|Shares Out. (in M):||71||P/E||0||0|
|Market Cap (in $M):||17||P/FCF||0||0|
|Net Debt (in $M):||0||EBIT||0||0|
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I recommend IBKR shares as a BUY, given my conservative estimate of intrinsic value per share ($57) is 28% above the current market valuation. The company’s electronic brokerage business has a deep and widening moat as the industry’s lowest-cost producer, a proven track-record of growth (+17% new accounts per annum CAGR since 2007), a long runway for continued growth in several large under-penetrated markets/customer segments, an easy scalable platform with demonstrable operating leverage, an under-utilized balance sheet and a highly incentivized and brilliant owner-operator at the helm.
I believe the market is mispricing the opportunity due to a combination of i) the stock looking optically expensive at a glance, ii) the historical underperformance of the firm’s market-making business obscuring the extraordinary growth of the brokerage business, iii) sell-side/market reluctance to assign an appropriate multiple to the brokerage business’ earnings, despite the high-quality nature of the brokerage business’ earnings and its long-term growth prospects and iv) misperception that TAM is largely penetrated.
Headquartered in Greenwich, CT, IBKR is a holding company whose primary asset is its 17% stake in the operations of IBG LLC (‘IBG’), a market-maker and electronic brokerage. The remaining ownership stake is held by a management partnership (predominantly CEO/founder Tom Peterffy - further information on the (complicated) corporate structure is available in Appendix A).
Brief history of Interactive Brokers
Tom Peterffy (the founder, majority owner and CEO of IBKR) has a fascinating history. He arrived in the USA when he twenty-one years old in 1965, a penniless immigrant from Hungary, who couldn’t speak English. He taught himself computer programming and after a brief stint at an engineering firm, he found a job on Wall Street, where programming skills were in demand.
Working at a successful precious metals trader, Peterffy developed a mathematical algorithm based of a formula very similar to the Black-Scholes model (this was prior to its publication and well before it became common market practice to use B-S to price options) and consistently made money for the firm, at a time when traditional market makers relied on their wits and ability to read market psychology.
Peterffy left the firm after being denied equity, and in 1977 used his savings to purchase a seat on the AMEX and become a market-maker. Peterffy built out his operation by predominantly hiring computer programmers (a rarity at the time) and used the output of his algorithms as his guide to pricing derivatives, attempting to automate the entire trade execution as much as possible. His success saw him roll out his algorithmic approach to other US exchanges and products and eventually around to the rest of the world’s exchanges, whilst playing a pioneering role in exchanges moving to the digital age.
In 1993, he started an electronic brokerage business, essentially leveraging the impressive electronic network created for the market-making operation, with the main initial customers being the floor traders that the era of automation he helped ushered in had displaced.
Whilst the firm has its roots in the market-making business, more recently the relative importance of the two businesses has flipped, culminating in IB selling its market-making business to Two Sigma and now effectively being a pure electronic brokerage business.
Electronic Brokerage Business (IB):
IB, which began operations in 1993, is a global online discount broker that occupies a niche space between traditional retail online discount brokers and prime brokers, targeting sophisticated retail investors and small hedge funds/prop shops. It provides customers with direct market access to stocks, options, futures, forex, bonds, ETFs and CFDs across over 100 market centers and 24 countries from one universal account. IB is acknowledged in the industry as having the lowest commission/financing rates, whilst its TWS (trading workstation) provides sophisticated traders with the technology required to execute and risk manage complex strategies
Source: Sandler O’Neill + Partners Global Exchange and Brokerage Conference 2017
However, IB is not for everyone – whilst their trading platform is very powerful, the system has a steep learning curve and isn’t suitable for novice traders. (In fact, IB actively discourages dilettante retail traders, by having a $10,000 minimum balance before opening an account as well as $10 monthly inactivity fee.) Furthermore, the customer service is not as high-touch as its more traditional peers.
IB’s compelling value proposition to clients has seen rapid growth in the business over the past few years (growth as at Dec 2016)
· Number of Accounts: 17% CAGR from 2007-2016 (and up 18.1% from Dec 2016 to Aug 2017)
· Client Equity: 29% CAGR from 2007-2016 (and up 33% from Dec 2016 to Aug 2017)
· Margin Balance: 35% CAGR from 2008-2016 (and up 35% from Dec 2016 to Aug 2017)
· Credit Balance: 26% CAGR from 2008-2016 (and up 11% from Dec 2016 to Aug 2017)
· DARTS: 12% CAGR from 2008-2016
Despite its compelling value proposition to customers and industry-leading growth over the past few years, the size of Interactive Brokers customer accounts, is dwarfed by the major players in the space (Schwab, Etrade, Ameritrade). Nevertheless, as Interactive Brokers targets active traders, it is the market leader in DARTS, with the typical IB account exhibiting far greater trading velocity than its larger peers. Furthermore, despite having commission rates far below its peers, IB has the highest operating margins and these margins continue to expand in recent years, demonstrating the favorable operating leverage inherent in the business.
Graph A: Electronic Brokerage Pre-tax Profit Margins
Graph B: Peer comparison - Pre-tax Profit Margins
So, how did IB reach this position of being the least expensive broker in the first place In one word -automation. As CFL41 described well in his previous write-up, the DNA of IB is very different from its competitors that operate with large branch outlets, back offices, advertising campaigns/promotions, large salesforce and customer service call centres. As Peterffy explains “Most brokers are basically salesmen. We do not have salesmen. Everybody's a computer programmer … It's a very different culture. We're into building the platform and we're not very good at sales. But over the years it appears that many people have come over to our side, so we now do more trades than any other broker.” S&P mentioned in a 2015 note on IB, “(their) use of technology instead of human financial advisers keeps personnel expenses to very low levels, about 20% of revenue, compared with the 50% or higher typically seen at traditional institutional brokers.”
The Strength of IB’s moat
The moat of being the lowest cost producer appears to be deepening over time as evidenced by the expansion in operating margins. The more trades IB does, the larger revenue base it has to spread its executing/commission costs.
It is my belief that this moat will be difficult for potential newcomers to overcome. Firstly, IB had the benefit of leveraging the technology of its market maker business, in order to build out its brokerage business. Also, it was making substantial returns from its market making business, whilst the brokerage business was operating at a sub-scale level for at least a decade.
Secondly, the business of programming automation is a grind. Unlike the market making business, where the barriers to entry are lower and it ultimately becomes a technological arms race to determine the winner, the brokerage business is more a hard slog …. building the compliance automation for the different countries, constant incremental improvement of the platform (adding exchanges, products, modules, incorporating user feedback, etc) and frankly there is no substitute for time. It takes years to build the platform and then years to convince customers of the platform’s value proposition (even if it is the best one).
Thirdly, as the competitive landscape currently stands, for an active individual trader, small hedge fund or prop shop that trades across asset classes and geographies, there is basically no platform that comes close to Interactive Brokers value proposition. The economics to move platform are compelling. However, it is still my belief that there is a level of customer captivity associated with brokerage accounts, given the hassle involved, general human inertia and comfort/familiarity with existing broker relationship/setup (which frankly makes IB’s growth all the more impressive, especially given they spend little on marketing/promotions). So even if a new competitor came on the scene and spent time to build a more impressive platform with better pricing, I believe it would still be tough for this competitor to win accounts from IB. Why? I believe it has to do with the delta of the improvement. Right now for a highly active trader, they would save substantial money moving from say E-trade to IB, which is enough to overcome their natural inertia to switch accounts. Let’s say this shinier competitor comes along. How much cheaper on transactions and margin loan spreads could it possibly get? And would it be able to get them to a level where a customer now comfortable with IB’s systems could be bothered changing?
Potential growth runway
However, the key question remains as to the length of IB’s potential future growth runway. It’s all well and good to have a strong moat to protect against losing existing customers, but to justify a premium valuation, you need a moat AND growth.
In order to examine the potential runway, I have separately examined the growth prospects across IB’s key customer segments including i) active individual traders, ii) introducing brokers, iii) hedge funds and iv) financial advisors.
Graph C: IB Account Type
Source: Sandler O’Neill + Partners Global Exchange and Brokerage Conference 2017
i) Sophisticated Individual Traders/Investors:
With the exception of proprietary trading groups, sophisticated individual traders represent the customer segment where IB is relatively well penetrated. Without defining what the threshold he is using that constitutes a sophisticated/active trader, Peterffy estimates that they currently have 15% market share of this group, and expect to gain close to 100%.
Goldman Sachs research estimates that in the US, Interactive Brokers currently has 5% market share of active trader accounts and 13% share of DARTs amongst such traders (the delta representing the perfectly reasonable assumption that the average IB account in far more active). They also estimate that Europe and Asia are slightly behind in US, although they are less certain of their estimating methodology here.
Interestingly, GS believe their derived market share numbers suggests that the IB growth story is more advanced than bulls may believe. Their logic is, given that the typical IB account is more active than even the typical ‘active’ account in the broader market, the scope to increase share in revenue trades (as opposed to customer accounts) is more limited.
However, I believe that using GS’s own pareto logic, would suggest that there is still substantial room to grow. It is not unreasonable to believe that given IB disproportionately should be attracting the most active traders, that their share of revenue trades should dominate the market amongst ‘active’ traders, even if actual market share by accounts remains low. It doesn’t strike me at all as crazy that IB could have 30-40% of revenue trades, whilst having less than 10% market share amongst active traders. Whilst I don’t know to what extend the power laws work for traders/trading frequency, it cuts both ways – the less dispersion, the greater IB’s TAM and the greater their account market share … the greater the dispersion, the smaller IB’s TAM, but that small TAM will presumably account for a substantial proportion of total trades.
Obviously these estimates are susceptible to large error, but I think it’s clear that even conservatively speaking, IB could easily double its market share of US revenue trades amongst active traders. The overseas opportunity should also prove compelling, given that most online broker markets are far less competitive, making IB an even more compelling offering. Speaking from personal experience, in Australia my ANZ (formerly e-trade) Share Trading account charges A$20 per trade for purchasing local shares (approx. double what US brokers ex-IB charge) and the ability to trade shares internationally is hampered even further by egregious brokerage charges and FX rates.
ii) Introducing Brokers:
“If you look at the brokerage business, there are hundreds of brokers and they are all doing the same thing – back office, stock lending, executions – it all requires the same technology. And, of course, we have to add that there is an ever-increasing regulatory burden. Exchanges are continually adding products and changing systems. So, it is very unlikely that these hundreds of brokers – especially if you look at it all around the globe – will keep on building these systems. It doesn’t make sense. So, eventually the best platform would have to end up with the majority, if not all, of the business, and I think we’re the platform. So that’s it. The game is over.”(Tom Peterffy 2015)
Interactive Brokers offer the ability for brokers to white label IB’s platform and offer it to their client base. This currently represents a small part of IB’s total accounts, with apparently mainly small European and Asian brokers as clients.
However, Peterffy is excited by the potential growth in this segment, having referred to it as IB’s ‘ace in the hole’ in conference calls. He believes that with the regulatory/system costs associated with running a brokerage business, it would actually make sense for a lot of brokers to simply outsource the platform to IB and focus on customer acquisition/servicing.
The way the deals are typically structured, all the accounts from the introducing broker would effectively treated as one customer under IB’s tiered pricing. The introducing broker would then charge the accounts rates more reflective of individual tiering (maybe even more – it is totally up to them what they charge), whilst earning the spread and also incurring the cost of servicing accounts. From IB’s perspective, these deals represent opportunity for pure incremental margin.
A recent success IB had was winning this business of Zions Direct, a broker-dealer with over $2bn in client equity and 12,000 accounts. Following the announcement, Lincoln Taylor, President of Zions Direct said “IB’s platform and technology lead the brokerage industry …. After a rigorous selection process, we picked IB because they help us offer leading technology and a great online experience to our customers.”
iii) Hedge Funds
There is always going to be a large portion of the hedge fund universe that will remain inaccessible for IB for the foreseeable future. Several large funds would only consider broking with a Goldmans or Morgan Stanley. Perceptions matter and there is clearly a greater cachet associated with being brokered by top tier bank, particularly on how it would reflect with clients (with IB still being far from a household name at this point). Also the ability to source difficult borrows, OTC securities, offer capital introduction and gain IPO allocations are also areas that IB can’t compete with the larger banks (although IB is making strides in its capital introduction and securities lending operations).
Nevertheless, global hedge fund assets are estimated at $3 trillion, whilst IB has just ~US$10b (est) mainly from smaller hedge funds or roughly 0.3% of the total market). If it can even capture 1% of the market, this would hugely boost its client equity and trading commissions over time. There is also reason to believe that IB’s hedge fund business could grow dramatically.
The new rules being imposed on the banking system like Dodd-Frank and the Basel 3 accord are increasing capital and liquidity requirements on bank’s broker-dealer operations. As a result, we are seeing almost all the major banks downsizing their prime brokerage businesses and essentially ‘firing’ lower value clients.
Look at a list below of the largest prime brokers. IB sneaks onto the list as the only non-bank broker dealer, however more interestingly IB is fourth amongst primer brokers of recently launched funds (whilst the other brokers in this category, more or less line up their overall ranking.
Source: Preqin Special Report Hedge Fund Service Providers
iv) Financial Advisors
“Investment advisors have $18 billion with us, while we estimate their total AUM well over $20 trillion. So, that even on a very conservative basis, we have no more than 0.1% of this market.” Peterffy Q4 2015 earnings call
Like with hedge funds, I don’t necessarily expect IB being a large player in the market necessarily, but even if it can carve out a niche, it should still be able to grow the RIA business substantially. In the second quarter of 2015, IB launched its RIA Compliance Centre to help advisors set up their business.
I also think IB benefits from another secular tailwind at the margin, being the massive growth in ETFs. IB’s mutual fund offering is very limited compared to the giants of the RIA world (like Schwab and Fidelity), which has currently posed as roadblock in growing their RIA business. However as the popularity of ETFs increases relative to Mutual Funds, this should be less of an issue going forward. Furthermore IB’s low commission costs will convince some of the most cost sensitive advisors to move over.
Management team/capital allocation
I believe the management team is one of the key strengths of IB. Peterffy has been a pioneer in the automation of financial markets and has demonstrated a track record of wealth creation and operating excellence over a period of decades. IB has also managed a high degree of stability, with senior management having an average tenure of 17 years.
Apart from his obvious smarts, what also impresses me about Peterffy’s integrity and honesty. For example, when discussing the market makers results in 2013, Peterffy admits “… the unfortunate fact is that we find ourselves accumulating positions on the wrong side of the market more and more often than we used to. This means that our estimate of the equilibrium price is off and our trading counterparts have a better one than we did.” He doesn’t mince his words, and frankly just listening to the conference calls, his candid nature is quite refreshing.
On capital allocation, there hasn’t been much material by way of share buyback/M&A activity to judge management’s external capital allocation record. Some minor share buybacks were undertaken between 2010 and 2012 when IB’s share price was depressed (mid-high teens), so Peterffy clearly has some idea as to the worth of the stock’s ‘currency’. The only reason they were not more aggressive, was Peterffy being cognizant of IB’s small free float as well as certain tax benefit considerations (management members can’t own over a certain percentage of common shares, otherwise tax benefits from the company structure become impaired). Certainly as far as internal capital management goes, Peterffy has done a good job in identifying the concurrent growth potential of the brokerage business and decline of the market maker, adjusting the capital levels of both businesses accordingly, culminating in the sale of the market-maker business.
Management is also highly incentivized to create value for shareholders. Peterffy himself directly owns greater than 85% of the management partnership, IBG Holdings LLC, with rest held by senior management, giving them multi-million dollar stakes in the business. Base salaries for senior executive team members are relatively modest ($400-500k) and >50% of total compensation is via share awards. It is also noteworthy that management initially only looked to sell 10% of their stake in the business when it IPO-ed. Apparently the main motivation for the IPO was Peterffy’s belief that being a listed company would give the company greater recognition and credibility in gaining institutional accounts.
For the electronic brokerage, a DCF approach seems most appropriate given the more stable earnings profile, as well as its growth trajectory. The following are my key assumptions and justifications in valuing the brokerage, which I view as being conservative given my very positive outlook on the company.
· Using 10 year DCF model after which a terminal value growth rate/multiple will be applied.
· Annual account growth rate of 17.5% in 2017. Fading down 0.25% annually during ‘high growth phase’ (2017-2021) and 1% during ‘low growth phase (2022-2026).
· DARTs growth rate to be 60% of Account Growth rate. The implication here is that future IB customers will not trade as actively as existing customer, given presumably more active traders have greater incentive to move to IB’s platform more quickly. This assumption may prove conservative if IB gains significant traction amongst active hedge funds. Also, it is possible if the RIA business gains disproportionate traction, our DART factor may be too aggressive, given RIA accounts aren’t anywhere active as IB’s existing customer base However, in this instance we would be massively underestimating account growth (and therefore equity account balances and net interest income).
· Average equity balance per account to increase by 2% annually. Historically, average equity balance per account has increased by roughly double S&P 500 since 2008. Equity per account balance would be driven by broader market returns (although perhaps not 1:1, given the ratio of traders to long-only investors), new account types (institutional > individual) and IB’s ‘wallet-share’ of customer (Peterffy notes that over time, account funding tends to increase as people get more comfortable with the system). All considered, I think 2% annually is quite conservative, given historical CAGR of ~12%.
· Margin loans to stay at constant proportion of total client equity (at August 2017 levels)
· Client credit balance to reduce by 2% annually during forecast period.
· Net Interest Income spread on margin/client credit balances at 0.73% (blended)
· Execution & Clearing expenses forecasted via simple linear regression to take into account fixed and variable nature
· Other Non-interest expenses as fixed proportion of net revenues.
· Discount rate of 9% (5% Risk Free and 4% Equity Risk Premium). Terminal growth rate assumption of 4.5%
· Tax Rate of 27.5%. Lower than statutory rate as i) IB benefits from substantial overseas revenue and ii) the company partially benefits from the tax structure outlined in Appendix A. Whilst most of the benefits reside with management, public shareholders still retains 15%. This rate is lower than what my estimation of IB’s effective tax rate after accounting for transfer payments to management.
· Excess cash: It is difficult to split of how much capital is needed to maintain the existing operations (and growth), given that regulatory capital requirements are so low. In its most recent annual report, IB mentioned they have over $4bn in excess to regulatory capital requirements. However I note in S&P’s most recent report on IBG “As of Sept. 30, 2016, IBG had approximately $3 billion of total adjusted capital above our 15% threshold to maintain its "very strong" capital assessment.” Given this figure doesn’t include the nine-months of retained earnings since, I believe it is reasonable to take this number as excess cash for valuation purposes.
Using the above assumptions, I arrive at a valuation of $23.2bn for the broker business (or $57 per share). This valuation also doesn’t factor what any sale proceeds from the market-maker business sale might be and/or excess capital released from cessation of these activities.
I also note the following with regards to my valuation:
· No credit is given for further Fed rate rises. IB pays Fed Funds Rate less 50bps on credit balances for amounts over $10,000, but no interest on any balance under. So as a thought exercise, if IB reaches ~1.6mn accounts by 2026 (as per my model), lets imagine that Feds Fund Rate is 3.5% in ten years. That would be an additional $420mn in net interest income, just on the balance amount under $10k.
· If growth really takes off in the hedge fund/RIA space and IB is able to capture a meaningful market share, then my forecasts and 2026 terminal value multiple (~22x) are understating potential future growth.
Obviously, the further out the projections go the more prone they are to error. As a sanity-check, based on my 2019E NPAT forecast of US$712mn (which assumes 64.5% pre-tax profit margin), IB is trading at a three-year forward P/E multiple of 21x, which strikes me as a very reasonable valuation for the company's potential growth runway.
Why is the opportunity available?
· Sell-side coverage: I believe the sell-side has consistently underestimated the moat and growth of the company and struggles to assign a multiple higher than its peers. In GS report, they note that during TD Ameritrade had an average multiple of 25x during its ‘high growth’ phase between 2003-2007 (18% revenue CAGR), and therefore are reticent to assign a higher multiple to IB’s brokerage business. Yet during this high growth period, Ameritrade’s share price went up by a factor of 3-4x, so I find this argument rather curious.
· Perception that TAM is penetrated: Some market participants take the view that the Interactive Brokers platform only appeals to a specific niche of very highly active retail traders and all the low hanging fruit for IB has been picked, limiting future growth. However, as I’ve previously discussed, I still believe there is still substantial opportunity to grow amongst individual investors, (customer equity growth on in individual trader accounts between 2010 and 2015 has been 20% CAGR) whilst the company at this stage is just scratching the surface of the RIA/hedge fund opportunity.
· Small float: Given IBKR only represents 17% ownership in the IBG’s operating assets, the outstanding float would preclude several large, concentrated funds from being able to establish a meaningful position.
· Moat of the brokerage business is underestimated: It is possible that market participants are looking at how quickly the moat eroded in the market-maker business and generalizing this to the brokerage business. As discussed previously, I believe the broker business is higher quality and much harder to replicate.
· Optically expensive: At a glance, the stock screens poorly. It appears to have an expensive multiple, whilst EPS earnings don’t look to have increased in the past few years. However, what has been driving the poor trend in bottom line earnings i) the decline in market maker earnings, disguising the extraordinary growth of the broker business, ii) OCI losses associated with FX translation losses of US$293mn and $269mn in 2014 and 2015 respectively, as the company holds its $5bn+ equity in a basket of sixteen currencies (called GLOBAL), and the strengthening of the US dollar, has seen this basket lose value in US denominated terms and iii) $121mn loss in 2015 due to bad debts associated with accounts that had their equity wiped out due to unexpected move in the Swiss Franc-Euro peg by the SNB.
Key Investment Risks:
· Sensitive to subdued trading volumes: DARTs will be impacted if overall market volumes decline (as evidenced most recently in 2012).
· Market crash: If markets crash, heightened risk aversion would likely see margin gearing levels go lower).
· Key man risk: Obviously Tom Peterffy has been integral to Interactive Broker’s success and he’s getting on in years. Whilst much like Steve Jobs/Apple or Warren Buffett/Berkshire he can never be fully replaced, this risk is partially mitigated by the tenure of the senior management team. Also, Peterffy has spoken about succession planning on past earnings calls. Currently the plan is that he will progressively reduce his day-to-day involvement whilst grooming long-standing executive Milan Galik to eventually take over.
· Valuation risk: A key part of my thesis on IBKR is that they have a deep moat and long runway for growth. This is reflected in my revenue forecasts. If it does turn out that IBKR has in fact largely penetrated its TAM and has limited success broadening its appeal to other market segments, there is downside valuation risk from current levels.
· Glitch risk: IB’s systems are highly automated which does potentially introduce the risk of a system error (recent exampled, SNB currency peg movement and Singaporean small caps)
· Minority interest: The management partnership controls IBKR, making public shareholders an effective minority interest (notwithstanding the accounting treatment). Peterffy controls everything.
IB’s complicated ownership structure reflects a series of transactions undertaken when the original owners (predominantly Peterffy and other senior management) IPO-ed a partial stake in the business in 2007. This series of transactions/entities is commonly known as ‘Up-C’ IPO structure – the main motivation of the transaction is to preserve tax benefits associated with the partnership structure (as opposed to a corporation structure) for the original owners.
Instead of the previous owners converting their ownership in the partnership for shares in the newly created corporation (as per a ‘traditional’ IPO structure), a new partnership is created (IBG LLC in this instance), whereby the newly IPO-ed corporation (IBKR) uses the IPO cash proceeds from public shareholders to purchase a stake in the partnership (IBG LLC). In this case of IB, management (via IBG Holdings LLC partnership) sold 10% of their membership interests in IBG LLC to the listed entity (IBKR), although this has subsequently increased.
Also, even though technically IBG does not have any economic ownership of the corporation, a class A/B share-structure has been set-up so that the management partnership exercises voting rights of the listed entity in-line with its economic ownership of IBG LLC (which currently is 17% public shareholders and 83% IBG Holdings LLC. Peterffy controls all voting rights of IBG Holdings LLC).
The peculiar ownership structure also explains why IBG Holdings is represented as a minority interest on IB’s financial statements.
The below is a schematic representation from IB’s website:
As explained when examining management incentives, IB gives stock grant awards to key management staff. Whilst this prima facie appears to bloat the share-count and dilute public shareholders, IB uses the proceeds from common share issuances to redeem IBG Holding LLC shares. The net effect on public shareholders as a result is that these transactions are non-dilutive. They own a smaller percentage of IBKR, but IBKR owns a greater percentage of IBG LLC:
 A more detailed version of Peterffy’s story can be found in the first chapter of the book ‘Automate This: How Algorithms came to rule the world’ by Christopher Steiner (highly recommended)
 The GS methodology assumes following: 2.2mn active trader households in US. Average annual trades per account of 132x (GS est), which gives 289mn revenue trades for total US market. This compares to IBKR’s estimated US individual active household revenue trades of 37.5mn, (derived by multiplying IBKR’s total annual revenue trades 152mn by % commissions from US residents (43%) and % commissions from households (58%).
 This presentation provides useful primer (It took me a while to get my head around the structure) http://media.mofo.com/files/Uploads/Images/140115-Up-C_Presentation.pdf
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