Interactive Brokers Beats on Q3 Revenue as Tiger’s Plunge Eases

The results for the quarter were driven by strong growth in net interest income, which increased $47 million or 19

Interactive Brokers today reported increased revenue for the third quarter, as the longtime leader in low-cost trading made gains in a couple of key areas.

Ranked as the largest US electronic broker by some measures, Interactive Brokers’ third-quarter revenues rose six percent year-over-year, to $466 million compared to $439 million in Q3 2018 and $413 million in the second quarter. Income before tax totaled $281 million, almost unchanged year-over-year from $276 million, but up 23 percent QoQ from $225 million in the prior quarter.

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The results for the quarter were driven by strong growth in net interest income, the company said in a statement, which increased $47 million, or 19 percent from a year ago. Commissions revenue also grew $20 million, or 12 percent, when weighed against the same period in 2018.

This was offset by lower other income, which decreased $40 million, and also a $47 million reversal on the company’s currency diversification strategy, which swung from a $6 million loss in the second quarter and $24 million loss in the year-ago quarter.

Aside from its core electronic-brokerage business, the IB earnings for the second quarter included a mark-to-market loss of $13 million from its 7.7 percent stake in Tiger Brokers. This loss, however, reflects an improvement in the company’s float loss tied to the Chinese brokerage that raised $104 million from its IPO on Nasdaq exchange, which stood at $74 million in the second quarter.

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IB initiates no-fee trading craze

Among other major indicators, Interactive Brokers’ saw a 13 percent year-over-year decrease in daily average revenue trades (DARTs) — amounting in the past quarter to about 859,000 transactions per day that generate commissions or fees.

This announcement comes on the heels of Interactive Brokers’ launch of the IBKR Lite, which routes trades through market makers rather than seeking best execution through its smart order router.

In doing so, the ‎company plans to make ‎money from order flows, a ‎common tactic used by discount brokers to ‎generate ‎revenue by directing orders to certain trading venues.

Rivals such as Charles Schwab and TD Ameritrade also eliminated commissions for online trading of some stocks and funds.

Shares of US retail brokerage firms all traded down following these announcements, signaling that investors think these steps are squeezing their profitability.

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