Interactive Brokers’ Fee-Generating Trades Ease in December

abdelaziz Fathi

Trading activity at Interactive Brokers LLC (NASDAQ:IBKR) lost momentum in December 2021 with volumes easing on a month-on-month basis following strong gains in November.

The broker posted its third-worst reading for Daily Average Revenue Trades (DARTs) for the year just ended. This is a sign that trades continue to meaningfully deaccelerate despite the pandemic volatility over the winter.

During December 2021, the number of DARTs, a standard industry metric, reported were at 2.3 million transactions. This is a fall of 20 percent month-over-month from 2.79 million in November. On a year-on-year basis, Interactive Brokers saw a similar negative pattern in its DARTs with December’s figure down three percent relative to nearly 2.3 million transactions reported in the same month last year.

Interactive Brokers, whose two main divisions were online brokerage and market-making before it ceased the latter in 2018, has won more clients, with the total for December’s active accounts up to 1.68 million. That is 2 percent higher from 1.64 million accounts for the previous month. The figure increased by 56 percent year-on-year when compared to December 2020 (‎1.07 million).

Interactive Brokers seemingly continue to ease restrictions on borrowed margins, which were tightened earlier this year amid fears over the impact of the spreading coronavirus  on its traders’ bets. The company’s ending client margin loan balances were around $54.6 billion in December 2021. This figure has climbed 40 percent from $39 billion in 2020, and was also slightly higher against the month prior.

On average, in November 2021, Interactive Brokers charged clients commission fees of $2.37 per order, down from $2.48 in November. This figure includes exchange, clearing and regulatory fees, with the key products metrics coming out at $1.68 for stocks, $3.14 for equity options and $4.15 for futures orders.

IBKR reports strong financials despite no-fee trading push

Interactive Brokers’ third-quarter earnings beat analysts’ expectations as the longtime leader in low-cost trading made gains in a couple of key areas, but its headline earnings missed estimates.

Despite headwinds from a push to no-fee trading and historically low interest, Interactive Brokers’ commission revenue increased $32 million, or 11 percent from the year-ago quarter. The upbeat figure was attributed to higher customer trading volumes in stock and options markets.

The results for the quarter were also driven by strong growth in interest revenue, which increased $79 million, or 41 percent on a yearly basis. The increase was supported by higher margin loan balances and strong securities lending activity. However, this was offset by lower revenues in the “other income’ segment, which decreased $199 million.

Aside from its core electronic-brokerage business, the IB earnings for the third quarter included a mark-to-market loss of $185 million from its 7.7 percent stake in Tiger Brokers. This compares to the company’s $6 million float gain, which was tied to the Chinese brokerage in Q3 2020.

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