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I believe many VBs with highly vested overseas interests, may be customers of Interactive Brokers. Matter of fact, those who are using Moomoo or Tiger Brokers are IBKR customers too. IBKR is also 1 of those brokerages who use their own shares as a "customer acquisition tool".
Asset
- Zero gearing. Has total float of ~115billion or 7x of its 14.5billion equity.
- It's total asset base (liabilities + equity) is made up of receivables-40%, borrowed securities-30%, cash-25% and others-5%.
Business
- An online discount brokerage with revenue breakdown: commissions/fees-50% and net interest income (NII)-50%. In current high-interest rate environment, it is more like commissions/fees-40% and NII-40%. 10years ago, half of the revenue came in market-making
- Its business model is setup to be biased towards larger customers. IBKR Pro has low margin lending rates and higher deposit rates than IBKR Lite. Cash balances <10k earn no interest, while balances>100k has higher rates. Bigger customers also have lower commission rates.
- Commissions/Customers' equity breakdown - (1) By geography: 50% Americas, 30-35% AP, 20% Europe. (2) By clientele profile: 45-55%Individuals, 20% Professional institutions (hedge fund/traders/mutual funds), 10-15% financial advisory groups and 10-20% Introducing Brokers (ie. brokerages like Tiger Brokers/MooMoo who uses their backend).
- Essentially, IBKR is the lowest cost brokerage with a lot of opportunities to take market share - whether is it the growing market (Did Robinhood introduced a new generation to trading whom many may eventually become IBKR future clients?), or from competitors (Charles Schwab/TD Ameritrade 2019-2024 integration post merger driving its customers away to IBKR). Brokerages are similar to exchanges - anti-fragile and long volatility. IBKR is also a pseudo-bank: its NIM benefiting from rate rises and vice-versa.
Structure
- IPO-ed on Nasdaq in 2007 with Founder selling 10% stake. It temporarily moved its listing to IEX on 2018 as its first listing, as a statement of intent against HFT. It moved back 1 year later as IEX's listing business just didn't scale.
- As of end FY23, ~75% owned by its founder/chairman Thomas Peterffy (80yrs old as of 2024) and only stepped down as CEO in 2019. Thomas Peterffy was a Hungarian with a software background who migrated to the United States during the cold war, bought his seat on the exchange in 1977 and was influential in persuading the SEC to electronically link the US options market in 1999. IBKR, the electronic brokerage biz is in current form was launched in 1993.
- IMHO, the holding structure is probably the most interesting part. The listed entity is essentially an empty shell (IBG Inc) and only holds ~25.4% of the economic interest of the holding company (IBG LLC) of all the subsidiaries. As of end FY23, Thomas Peterffy controls 91.3% of the controlling firm (IBG Holdings LLC) and owns the other 74.6% of IBG LLC, and not the listed entity (IBG Inc). The end result is that any cash declared upwards by the holding company is split into controlling firm-74.6% and listed entity-25.4%. OPMIs are not "positioned" together with Mr Thomas Peterffy. From FY21-23, for every dollar that OPMI received in dividends, the controlling company gotten 10dollars.
- Over the years, IBG inc (listed entity)'s stake in IBG LLC (holding company) has slowly increased from 10% (2007 IPO) to 25.4% (end FY23). This was done via IBG Inc issuing new shares to IBG LLC shareholders (at the latter's option) at market price on an annual basis. Another way to view it - This is a long term M&A for the listed entity to increase its economic interest in the holding company using its listed shares as currency.
Asset
- Zero gearing. Has total float of ~115billion or 7x of its 14.5billion equity.
- It's total asset base (liabilities + equity) is made up of receivables-40%, borrowed securities-30%, cash-25% and others-5%.
Business
- An online discount brokerage with revenue breakdown: commissions/fees-50% and net interest income (NII)-50%. In current high-interest rate environment, it is more like commissions/fees-40% and NII-40%. 10years ago, half of the revenue came in market-making
- Its business model is setup to be biased towards larger customers. IBKR Pro has low margin lending rates and higher deposit rates than IBKR Lite. Cash balances <10k earn no interest, while balances>100k has higher rates. Bigger customers also have lower commission rates.
- Commissions/Customers' equity breakdown - (1) By geography: 50% Americas, 30-35% AP, 20% Europe. (2) By clientele profile: 45-55%Individuals, 20% Professional institutions (hedge fund/traders/mutual funds), 10-15% financial advisory groups and 10-20% Introducing Brokers (ie. brokerages like Tiger Brokers/MooMoo who uses their backend).
- Essentially, IBKR is the lowest cost brokerage with a lot of opportunities to take market share - whether is it the growing market (Did Robinhood introduced a new generation to trading whom many may eventually become IBKR future clients?), or from competitors (Charles Schwab/TD Ameritrade 2019-2024 integration post merger driving its customers away to IBKR). Brokerages are similar to exchanges - anti-fragile and long volatility. IBKR is also a pseudo-bank: its NIM benefiting from rate rises and vice-versa.
Structure
- IPO-ed on Nasdaq in 2007 with Founder selling 10% stake. It temporarily moved its listing to IEX on 2018 as its first listing, as a statement of intent against HFT. It moved back 1 year later as IEX's listing business just didn't scale.
- As of end FY23, ~75% owned by its founder/chairman Thomas Peterffy (80yrs old as of 2024) and only stepped down as CEO in 2019. Thomas Peterffy was a Hungarian with a software background who migrated to the United States during the cold war, bought his seat on the exchange in 1977 and was influential in persuading the SEC to electronically link the US options market in 1999. IBKR, the electronic brokerage biz is in current form was launched in 1993.
- IMHO, the holding structure is probably the most interesting part. The listed entity is essentially an empty shell (IBG Inc) and only holds ~25.4% of the economic interest of the holding company (IBG LLC) of all the subsidiaries. As of end FY23, Thomas Peterffy controls 91.3% of the controlling firm (IBG Holdings LLC) and owns the other 74.6% of IBG LLC, and not the listed entity (IBG Inc). The end result is that any cash declared upwards by the holding company is split into controlling firm-74.6% and listed entity-25.4%. OPMIs are not "positioned" together with Mr Thomas Peterffy. From FY21-23, for every dollar that OPMI received in dividends, the controlling company gotten 10dollars.
- Over the years, IBG inc (listed entity)'s stake in IBG LLC (holding company) has slowly increased from 10% (2007 IPO) to 25.4% (end FY23). This was done via IBG Inc issuing new shares to IBG LLC shareholders (at the latter's option) at market price on an annual basis. Another way to view it - This is a long term M&A for the listed entity to increase its economic interest in the holding company using its listed shares as currency.