Interactive Brokers Group, Inc. (IBKR): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


Interactive Brokers' third-quarter 2014 adjusted earnings missed the Zacks Consensus Estimate. Results were adversely affected by significant trading losses in the Market Making segment and higher operating expenses. However, strong performance of the Electronic Brokerage segment along with improvement in daily average revenue trades (DARTs) acted as the positive factors. The company is well positioned for future growth given its better-than-peer positioning, adoption of technology, spreading of the equity culture and optimization of resource allocation on global electronic networks. Also, the company's healthy capital base and liquid balance sheet will facilitate expansion going forward. However, the increasing competitive environment and Market Making segment's high sensitivity to fluctuating volatility are bound to weigh on its performance in the near term.


Headquartered in Greenwich, CT, Interactive Brokers Group Inc. operates as an automated global electronic market maker and broker with 937 employees worldwide as of Sep 30, 2014. The company specializes in routing orders, besides executing and processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on more than 100 electronic exchanges and trading venues worldwide. Incorporated in 1977, the company operates through two principal business segments:

Market Making: The company operates the Market Making business through its Timber Hill subsidiaries. Interactive Brokers provides continuous bid and offers quotations on over 985,000 tradable securities and futures related products listed on electronic exchanges worldwide. The company is a market leader in exchange-traded equity options and equity-index options and futures, accounting for approximately 9.0% of equity options traded worldwide.

Electronic Brokerage: As an electronic broker, the company executes, clears and settles trades globally for both institutional and individual customers. From a single account in any major currency, the customers can access products traded on more than 100 exchanges and market centers across 24 countries and in 21 different currencies.

The two business segments are complementary and benefit from knowledge and technological synergies as well as from the combined scale and volume. This enables the company to provide low-cost services to its customers.

On May 3, 2007, Interactive Brokers priced its initial public offering (IPO) of the common stock. Prior to the IPO, the company had conducted its business through a limited liability company (LLC) structure. In connection with the IPO, the company purchased 10.0% of the membership interest in IBG LLC. As of Sep 30, 2014, Interactive Brokers' primary assets are its ownership of approximately 14.1% of the membership interests of IBG LLC. The remaining 85.9% of the membership interests are held by IBG Holdings LLC.

Periodically, Interactive Brokers involves itself in strategic investments and acquisitions. The company has made strategic investments in electronic trading exchanges including Boston Options Exchange LLC, OneChicago LLC, ISE Stock Exchange LLC and CBOE Stock Exchange LLC. Interactive Brokers has also made investments in Quadriserv Inc., an electronic securities lending platform provider and Factor Advisors, LLC, an Exchange Traded Funds (ETF) issuer. The company acquired FutureTrade Technologies LLC a technology solutions provider to hedge funds and other institutional investors and its wholly owned subsidiary, FutureTrade Securities LLC.

As of Sep 30, 2014, Interactive Brokers had $41.6 billion in total assets, $16.3 billion in cash and cash equivalents (including segregated cash and securities of $15.3 billion) and $750.8 million in stockholders' equity.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: IPO , ETF , IBKR

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