Interactive Brokers’ fee-generating trades drop 20% YoY

abdelaziz Fathi

Despite a multitude of trading incentives that Interactive Brokers LLC (NASDAQ:IBKR) introduced over the past few years, including commission-free trading and fractional shares, monthly volumes are struggling for any real traction.

During April 2023, the number of DARTs was reported at 1.77 million transactions, down 14 percent from 2.05 million transactions in the month of March. Over a year-on-year basis, Interactive Brokers saw a larger drop in its DARTs with April’s figure down by 20 percent relative to 2.2 million reported in April 2022.

In terms of equity balance in customers’ accounts during April 2023, the figure totaled $342 billion, higher by 5 percent on a yearly basis and about even with prior month.

Elsewhere, the discount brokerage has won more than 28,700 new accounts. April’s active accounts increased to 2.22 million, or 1 percent higher from March and 20 percent above the previous year’s figure of 1.48 million ‎accounts.

The Greenwich, Connecticut-based company also revealed that on average it charged clients commission fees of $3.18 per order. This figure includes exchange, clearing and regulatory fees, with the key product metrics coming out at $2.03 for stocks, $4.65 for equity options and $4.25 for futures orders.

The data shows that the trend of rising accounts number is still in play, though volumes were interrupted. It is not clear whether that will be enough to support the revenue growth in the second quarter after the listed discount broker reported solid earnings for the three months through March 2023.

Interactive Brokers reported last month its largest-ever quarterly profit, buoyed by a favorable interest rate environment and an increasing user base.

The discount broker posted strong first-quarter earnings led by a recovery in interest income and its investment in Tiger Brokers. However, IBKR’s commission revenue was muted due to higher operating expenses and lower customer stock trading volume.

Ranked as the largest US electronic broker by some measures, Interactive Brokers’ first-quarter revenues rose 63 percent year-over-year, to $1.04 billion compared to $645 million in Q4 2022.

On an adjusted basis, income before tax totaled $720 million, up by nearly two thirds year-over-year from $441 million in the previous year. Diluted earnings per share came in at $1.35 for this quarter compared to $0.82 in Q4 2022.

Despite headwinds from a push to no-fee trading, Interactive Brokers’ commission revenue increased 2 percent from the year-ago quarter to $357 million. The growth was attributed to customer’s futures trading volume and higher options commission per contract. However, the figure was tempered partially by lower stock volume.

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