest income 144% 88% 51% Interest expense (79%) (33%) (8%) Total net interest income 64% 54% 42% Total net revenues 100% 100% 100% Non-interest expenses Execution, clearing and distribution fees 9% 11% 9% Employee compensation and benefits 12% 15% 15% Occupancy, depreciation and amortization 2% 3% 3% Communications 1% 1% 1% General and administrative 5% 5% 6% Customer bad debt 0% 0% 0% Total non-interest expenses 29% 35% 34% Income before income taxes 71% 65% 66% Income tax expense 6% 5% 6% Net income 65% 60% 60% Less net income attributable to noncontrolling interests 51% 48% 49% Net income available for common stockholders 14% 12% 11% Year Ended December 31 , 2023 (“current year”) compared to the Year Ended December 31, 2022 (“prior year”) Net Revenues Total net revenues, for the current year, increased $1,273 million, or 42%, compared to the prior year, to $4,340 million.
DARTs for cleared customers, i.e., customers for whom we execute trades, as well as clear and carry positions, for the current year, decreased 18% to 1.9 million, compared to 2.3 million for the prior year.
Total DARTs for cleared and execution-only customers, for the current year, decreased 9% to 1.9 million, compared to 2.1 million for the prior year. DARTs for cleared customers, i.e., customers for whom we execute trades, as well as clear and carry positions, for the current year, decreased 8% to 1.7 million, compared to 1.9 million for the prior year.
Execution fees are paid primarily to electronic exchanges and market centers on which we trade. Clearing fees are paid to clearing houses and clearing agents. Market data fees are paid to third parties to receive streaming price quotes and related information.
Execution fees are paid primarily to electronic exchanges and market centers on which we trade. Clearing fees are paid to clearing houses and clearing agents. Market data fees, which are associated with market data revenue included in other fees and services, are paid to third parties to receive streaming price quotes and related information.
For the years ended December 31, 2022, 2021, and 2020, $10 million, $15 million and $21 million were reported in other fees and services, respectively. For the years ended December 31, 2022, 2021, and 2020, $4 million, $0 million and $5 million were reported in other income, respectively.
For the years ended December 31, 2023, 2022, and 2021, $19 million, $10 million and $15 million were reported in other fees and services, respectively. For the years ended December 31, 2023, 2022, and 2021, $7 million, $4 million and $0 million were reported in other income, respectively.
As a result, in the event dividends were to be paid to the Company in the future by a non - U.S. operating subsidiaries , the Company would not be required to accrue and pay income taxes on such dividends, except for foreign taxes in the form of dividend withholding tax, if any, imposed on the recipient of the distribution or dividend distribution tax imposed on the payor of the distribution.
As a result, in the event dividends were to be paid to the Company in the future by a non - U.S. operating subsidiaries , the Company would not be required to accrue and pay income taxes on such dividends, except for foreign taxes in the form of dividend withholding tax, and in connection with accumulated other comprehensive income/loss from currency exchange rate changes not previously taxed in the U.S., if any, imposed on the recipient of the distribution or dividend distribution tax imposed on the payor of the distribution.
As of December 31, 2022, we held approximately 24.5% ownership interest in IBG LLC. Holdings holds approximately 75.5% ownership interest in IBG LLC. We reflect Holdings’ ownership as a noncontrolling interest in our consolidated statements of financial condition, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows.
As of December 31, 2023, we held approximately 25.4% ownership interest in IBG LLC. Holdings holds approximately 74.6% ownership interest in IBG LLC. We reflect Holdings’ ownership as a noncontrolling interest in our consolidated statements of financial condition, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows.
The increase in net interest income was driven by higher benchmark interest rates and customer credit balances, despite a decline in margin lending balances.
The increase in net interest income was driven by higher benchmark interest rates and customer credit balances.
Customer bad debt expense, for the current year, was unchanged at $3 million . Income Tax Expense We pay U.S. federal, state and local income taxes on our taxable income, which is proportional to the percentage we own of IBG LLC. Also, our operating subsidiaries are subject to income tax in the respective jurisdictions in which they operate.
Income Tax Expense We pay U.S. federal, state and local income taxes on our taxable income, which is proportional to the percentage we own of IBG LLC. Also, our operating subsidiaries are subject to income tax in the respective jurisdictions in which they operate.
Period Trades Change Trades Change Trades Change Trades Change Trading Day 2018 328,099 21,880 18,663 368,642 1,478 2019 302,289 (8%) 26,346 20% 17,136 (8%) 345,771 (6%) 1,380 2020 620,405 105% 56,834 116% 27,039 58% 704,278 104% 2,795 2021 871,319 40% 78,276 38% 32,621 21% 982,216 39% 3,905 2022 735,619 (16%) 70,049 -11% 32,863 1% 838,531 (15%) 3,347 CONTRACT AND SHARE VOLUMES: (in thousands, except %) TOTAL Options % Futures (1) % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2018 408,406 151,762 210,257,186 2019 390,739 (4%) 128,770 (15%) 176,752,967 (16%) 2020 624,035 60% 167,078 30% 338,513,068 92% 2021 887,849 42% 154,866 (7%) 771,273,709 128% 2022 908,415 2% 207,138 34% 330,035,586 (57%) ALL CUSTOMERS Options % Futures (1) % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2018 358,852 148,485 198,909,375 2019 349,287 (3%) 126,363 (15%) 167,826,490 (16%) 2020 584,195 67% 164,555 30% 331,263,604 97% 2021 852,169 46% 152,787 (7%) 766,211,726 131% 2022 873,914 3% 203,933 33% 325,368,714 (58%) CLEARED CUSTOMERS Options % Futures (1) % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2018 313,795 146,806 194,012,882 2019 302,068 (4%) 125,225 (15%) 163,030,500 (16%) 2020 518,965 72% 163,101 30% 320,376,365 97% 2021 773,284 49% 151,715 (7%) 752,720,070 135% 2022 781,373 1% 202,145 33% 314,462,672 (58%) ___________________________ (1) Futures contract volume includes options on futures. ‎ 38 Table of Contents PRINCIPAL TRANSACTIONS Options % Futures (1) % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2018 49,554 3,277 11,347,811 2019 41,452 (16%) 2,407 (27%) 8,926,477 (21%) 2020 39,840 (4%) 2,523 5% 7,249,464 (19%) 2021 35,680 (10%) 2,079 (18%) 5,061,983 (30%) 2022 34,501 (3%) 3,205 54% 4,666,872 (8%) ___________________________ (1) Futures contract volume includes options on futures.
Period Trades Change Trades Change Trades Change Trades Change Trading Day 2019 302,289 26,346 17,136 345,771 1,380 2020 620,405 105% 56,834 116% 27,039 58% 704,278 104% 2,795 2021 871,319 40% 78,276 38% 32,621 21% 982,216 39% 3,905 2022 735,619 (16%) 70,049 (11%) 32,863 1% 838,531 (15%) 3,347 2023 670,263 (9%) 58,580 (16%) 36,725 12% 765,568 (9%) 3,075 CONTRACT AND SHARE VOLUMES: (in thousands, except %) TOTAL Options % Futures 1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2019 390,739 128,770 176,752,967 2020 624,035 60% 167,078 30% 338,513,068 92% 2021 887,849 42% 154,866 (7%) 771,273,709 128% 2022 908,415 2% 207,138 34% 330,035,586 (57%) 2023 1,020,736 12% 209,034 1% 252,742,847 (23%) ALL CUSTOMERS Options % Futures 1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2019 349,287 126,363 167,826,490 2020 584,195 67% 164,555 30% 331,263,604 97% 2021 852,169 46% 152,787 (7%) 766,211,726 131% 2022 873,914 3% 203,933 33% 325,368,714 (58%) 2023 981,172 12% 206,073 1% 248,588,960 (24%) CLEARED CUSTOMERS Options % Futures 1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2019 302,068 125,225 163,030,500 2020 518,965 72% 163,101 30% 320,376,365 97% 2021 773,284 49% 151,715 (7%) 752,720,070 135% 2022 781,373 1% 202,145 33% 314,462,672 (58%) 2023 834,866 7% 204,691 1% 240,270,617 (24%) ___________________________ (1) Futures contract volume includes options on futures. ‎ 45 Table of Contents PRINCIPAL TRANSACTIONS Options % Futures 1 % Stocks % Period (contracts) Change (contracts) Change (shares) Change 2019 41,452 2,407 8,926,477 2020 39,840 (4%) 2,523 5% 7,249,464 (19%) 2021 35,680 (10%) 2,079 (18%) 5,061,983 (30%) 2022 34,501 (3%) 3,205 54% 4,666,872 (8%) 2023 39,564 15% 2,961 (8%) 4,153,887 (11%) ___________________________ (1) Futures contract volume includes options on futures.
Comparing our operating results for the current year to the prior year using non-GAAP financial measures, adjusted net revenues were $3,213 million, up 16%; adjusted income before income taxes was $2,144 million, up 16%; and adjusted pre-tax profit margin was 67% for both the current year and the prior year.
Comparing our operating results for the current year to the prior year using non-GAAP financial measures, adjusted net revenues were $4,367 million, up 36%; adjusted income before income taxes was $3,101 million, up 45%; and adjusted pre-tax profit margin was 71% for the current year and 67% for the prior year.
In the current year, our currency diversification strategy decreased our comprehensive earnings by $211 million (compared to a decrease of $134 million in the prior year), as the U.S. dollar value of the GLOBAL decreased by approximately 1.85%, compared to its value as of December 31, 2021.
In the current year, our currency diversification strategy increased our comprehensive earnings by $42 million (compared to a decrease of $211 million in the prior year), as the U.S. dollar value of the GLOBAL increased by approximately 0.41%, compared to its value as of December 31, 2022.
Year-Ended December 31, 2022 2021 2020 (in millions) Net cash provided by operating activities $ 3,968 $ 5,896 $ 8,068 Net cash used in investing activities (67) (188) (50) Net cash used in financing activities (470) (523) (229) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (111) (97) 124 Increase in cash, cash equivalents and restricted cash $ 3,320 $ 5,088 $ 7,913 Our cash flows from operating activities are largely a reflection of the changes in customer credit and margin loan balances.
Year-Ended December 31, 2023 2022 2021 (in millions) Net cash provided by operating activities $ 4,544 $ 3,968 $ 5,896 Net cash used in investing activities (52) (67) (188) Net cash used in financing activities (624) (470) (523) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 122 (111) (97) Increase in cash, cash equivalents, and restricted cash $ 3,990 $ 3,320 $ 5,088 56 Table of Contents Our cash flows from operating activities are largely a reflection of the changes in customer credit and margin loan balances.
As we continue to grow, our focus on automation has allowed us to maintain a relatively small staff. As a percentage of total net revenues, employee compensation and benefits expenses were 15% for both the current year and the prior year.
We continued to add staff worldwide, primarily in software development and information technology services. As we continue to grow, our focus on automation has allowed us to maintain a relatively small staff. As a percentage of total net revenues, employee compensation and benefits expenses were 12% for the current year and 15% for the prior year.
Year-Ended December 31, 2022 2021 2020 (in millions, except %) Consolidated Consolidated income before income taxes $ 1,998 $ 1,787 $ 1,256 IBG, Inc. stand-alone income before income taxes 2 - (4) Operating subsidiaries income before income taxes $ 1,996 $ 1,787 $ 1,260 Operating subsidiaries Income before income taxes $ 1,996 $ 1,787 $ 1,260 Income tax expense 69 76 38 Net income available to members $ 1,927 $ 1,711 $ 1,222 IBG, Inc.
Year-Ended December 31, 2023 2022 2021 (in millions, except %) Consolidated Consolidated income before income taxes $ 3,069 $ 1,998 $ 1,787 IBG, Inc. stand-alone income before income taxes and eliminations 4 2 - Operating subsidiaries income before income taxes $ 3,065 $ 1,996 $ 1,787 Operating subsidiaries Income before income taxes $ 3,065 $ 1,996 $ 1,787 Income tax expense 115 69 76 Net income available to members $ 2,950 $ 1,927 $ 1,711 IBG, Inc.
Year-Ended December 31, 2022 2021 2020 (in millions) Average interest-earning assets Segregated cash and securities $ 51,644 $ 40,328 $ 41,898 Customer margin loans 43,402 45,681 28,960 Securities borrowed 3,961 3,677 4,235 Other interest-earning assets 9,000 7,029 5,593 FDIC sweeps 1 2,229 2,663 2,882 $ 110,235 $ 99,376 $ 83,568 Average interest-bearing liabilities Customer credit balances $ 90,172 $ 79,297 $ 67,540 Securities loaned 10,095 10,871 5,702 Other interest-bearing liabilities 4 109 215 $ 100,271 $ 90,277 $ 73,457 Net Interest income Segregated cash and securities, net $ 742 $ (9) $ 166 Customer margin loans 2 1,083 535 380 Securities borrowed and loaned, net 413 568 343 Customer credit balances, net 2 (763) 33 (46) Other net interest income 1,3 207 36 55 Net interest income 3 $ 1,682 $ 1,163 $ 898 Net interest margin ("NIM") 1.53% 1.17% 1.07% Annualized Yields Segregated cash and securities 1.44% -0.02% 0.40% Customer margin loans 2.50% 1.17% 1.31% Customer credit balances 0.85% -0.04% 0.07% ___________________________ (1) Represents the average amount of customer cash swept into FDIC-insured banks as part of our Insured Bank Deposit Sweep Program.
Year-Ended December 31, 2023 2022 2021 (in millions) Average interest-earning assets Segregated cash and securities $ 59,582 $ 51,644 $ 40,328 Customer margin loans 41,229 43,402 45,681 Securities borrowed 5,315 3,961 3,677 Other interest-earning assets 10,114 9,000 7,029 FDIC sweeps 1,3 3,003 2,229 2,663 $ 119,243 $ 110,235 $ 99,376 Average interest-bearing liabilities Customer credit balances $ 96,081 $ 90,172 $ 79,297 Securities loaned 9,518 10,095 10,871 Other interest-bearing liabilities 1 4 109 $ 105,600 $ 100,271 $ 90,277 Net Interest income Segregated cash and securities, net $ 2,791 $ 742 $ (9) Customer margin loans 2 2,278 1,083 535 Securities borrowed and loaned, net 276 413 568 Customer credit balances, net 2 (3,125) (763) 33 Other net interest income 1,3 600 207 36 Net interest income 3 $ 2,820 $ 1,682 $ 1,163 Net interest margin ("NIM") 2.36% 1.53% 1.17% Annualized Yields Segregated cash and securities 4.68% 1.44% -0.02% Customer margin loans 5.53% 2.50% 1.17% Customer credit balances 3.25% 0.85% -0.04% ___________________________ (1) Represents the average amount of customer cash swept into FDIC-insured banks as part of our Insured Bank Deposit Sweep Program.
Such risks and uncertainties include political, economic and financial instability, and foreign policy changes. For example, tensions between the U.S. and China have escalated recently, and changes in Chinese governmental oversight of Hong Kong and in the Chinese and Hong Kong capital markets could result in adverse effects on our business and loss of assets we hold in the region.
For example, tensions between the U.S. and China have escalated in recent years, and changes in Chinese governmental oversight of Hong Kong and in the Chinese and Hong Kong capital markets could result in adverse effects on our business and loss of assets we hold in the region.
Net interest income on customer balances, for the current year, increased $503 million, compared to the prior year, driven by an increase in the average federal funds effective rate to 1.68% from 0.08% in the prior year and a $10.9 billion increase in average customer credit balances; despite a $2.3 billion decrease in average margin lending balances.
Net interest income on customer balances, for the current year, increased $882 million, compared to the prior year, driven by an increase in the average federal funds effective rate to 5.02% from 1.68% in the prior year and a $5.9 billion increase in average customer credit balances.
According to industry data, in 2022 average daily volume in U.S. exchange - listed equity - based options increased by 5%, U.S. futures by 19% and U.S. listed cash equities volume by 4%, over the prior year.
In the U.S., according to industry data, average daily volume in exchange-listed equity-based options increased by 8% and futures by 5%, while listed cash equities volume decreased by 7%, compared to 2022.
Our cash flows from financing activities are comprised of short - term borrowings, capital transactions and payments made to Holdings under the Tax Receivable Agreement. Short - term borrowings from banks and through our senior notes program are part of our daily cash management in support of operating activities.
Our cash flows from financing activities are comprised of short - term borrowings, capital transactions and payments made to Holdings under the Tax Receivable Agreement. Short - term borrowings from banks are part of our daily cash management in support of operating activities. Capital transactions consist primarily of quarterly dividends paid to common stockholders and related distributions paid to Holdings.
Average ownership percentage in IBG LLC 24.0% 22.6% 19.2% Net income available to IBG, Inc. from operating subsidiaries $ 463 $ 383 $ 237 IBG, Inc. stand-alone income before income taxes 4 - (3) Income before income taxes 467 383 234 Income tax expense 87 75 39 Net income available to common stockholders $ 380 $ 308 $ 195 Consolidated income tax expense Income tax expense attributable to operating subsidiaries $ 69 $ 76 $ 38 Income tax expense attributable IBG, Inc. 87 75 39 Consolidated income tax expense $ 156 $ 151 $ 77 Operating Results Income before income taxes, for the current year, increased $211 million, or 12%, compared to the prior year, to $1,998 million.
Average ownership percentage in IBG LLC 25.0% 24.0% 22.6% Net income available to IBG, Inc. from operating subsidiaries $ 737 $ 463 $ 383 IBG, Inc. stand-alone income before income taxes 5 4 - Income before income taxes 742 467 383 Income tax expense 142 87 75 Net income available to common stockholders $ 600 $ 380 $ 308 Consolidated income tax expense Income tax expense attributable to operating subsidiaries $ 115 $ 69 $ 76 Income tax expense attributable to IBG, Inc. 142 87 75 Consolidated income tax expense $ 257 $ 156 $ 151 Operating Results Income before income taxes, for the current year, increased $1,071 million, or 54%, compared to the prior year, to $3,069 million.
During an extended period prior to 2022, the interest we paid on customer cash balances and earned on customer margin loans and investment of customer segregated funds resulted in spreads that were compressed at low benchmark rates. Benchmark interest rates over 50 basis points eliminate this spread compression and lead to higher net interest income.
During an extended period prior to and including part of 2022, the interest we paid on customer cash balances and earned on customer margin loans and investment of customer segregated funds resulted in spreads that were compressed at low benchmark rates.
Statements about future inflation are subject to the risk that actual inflation and its effects may differ, possibly materially, due to, among other things, changes in economic growth, impact of supply chain disruptions, unemployment and consumer demand. Investments in U.S. Government Securities We invest in U.S. government securities to satisfy U.S. regulatory requirements.
Inflation may also be a contributing factor to general uncertainty in the markets in the foreseeable future. Statements about future inflation are subject to the risk that actual inflation and its effects may differ, possibly materially, due to, among other things, changes in economic growth, impact of supply chain disruptions, unemployment and consumer demand. Investments in U.S.
Execution, clearing and distribution fees, for the current year, increased $88 million, or 37%, compared to the prior year, to $324 million, primarily driven by an $86 million increase in exchange fees on higher customer trading volumes in futures, which carry higher fees, and lower liquidity rebates; and a $12 million increase in regulatory fees due to higher SEC and FINRA fee rates; partially offset by a $6 million decrease in market data fees and a $3 million decrease in clearing and depository fees on lower options fee rates.
Execution, clearing and distribution fees, for the current year, increased $62 million, or 19%, compared to the prior year, to $386 million, primarily driven by a $60 million increase in exchange fees on higher customer trading volumes in options and futures, which carry higher fees, and an $8 million increase in clearing and depository fees; partially offset by a $6 million decrease in regulatory fees on lower fee rates.
Adjusted pretax profit margin was 67% for both years. In connection with our currency diversification strategy as of December 31, 2022, approximately 24% of our equity was denominated in currencies other than the U.S. dollar.
Adjusted pretax profit margin was 71%, up from 67% in the prior year. In connection with our currency diversification strategy as of December 31, 2023, approximately 25% of our equity was denominated in currencies other than the U.S. dollar.
We also hold strategic investments in certain businesses, including Tiger Brokers, an online stock brokerage established for Chinese retail and institutional customers, in which we have a beneficial ownership interest of 7.6%.
We also hold strategic investments in certain businesses, including Tiger Brokers, an online stock brokerage established for Chinese retail and institutional customers, and Zero Hash Holdings Ltd., a crypto-service provider, in which we have beneficial ownership interests of 6.2% and 31.6%, respectively.
Year-Ended December 31, 2022 2021 2020 (in millions, except share and per share amounts) Revenues Commissions $ 1,322 $ 1,350 $ 1,112 Other fees and services 184 218 175 Other income (loss) (107) (2) 59 Total non-interest income 1,399 1,566 1,346 Interest income 2,686 1,372 1,133 Interest expense (1,018) (224) (261) Total net interest income 1,668 1,148 872 Total net revenues 3,067 2,714 2,218 Non-interest expenses Execution, clearing and distribution fees 324 236 293 Employee compensation and benefits 454 399 325 Occupancy, depreciation and amortization 90 80 69 Communications 33 33 26 General and administrative 165 176 236 Customer bad debt 3 3 13 Total non-interest expenses 1,069 927 962 Income before income taxes 1,998 1,787 1,256 Income tax expense 156 151 77 Net income 1,842 1,636 1,179 Less net income attributable to noncontrolling interests 1,462 1,328 984 Net income available for common stockholders $ 380 $ 308 $ 195 Earnings per share Basic $ 3.78 $ 3.27 $ 2.44 Diluted $ 3.75 $ 3.24 $ 2.42 Weighted average common shares outstanding Basic 100,460,016 94,167,572 79,939,289 Diluted 101,299,609 95,009,880 80,638,908 Comprehensive income Net income available for common stockholders $ 380 $ 308 $ 195 Other comprehensive income Cumulative translation adjustment, before income taxes (26) (22) 26 Income taxes related to items of other comprehensive income - - - Other comprehensive income (loss), net of tax (26) (22) 26 Comprehensive income available for common stockholders $ 354 $ 286 $ 221 Comprehensive income attributable to noncontrolling interests Net income attributable to noncontrolling interests $ 1,462 $ 1,328 $ 984 Other comprehensive income - cumulative translation adjustment (85) (75) 98 Comprehensive income attributable to noncontrolling interests $ 1,377 $ 1,253 $ 1,082 40 Table of Contents The table below presents our consolidated results of operations as a percent of our total net revenues for the periods indicated.
Year-Ended December 31, 2023 2022 2021 (in millions, except share and per share amounts) Revenues Commissions $ 1,360 $ 1,322 $ 1,350 Other fees and services 197 184 218 Other income (loss) (11) (107) (2) Total non-interest income 1,546 1,399 1,566 Interest income 6,230 2,686 1,372 Interest expense (3,436) (1,018) (224) Total net interest income 2,794 1,668 1,148 Total net revenues 4,340 3,067 2,714 Non-interest expenses Execution, clearing and distribution fees 386 324 236 Employee compensation and benefits 527 454 399 Occupancy, depreciation and amortization 99 90 80 Communications 41 33 33 General and administrative 211 165 176 Customer bad debt 7 3 3 Total non-interest expenses 1,271 1,069 927 Income before income taxes 3,069 1,998 1,787 Income tax expense 257 156 151 Net income 2,812 1,842 1,636 Less net income attributable to noncontrolling interests 2,212 1,462 1,328 Net income available for common stockholders $ 600 $ 380 $ 308 Earnings per share Basic $ 5.72 $ 3.78 $ 3.27 Diluted $ 5.67 $ 3.75 $ 3.24 Weighted average common shares outstanding Basic 104,965,050 100,460,016 94,167,572 Diluted 105,846,877 101,299,609 95,009,880 Comprehensive income Net income available for common stockholders $ 600 $ 380 $ 308 Other comprehensive income Cumulative translation adjustment, before income taxes 30 (26) (22) Income taxes related to items of other comprehensive income - - - Other comprehensive income (loss), net of tax 30 (26) (22) Comprehensive income available for common stockholders $ 630 $ 354 $ 286 Comprehensive income attributable to noncontrolling interests Net income attributable to noncontrolling interests $ 2,212 $ 1,462 $ 1,328 Other comprehensive income - cumulative translation adjustment 92 (85) (75) Comprehensive income attributable to noncontrolling interests $ 2,304 $ 1,377 $ 1,253 47 Table of Contents The table below presents our consolidated results of operations as a percent of our total net revenues for the periods indicated.
We continue to offer among the lowest rates in the industry on margin lending, and we believe our low rates are an important feature that attracts customers to our platform. Increasing rates also increase our interest expense.
Further, our margin balances are tied to benchmark rates, so higher rates in 2023 have also improved the interest we earn on margin lending to our customers. We continue to offer among the lowest rates in the industry on margin lending, and we believe our low rates are an important feature that attracts customers to our platform.
Payments Due by Year Total 2023-2024 2025-2026 Thereafter (in millions) Payable to Holdings under Tax Receivable Agreement (1) $ 214 $ 50 $ 26 $ 138 Operating leases 159 56 40 63 Transition Tax liability (2) 44 26 18 - Total contractual cash obligations $ 417 $ 132 $ 84 $ 201 ___________________________ (1) As of December 31, 2022, contractual amounts owed under the Tax Receivable Agreement of $214 million have been recorded in payable to affiliate in the consolidated financial statements, representing management’s best estimate of the amounts currently expected to be owed under the Tax Receivable Agreement.
Payments Due by Year Total 2024-2025 2026-2027 Thereafter (in millions) Payable to Holdings under Tax Receivable Agreement (1) $ 206 $ 39 $ 26 $ 141 Operating leases 160 62 41 57 Transition Tax liability (2) 33 33 - - Total contractual cash obligations $ 399 $ 134 $ 67 $ 198 ___________________________ (1) As of December 31, 2023, contractual amounts owed under the Tax Receivable Agreement of $206 million have been recorded in payable to affiliate in the consolidated financial statements, representing management’s best estimate of the amounts currently expected to be owed under the Tax Receivable Agreement.
We raised $3,968 million in net cash from operating activities. We used net cash of $537 million in our investing and financing activities, primarily for distributions to noncontrolling interests, short-term borrowings, dividends paid to our common stockholders and payments made under the Tax Receivable Agreement. Investing activities mainly consisted of purchases of other investments and property, equipment and intangible assets.
We used net cash of $676 million in our investing and financing activities, primarily for distributions to noncontrolling interests, short-term borrowings, dividends paid to our common stockholders and payments made to Holdings under the Tax Receivable Agreement.
Non - Interest Expenses Non-interest expenses, for the current year, increased $142 million, or 15%, compared to the prior year, to $1,069 million, mainly due to an $88 million increase in execution, clearing and distribution fees; a $55 million increase in employee compensation and benefits; and a $10 million increase in occupancy, depreciation and amortization; partially offset by a $11 million decrease in general and administrative expenses.
Non - Interest Expenses Non-interest expenses, for the current year, increased $202 million, or 19%, compared to the prior year, to $1,271 million, mainly due to a $73 million increase in employee compensation and benefits; a $62 million increase in execution, clearing and distribution fees; a $46 million increase in general and administrative expenses; a $9 million increase in occupancy, depreciation and amortization; and an $8 million increase in communications expenses.
Net interest earned from securities lending is affected by the level of demand for securities positions held by our customers that investors are looking to sell short. During the current year, net interest earned from securities lending transactions decreased $155 million, or 27%, compared to the prior year.
In the current year, average securities borrowed balances increased 34%, to $5.3 billion, and average securities loaned balances decreased 6%, to $9.5 billion, compared to the prior year. Net interest earned from securities lending is affected by the level of demand for securities positions held by our customers that investors are looking to sell short.
Commissions for the current year decreased $28 million, or 2%, compared to the prior year, to $1,322 million, driven by lower customer trading volumes in stocks, partially offset by higher volumes in futures and options.
Commissions for the current year increased $38 million, or 3%, compared to the prior year, to $1,360 million, driven by higher customer trading volumes in options and futures, partially offset by lower customer trading volume in stocks. Total customer options and futures contract volumes increased 12% and 1%, respectively, while stock share volume decreased 24% from the prior year.
As of December 31, 2022, liability balances in connection with payables to customers were higher than the average monthly balance during the current year and our securities loaned and short-term borrowings were lower than their respective average monthly balances during the current year.
As of December 31, 2023, liability balances in connection with securities loaned, payable to customers and our short-term borrowings were higher than the average monthly balance during the current year. Cash and cash equivalents held by our non - U.S. operating subsidiaries as of December 31, 2023 were $1,625 million ($1,394 million as of December 31, 2022).
Securities lending opportunities maintained a strong pace during the current year, despite fewer opportunities than the prior year. However, the rise in benchmark interest rates rise has shifted the interest reported as generated by lending securities to interest income on segregated cash (see further explanation below).
However, as noted above, the rise in benchmark interest rates has shifted a portion of the interest reported as generated by lending securities to interest income on segregated cash (see further explanation above).
Because we report our financial results in U.S. dollars, the change in the value of the GLOBAL versus the U.S. dollar affects our earnings. In 2022, the value of the GLOBAL, as measured in U.S. dollars, decreased 1.85% compared to its value at December 31, 2021, which had a negative impact on our comprehensive earnings for the current year.
During the current year, the value of the GLOBAL, as measured in U.S. dollars, increased 0.41% compared to its value at December 31, 2022, which had a positive impact on our comprehensive earnings for the current year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

18 edited+1 added−1 removed53 unchanged
Biggest changeUSD 0.72 1.0000 0.720 74.4% $ 7,605 1.0000 0.720 75.8% $ 8,803 1.4% EUR 0.09 1.1372 0.102 10.6% 1,081 1.0704 0.096 10.1% 1,178 -0.4% JPY 3.91 0.0087 0.034 3.5% 359 0.0076 0.030 3.1% 365 -0.4% GBP 0.02 1.3527 0.027 2.8% 286 1.2099 0.024 2.5% 296 -0.2% CHF 0.02 1.0963 0.022 2.3% 232 1.0816 0.022 2.3% 265 0.0% CNH 0.13 0.1572 0.020 2.1% 216 0.1445 0.019 2.0% 230 -0.1% INR 1.10 0.0134 0.015 1.5% 156 0.0121 0.013 1.4% 163 -0.1% CAD 0.02 0.7912 0.012 1.2% 125 0.7385 0.011 1.2% 135 -0.1% AUD 0.02 0.7266 0.011 1.1% 115 0.6816 0.010 1.1% 125 0.0% HKD 0.04 0.1283 0.004 0.5% 47 0.1281 0.004 0.5% 55 0.0% 0.968 100.0% $ 10,222 0.950 100.0% $ 11,615 0.0% The effects of our currency diversification strategy appear in two places in the consolidated financial statements: (1) as a component of other income in the consolidated statements of comprehensive income and (2) as OCI in the consolidated statements of financial condition and the consolidated statements of comprehensive income.
Biggest changeUSD 0.72 1.0000 0.720 75.8% $ 8,803 1.0000 0.720 75.5% $ 10,619 -0.3% EUR 0.09 1.0704 0.096 10.1% 1,178 1.1037 0.099 10.4% 1,465 0.3% JPY 3.91 0.0076 0.030 3.1% 365 0.0071 0.028 2.9% 409 -0.2% GBP 0.02 1.2099 0.024 2.5% 296 1.2731 0.025 2.7% 376 0.1% CHF 0.02 1.0816 0.022 2.3% 265 1.1881 0.024 2.5% 350 0.2% CNH 0.13 0.1445 0.019 2.0% 230 0.1404 0.018 1.9% 269 -0.1% INR 1.10 0.0121 0.013 1.4% 163 0.0120 0.013 1.4% 195 0.0% CAD 0.02 0.7385 0.011 1.2% 135 0.7549 0.011 1.2% 167 0.0% AUD 0.02 0.6816 0.010 1.1% 125 0.6811 0.010 1.1% 151 0.0% HKD 0.04 0.1281 0.004 0.5% 55 0.1281 0.004 0.5% 66 0.0% 0.950 100.0% $ 11,615 0.954 100.0% $ 14,067 0.0% The effects of our currency diversification strategy appear in two places in the consolidated financial statements: (1) as a component of other income in the consolidated statements of comprehensive income and (2) as OCI in the consolidated statements of financial condition and the consolidated statements of comprehensive income.
Our Risk Management Committee continually monitors and evaluates our risk management policies, including the implementation of policies and procedures to enhance the detection and prevention of potential events to mitigate margin loan losses. ‎ 56 Table of Contents Value - at - Risk We estimate VaR using a historical approach, which uses the historical daily price returns of underlying assets as well as estimates of the end of day implied volatility for options.
Our Risk Management Committee continually monitors and evaluates our risk management policies, including the implementation of policies and procedures to enhance the detection and prevention of potential events to mitigate margin loan losses. ‎ 62 Table of Contents Value - at - Risk We estimate VaR using a historical approach, which uses the historical daily price returns of underlying assets as well as estimates of the end of day implied volatility for options.
The full effect of the GLOBAL is captured in the consolidated statements of comprehensive income. Reported results on a comprehensive basis reflect the U.S. GAAP convention that requires the reporting of currency translation results contained in OCI as part of reportable earnings. Interest Rate Risk We had no variable - rate debt outstanding as of December 31, 2022.
The full effect of the GLOBAL is captured in the consolidated statements of comprehensive income. Reported results on a comprehensive basis reflect the U.S. GAAP convention that requires the reporting of currency translation results contained in OCI as part of reportable earnings. Interest Rate Risk We had no variable - rate debt outstanding as of December 31, 2023.
GAAP purposes, in our consolidated statements of comprehensive income as a component of other income. ‎ 54 Table of Contents IBKRFS ’ financial statements are presented in Swiss francs (i.e., its functional currency) as noted above.
GAAP purposes, in our consolidated statements of comprehensive income as a component of other income. ‎ 60 Table of Contents IBKRFS ’ financial statements are presented in Swiss francs (i.e., its functional currency) as noted above.
(3) The Non-Trading – Fixed Income, Other category contains primarily U.S. government securities held in segregated safekeeping accounts for the exclusive benefit of our brokerage customers, on which the risk is measured using a stress test analysis.
(3) The Non-Trading – Fixed Income, Other category contains primarily U.S. government securities held in segregated safekeeping accounts for the exclusive benefit of our brokerage customers, on which the risk is measured using a stress test analysis. 64 Table of Contents
Based on customer balances and investments outstanding as of December 31, 2022, and assuming reinvestment of maturing instruments in instruments of short-term duration, an unexpected increase of 0.25% over current U.S. dollar interest rate levels would increase our net interest income by approximately $49 million on an annualized basis, assuming the full effect of reinvestment at higher rates.
Based on customer balances and investments outstanding as of December 31, 2023, and assuming reinvestment of maturing instruments in instruments of short-term duration, an unexpected increase of 0.25% over current U.S. dollar interest rate levels would increase our net interest income by approximately $56 million on an annualized basis, assuming the full effect of reinvestment at higher rates.
Based on customer balances and investments outstanding as of December 31, 2022, and assuming reinvestment of maturing instruments in instruments of short-term duration, an unexpected decrease in U.S. dollar interest rates of 0.25% would decrease our net interest income by approximately $49 million on an annualized basis, assuming the full effect of reinvestment at lower rates.
Based on customer balances and investments outstanding as of December 31, 2023, and assuming reinvestment of maturing instruments in instruments of short-term duration, an unexpected decrease in U.S. dollar interest rates of 0.25% would decrease our net interest income by approximately $56 million on an annualized basis, assuming the full effect of reinvestment at lower rates.
A 0.25% increase in all the relevant non-U.S. dollar benchmark rates would increase our net interest income by $25 million on an annualized basis. Our interest rate sensitivity estimate contains separate assumptions for U.S. dollar rates from other currencies’ rates and it isolates the effects of a rate increase on reinvestments.
A 0.25% increase in all the relevant non-U.S. dollar benchmark rates would increase our net interest income by approximately $18 million to $20 million on an annualized basis. Our interest rate sensitivity estimate contains separate assumptions for U.S. dollar rates from other currencies’ rates and it isolates the effects of a rate increase on reinvestments.
As of 12/31/2021 As of 12/31/2022 GLOBAL in % of Net Equity GLOBAL in % of Net Equity CHANGE in Currency Composition FX Rate USD Equiv. Comp. (in USD millions) FX Rate USD Equiv. Comp. (in USD millions) % of Comp.
As of 12/31/2022 As of 12/31/2023 GLOBAL in % of Net Equity GLOBAL in % of Net Equity CHANGE in Currency Composition FX Rate USD Equiv. Comp. (in USD millions) FX Rate USD Equiv. Comp. (in USD millions) % of Comp.
A 0.25% decrease in all the relevant non-U.S. dollar benchmark rates would decrease our net interest income by $25 million on an annualized basis.
A 0.25% decrease in all the relevant non-U.S. dollar benchmark rates would decrease our net interest income by approximately $18 million to $20 million on an annualized basis.
At negative or near-zero benchmark rates, our interest sensitivity to rate increases is limited to the extent that a higher benchmark rate 55 Table of Contents plus a spread may still be below the minimum charge.
At negative or near- 61 Table of Contents zero benchmark rates, such as during 2021, our interest sensitivity to rate increases is limited to the extent that a higher benchmark rate plus a spread may still be below the minimum charge.
The fixed income stress amounts are based on the four quarter ending calculations performed in 2022. ‎ (2) Equities and currencies held for market making purposes are combined because these products are part of an integrated, hedged market making portfolio, on which the risk is measured using VaR.
The average and high VaR amounts are based on the four quarter ending calculations performed in 2023. ‎ (2) Equities and currencies held for market making purposes are combined because these products are part of an integrated, hedged market making portfolio, on which the risk is measured using VaR.
The scenarios are shifts of +/−50 basis points. ‎ 57 Table of Contents VaR and Stress Test Measures At December 31, At December 31, Average High Market Risk Category 2022 2021 2022 2022 (in millions) Trading (1) Equities and Currencies (2) $ 8 $ 8 $ 7 $ 8 Trading Total $ 8 $ 8 $ 7 $ 8 Non-Trading (1) Equities and Currencies $ 26 $ 18 $ 20 $ 26 Fixed Income, Other (3), (4) 9 14 12 16 Non-Trading Total $ 35 $ 32 $ 32 $ 42 ___________________________ (1) The product categories displayed in the table as “Trading” reflect activities undertaken in the Company's market making activities. ‎ ‎ The “Non-trading” category reflects investment activities and foreign currency exposures of the Company's non-market making subsidiaries (i.e., its brokerage subsidiaries and information technology subsidiaries).
The scenarios are shifts of +/−50 basis points. ‎ 63 Table of Contents VaR and Stress Test Measures At December 31, At December 31, Average High Market Risk Category 2023 2022 2023 2023 (in millions) Trading (1) Equities and Currencies (2) $ 10 $ 8 $ 9 $ 10 Trading Total $ 10 $ 8 $ 9 $ 10 Non-Trading (1) Equities and Currencies $ 28 $ 26 $ 29 $ 30 Fixed Income, Other (3) 3 9 3 5 Non-Trading Total $ 31 $ 35 $ 32 $ 35 ___________________________ (1) The product categories displayed in the table as “Trading” reflect activities undertaken in the Company's market making activities. ‎ The “Non-trading” category reflects investment activities and foreign currency exposures of the Company's non-market making subsidiaries (i.e., its brokerage subsidiaries and information technology subsidiaries).
The U.S. dollar value of the GLOBAL decreased 1.85% as of December 31, 2022 compared to December 31, 2021. As of December 31, 2022, approximately 24% of our equity was denominated in currencies other than the U.S. dollar. The table below presents a comparison of the U.S. dollar equivalent of the GLOBAL for the periods indicated.
The U.S. dollar value of the GLOBAL increased 0.41% as of December 31, 2023 compared to December 31, 2022. As of December 31, 2023, approximately 25% of our equity was denominated in currencies other than the U.S. dollar. The table below presents a comparison of the U.S. dollar equivalent of the GLOBAL for the periods indicated.
As of December 31, 2022, we had $38.8 billion in margin loans extended to our customers.
As of December 31, 2023, we extended $44.5 billion in margin loans to our customers.
We also face the potential for reduced net interest income from customer deposits and margin loans if benchmark rates were to fall.
If such securities were sold prior to maturity, the loss would be realized and the proceeds reinvested at prevailing higher interest rates. We also face the potential for reduced net interest income from customer deposits and margin loans if benchmark rates were to fall.
In currencies with negative rates, we pass through the cost of holding certain cash balances to our customers; therefore, we charge our customers interest on these cash balances . In a normal rate environment, we typically invest a portion of these funds in U.S. government securities with maturities of up to two years.
In currencies with negative rates, we pass through the cost of holding certain cash balances to our customers; therefore, we charge our customers interest on these cash balances .
This category also includes corporate activities in foreign exchange designed to achieve the Company's currency diversification strategy. The average and high VaR amounts for equities and currencies are based on end of day calculations performed in 2022.
This category also includes corporate activities in foreign exchange designed to achieve the Company's currency diversification strategy.
Removed
(4) As a result of the active rising interest rate environment, in 2022, we changed our methodology for risk computed under a stress test. Prior period amounts have been updated to conform to the current period presentation. 58 Table of Contents
Added
In a normal rate environment, we typically invest a portion of these funds in U.S. government securities with maturities of up to two years, although given the current interest rate environment, at this time all such investments mature within three months.

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