Notes to Consolidated Financial Statements
1. Organization of Business
Interactive Brokers Group, Inc. ("IBG, Inc.") is a Delaware holding company whose primary asset is its ownership of approximately 16.6% of the membership interests of IBG LLC,
which, in turn, owns operating subsidiaries (collectively, "IBG LLC"). IBG, Inc. together with IBG LLC and its consolidated subsidiaries (collectively, "the Company"), is an
automated global electronic broker and market maker specializing in executing and clearing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on more than 120
electronic exchanges and market centers around the world and offering custody, prime brokerage, securities and margin lending services to customers. In the United States of America ("U.S."), the
Company conducts its business primarily from its headquarters in Greenwich, Connecticut and from Chicago, Illinois. Abroad, the Company conducts its business through
offices located in Canada, England, Switzerland, Liechtenstein, India, China (Hong Kong and Shanghai), Japan, and Australia. As of December 31, 2016, the Company had 1,204 employees worldwide.
IBG LLC
is a Connecticut limited liability company that conducts its business through its operating subsidiaries (collectively, the "Operating Companies"): Interactive Brokers LLC
("IB LLC"); Interactive Brokers Canada Inc. ("IBC"); Interactive Brokers (U.K.) Limited and its subsidiary, Interactive Brokers (U.K.) Nominee Limited (collectively, "IBUK"); Interactive
Brokers Securities Japan, Inc. ("IBSJ"); Interactive Brokers Hong Kong Limited ("IBHK"); Interactive Brokers (India) Private Limited ("IBI"); Interactive Brokers Australia Pty Limited and its
subsidiary, Interactive Brokers Australia Nominees Pty Limited (collectively, "IBA"); IB Business Services (Shanghai) Company Limited ("IBBSS"); Timber Hill LLC ("TH LLC"); Timber Hill
Europe AG and its subsidiary, Timber Hill (Liechtenstein) AG (collectively, "THE"); Timber Hill Australia Pty Limited ("THA"); Timber Hill Canada Company ("THC"); Interactive Brokers Financial
Products S.A. ("IBFP"); Interactive Brokers Hungary KFT ("IBH"); Interactive Brokers Software Services Estonia OU ("IBEST"); Interactive Brokers Software Services Russia ("IBRUS"); Interactive
Brokers Software Services (India) Private Limited ("IBSSI"); and IB Exchange Corp. ("IBEC") and its subsidiaries, Interactive Brokers Corp. ("IB Corp"), Covestor, Inc. and its subsidiary,
Covestor Limited (collectively, "Covestor"), and Greenwich Advisor Compliance Services Corp. ("GACS").
The
Company operates in two business segments: electronic brokerage and market making, both supported by corporate. The Company conducts its electronic brokerage business through certain Interactive
Brokers subsidiaries, which provide electronic execution and clearing services to customers worldwide. The Company conducts its market making business principally through its Timber Hill subsidiaries
on the world's leading exchanges and market centers, primarily in exchange-traded equities, equity options and equity-index options and futures. Corporate enables the Company to operate cohesively and
effectively by providing support via development services and control functions to the business segments and also by executing the Company's currency diversification strategy.
Certain
of the Operating Companies are members of various securities and commodities exchanges in North America, Europe and the Asia/Pacific region and are subject to regulatory capital and other
requirements (see Note 15). IB LLC, IBC, IBUK, IBSJ, IBHK, and IBI carry securities accounts for customers or perform custodial functions relating to customer securities.
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies
Basis of Presentation
These consolidated financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in
the U.S. ("U.S. GAAP") and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding financial reporting with respect to Form 10-K.
These
consolidated financial statements include the accounts of the Company and its consolidated subsidiaries and reflect all adjustments of a normal and recurring nature that are, in the opinion of
management, necessary for the fair presentation of the results for the periods presented.
Principles of Consolidation, including Noncontrolling Interests
These consolidated financial statements include the accounts of IBG, Inc. and its majority and wholly owned subsidiaries. As sole managing member of
IBG LLC, IBG, Inc. exerts control over IBG LLC's operations. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 810,
"Consolidation," the Company consolidates IBG LLC's financial statements and records the interests in IBG LLC that it does not own as noncontrolling interests.
The
Company's policy is to consolidate all other entities in which it owns more than 50% unless it does not have control. All inter-company balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported
amounts and disclosures in these consolidated financial statements and accompanying notes. These estimates and assumptions are based on judgment and the best available information at the time.
Therefore, actual results could differ materially from those estimates. Such estimates include the allowance for doubtful accounts, valuation of certain investments, compensation accruals, current and
deferred income taxes, and contingency reserves.
Fair Value
Substantially all of the Company's assets and liabilities, including financial instruments are carried at fair value based on published market prices and are
marked to market, or are assets and liabilities which are short-term in nature and are carried at amounts that approximate fair value.
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
The
Company applies the fair value hierarchy in accordance with FASB ASC Topic 820, "Fair Value Measurement" ("ASC Topic 820"), to prioritize the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of
the fair value hierarchy are:
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Level 1
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Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
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Level 2
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Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly.
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Level 3
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Prices or valuations that require inputs that are both significant to fair value measurement and unobservable.
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Financial
instruments owned, at fair value and financial instruments sold, but not yet purchased, at fair value are generally classified as Level 1 of the fair value hierarchy. The Company's
Level 1 financial instruments, which are valued using quoted market prices as published by exchanges and clearing houses or otherwise broadly distributed in active markets, include active
listed stocks, options, warrants and discount certificates, and U.S. and foreign government securities. The Company does not adjust quoted prices for financial instruments classified as Level 1
of the fair value hierarchy, even in the event that the Company may hold a large position whereby a purchase or sale could reasonably impact quoted prices.
Currency
forward contracts are valued using broadly distributed bank and broker prices, and are classified as Level 2 of the fair value hierarchy as such instruments are not exchange-traded.
Other securities that are not traded in active markets are also classified in Level 2 of the fair value hierarchy. Level 3 financial instruments are comprised of securities that have
been delisted or otherwise are no longer tradable and have been valued by the Company based on internal estimates.
Earnings per Share
Earnings per share ("EPS") is computed in accordance with FASB ASC Topic 260, "Earnings per Share." Basic EPS is computed by dividing the net income available
for common stockholders by the weighted average number of shares outstanding for that period. Diluted EPS is calculated by dividing the net income available for common stockholders by the diluted
weighted average shares outstanding for that period. Diluted EPS includes the determinants of the basic EPS and, in addition, reflects the dilutive effect of shares of common stock estimated to be
distributed in
the future under the Company's stock-based compensation plans, with no adjustments to net income available for common stockholders for dilutive potential common shares.
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Stock-Based Compensation
The Company follows FASB ASC Topic 718, "CompensationStock Compensation" ("ASC Topic 718"), to account for its stock-based compensation plans.
ASC Topic 718 requires all share-based payments to employees to be recognized in the consolidated financial statements using a fair value-based method. Grants, which are denominated in U.S. dollars,
are communicated to employees in the year of grant, thereby establishing the fair value of each grant. The fair value of awards granted to employees are generally expensed as follows: 50% in the year
of grant in recognition of the plans' post-employment provisions (as described below) and the remaining 50% over the related vesting period utilizing the "graded vesting" method permitted under ASC
Topic 718. In the case of "retirement eligible" employees (those employees older than 59), 100% of awards are expensed when granted.
Awards
granted under stock-based compensation plans are subject to the plans' post-employment provisions in the event an employee ceases employment with the Company. The plans provide that employees
who discontinue employment with the Company without cause and continue to meet the terms of the plans' post-employment provisions will be eligible to earn 50% of previously granted but not yet earned
awards, unless the employee is over the age of 59, in which case the employee would be eligible to receive 100% of previously granted but not yet earned awards.
Cash and Cash Equivalents
Cash and cash equivalents consist of deposits with banks and all highly liquid investments, with maturities of three months or less, that are not segregated
and deposited for regulatory purposes or to meet margin requirements at clearing houses.
Cash and SecuritiesSegregated for Regulatory Purposes
As a result of customer activities, certain Operating Companies are obligated by rules mandated by their primary regulators to segregate or set aside cash or
qualified securities to satisfy such regulations, which have been promulgated to protect customer assets. Securities segregated for regulatory purposes consisted of U.S. government securities of
$7.4 billion and $15.2 billion as of December 31, 2016 and December 31, 2015, respectively, and securities purchased under agreements to resell in the amount of
$11.0 billion and $0.6 billion as of December 31, 2016 and December 31, 2015, respectively, which amounts approximate fair value.
Securities Borrowed and Securities Loaned
Securities borrowed and securities loaned are recorded at the amount of the cash collateral advanced or received. Securities borrowed transactions require the
Company to provide counterparties with collateral, which may be in the form of cash, letters of credit or other securities. With respect to securities loaned, the Company receives collateral, which
may be in the form of cash or other securities in an amount generally in excess of the fair value of the securities loaned. The Company monitors the market value of securities borrowed and loaned on a
daily basis, with additional collateral obtained or refunded as permitted contractually. It is the Company's policy to net, in the consolidated statements of financial condition, securities borrowed
and securities loaned entered into with the same counterparty that meet the offsetting requirements prescribed in FASB ASC Topic 210-20, "Balance SheetOffsetting" ("ASC Topic 210-20").
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Securities
lending fees received and paid by the Company are included in interest income and interest expense, respectively, in the consolidated statements of comprehensive income.
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase
Securities purchased under agreements to resell, which are reported as collateralized financing transactions, are recorded at contract value, which
approximates fair value. To ensure that the fair value of the underlying collateral remains sufficient, the collateral is valued daily with additional collateral obtained or excess collateral
returned, as permitted under contractual provisions. It is the Company's policy to net, in the consolidated statements of financial condition, securities purchased under agreements to resell
transactions and securities sold under agreements to repurchase transactions entered into with the same counterparty that meet the offsetting requirements prescribed in ASC Topic 210-20.
Financial Instruments Owned and Financial Instruments Sold, But Not Yet Purchased, at Fair Value
Financial instrument transactions are accounted for on a trade date basis. Financial instruments owned and financial instruments sold, but not yet purchased
are stated at fair value based upon quoted market prices. The Company's financial instruments pledged to counterparties where the counterparty has the right, by contract or custom, to sell or repledge
the financial instruments are reported as financial instruments owned and pledged as collateral in the consolidated statements of financial condition.
The
Company also enters into currency forward contracts. These transactions, which are also accounted for on a trade date basis, are agreements to exchange a fixed amount of one currency for a
specified amount of a second currency at completion of the currency forward contract term. Unrealized mark-to-market gains and losses on currency forward contracts are included in financial
instruments owned, at fair value or financial instruments sold, but not yet purchased, at fair value in the consolidated statements of financial condition.
Customer Receivables and Payables
Customer securities transactions are recorded on a settlement date basis and customer commodities transactions are recorded on a trade date basis. Receivables
from and payables to customers include amounts due on cash and margin transactions, including futures contracts transacted on behalf of customers. Securities owned by customers, including those that
collateralize
margin loans or other similar transactions, are not reported in the consolidated statements of financial condition. Amounts receivable from customers that are determined by management to be
uncollectible are recorded as customer bad debt expense in the consolidated statements of comprehensive income.
Receivables from and Payables to Brokers, Dealers and Clearing Organizations
Receivables from and payables to brokers, dealers and clearing organizations include net receivables and payables from unsettled trades, including amounts
related to futures and options on futures contracts executed on behalf of customers, amounts receivable for securities not delivered by the Company to the purchaser by the settlement date ("fails to
deliver") and cash deposits. Payables to brokers, dealers and clearing organizations also include amounts payable for securities not received by the Company from a seller by the settlement date
("fails to receive").
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Investments
The Company makes certain strategic investments related to its business and accounts for these investments under the cost method of accounting or under the
equity method of accounting as required under FASB ASC Topic 323, "InvestmentsEquity Method and Joint Ventures." Investments accounted for under the equity method, including where the
investee is a limited partnership or limited liability company, are recorded at the fair value amount of the Company's initial investment and are adjusted each period for the Company's share of the
investee's income or loss. The Company's share of the income or losses from equity method investments is included in other income in the consolidated statements of comprehensive income. The recorded
amounts of the Company's equity method investments, $22 million as of December 31, 2016 ($32 million as of December 31, 2015), which are included in other assets in the
consolidated statements of financial condition, increase or decrease accordingly. Contributions paid to and distributions received from equity method investees are recorded as additions or reductions,
respectively, to the respective investment balance.
The
Company also holds exchange memberships and investments in equity securities of certain exchanges, as required to qualify as a clearing member, and strategic investments in corporate stock that do
not qualify for equity method accounting. Such investments, $33 million as of December 31, 2016
($34 million as of December 31, 2015), are recorded at cost or, if an other-than-temporary impairment in value has occurred, at a value that reflects management's estimate of the
impairment, and are also included in other assets in the consolidated statements of financial condition. Dividends received from cost basis investments are included in other income in the consolidated
statements of comprehensive income when such dividends are received.
A
judgmental aspect of accounting for investments is evaluating whether an other-than-temporary decline in the value of an investment has occurred. The evaluation of an other-than-temporary impairment
is dependent on specific quantitative and qualitative factors and circumstances surrounding an investment, including recurring operating losses, credit defaults and subsequent rounds of financing. The
Company's equity investments do not have readily determinable market values. All investments are reviewed for changes in circumstances or occurrence of events that suggest the Company's investment may
not be recoverable. If an unrealized loss on any investment is considered to be other-than-temporary, the loss is recognized in the period the determination is made.
Property, Equipment, and Intangible Assets
Property, equipment, and intangible assets, which are included in other assets in the consolidated statements of financial condition, consist of leasehold
improvements, computer equipment, software developed for the Company's internal use, office furniture, equipment, and acquired technology.
Property
and equipment are recorded at historical cost, less accumulated depreciation and amortization. Additions and improvements that extend the lives of assets are capitalized, while expenditures
for repairs and maintenance are expensed as incurred. Depreciation and amortization are computed using the straight-line method. Equipment is depreciated over the estimated useful lives of the assets,
while leasehold improvements are amortized over the lesser of the estimated economic useful life of the asset or the term of the lease. Computer equipment is depreciated over three to five years and
office furniture and equipment are depreciated over five to seven years. Intangible assets with a finite life are amortized on a straight line basis over their estimated useful lives of three years,
and tested for recoverability whenever events indicate that the carrying amounts may not be
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
recoverable.
Qualifying costs for internally developed software are capitalized and amortized over the expected useful life of the developed software, not to exceed three years. Upon retirement or
disposition of property and equipment, the cost and related accumulated depreciation are removed
from the consolidated statements of financial condition and any resulting gain or loss is recorded in other income in the consolidated statements of comprehensive income. Fully depreciated (or
amortized) assets are retired on an annual basis.
Comprehensive Income and Foreign Currency Translation
The Company's operating results are reported in the consolidated statements of comprehensive income pursuant to FASB ASC Topic 220, "Comprehensive Income."
Comprehensive
income consists of two components: net income and other comprehensive income ("OCI"). The Company's OCI is comprised of gains and losses resulting from translating foreign currency
financial statements of non-U.S. subsidiaries, net of related income taxes, where applicable. In general, the practice and intention of the Company is to reinvest the earnings of its non-U.S.
subsidiaries in those operations, therefore tax is usually not accrued.
The
Company's non-U.S. domiciled subsidiaries have a functional currency that is other than the U.S. dollar. Such subsidiaries' assets and liabilities are translated into U.S. dollars at
period-end exchange rates, and revenues and expenses are translated at average exchange rates prevailing during the period. Adjustments that result from translating amounts from a subsidiary's
functional currency to the U.S. dollar (as described above) are reported net of tax, where applicable, in accumulated OCI in the consolidated statements of financial condition.
Revenue Recognition
Trading Gains
Trading gains and losses are recorded on trade date and are reported on a net basis. Trading gains and losses are comprised of changes in the fair value of
financial instruments
owned, at fair value and financial instruments sold, but not yet purchased, at fair value (i.e., unrealized gains and losses) and realized gains and losses related to the Company's market
making business segment. Included in trading gains are net gains and losses on stocks, U.S. and foreign government securities, options, futures, foreign exchange and other derivative instruments.
Dividends are integral to the valuation of stocks and interest is integral to the valuation of fixed income instruments. Accordingly, both dividends and interest income and expense attributable to
financial instruments owned, at fair value and financial instruments sold, but not yet purchased, at fair value are reported on a net basis in trading gains in the consolidated statements of
comprehensive income.
Commissions and Execution Fees
Commissions earned for executing and clearing transactions are accrued on a trade date basis and are reported as commissions and execution fees in the
consolidated statements of comprehensive income.
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Interest Income and Expense
The Company earns interest income and incurs interest expense primarily in connection with its electronic brokerage customer business and its securities
lending activities, which are recorded on an accrual basis and are included in interest income and interest expense, respectively, in the consolidated statements of comprehensive income.
Foreign Currency Gains and Losses
Foreign currency balances are assets and liabilities in currencies other than the Company's functional currency. At every reporting date, the Company revalues
its foreign currency
balances to its functional currency at the spot exchange rate and records the associated foreign currency gains and losses. These foreign currency gains and losses are reported in the consolidated
statements of comprehensive income, as follows: (a) foreign currency gains and losses related to the Company's currency diversification strategy are reported in other income; (b) foreign
currency gains and losses related to the market making core-business activities are reported in trading gains; (c) foreign currency gains and losses arising from currency swap transactions in
the electronic brokerage business are reported in interest income; and (d) all other foreign currency gains and losses are reported in other income.
Rebates
Rebates consist of volume discounts, credits or payments received from exchanges or other market centers related to the placement and/or removal of liquidity
from the order flow in the marketplace. Rebates are recorded on an accrual basis and included net within execution and clearing expenses in the consolidated statements of comprehensive income. Rebates
received for trades executed on behalf of customers that elect tiered pricing are passed, in whole or part, to these customers; and such pass-through amounts are recorded net within commissions and
execution fees in the consolidated statements of comprehensive income.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC Topic 740, "Income Taxes" ("ASC Topic 740"). The Company's income tax expense, deferred tax
assets and liabilities, and reserves for unrecognized tax benefits are based on enacted tax laws (see Note 11) and reflect management's best assessment of estimated future taxes to be paid. The
Company is subject to income taxes in both the U.S. and numerous foreign jurisdictions. Determining income tax expense requires significant judgments and estimates.
The
Company recognizes interest related to income tax matters as interest income or interest expense and penalties related to income tax matters as income tax expense in the consolidated statements of
comprehensive income.
Deferred
income tax assets and liabilities arise from temporary differences between the tax and financial statements recognition of the underlying assets and liabilities. In evaluating the ability to
recover deferred tax assets within the jurisdictions from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax
liabilities,
projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, historical results are adjusted for changes in accounting policies and
incorporate
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
assumptions
including the amount of future state, federal and foreign pre-tax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax-planning
strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company is using to manage the underlying
businesses. In evaluating the objective evidence that historical results provide, three years of cumulative operating income (loss) are considered. Deferred income taxes have not been provided for
U.S. tax liabilities or for additional foreign taxes on the unremitted earnings of foreign subsidiaries that have been indefinitely reinvested.
The
calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across the Company's global
operations. Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. The Company is not aware of any such changes that would have a material effect
on the Company's results of operations, cash flows, or financial position.
The
Company recognizes a tax benefit from an uncertain tax position only when it is more likely than not that the position will be sustained upon examination, including resolutions of any related
appeals or litigation processes, on the basis of the technical merits. A tax position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized
on settlement.
The
Company records tax liabilities in accordance with ASC Topic 740 and adjusts these liabilities when management's judgment changes as a result of the evaluation of new information not previously
available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in payments that are different from the current estimates of these tax liabilities. These
differences will be reflected as increases or decreases to income tax expense in the period in which new information becomes available.
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
Recently Issued Accounting Pronouncements
Following is a summary of recently issued FASB Accounting Standards Updates ("ASUs") that have affected or may affect the Company's consolidated financial
statements:
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Affects
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Status
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ASU 2015-14
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Revenue from Contracts with Customers (Topic 606):
Deferral of the Effective Date.
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Effective for annual reporting periods beginning after December 15, 2017.
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ASU 2016-01
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Financial InstrumentsOverall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities.
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Effective for fiscal years beginning after December 15, 2017.
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ASU 2016-02
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Leases (Topic 842)
: Requires that, at lease inception, a lessee recognize a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability,
representing the liability to make lease payments, in the statements of financial condition, among other requirements.
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Effective for fiscal years beginning after December 15, 2018.
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ASU 2016-07
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InvestmentsEquity Method and Joint Ventures (Topic 323):
Simplifying the Transition to the Equity Method of Accounting.
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Effective for fiscal years beginning after December 15, 2016.
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ASU 2016-08
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Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations (Reporting Revenue Gross versus Net).
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Effective for annual reporting periods beginning after December 15, 2017.
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ASU 2016-09
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CompensationStock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.
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Effective for annual reporting periods beginning after December 15, 2016.
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ASU 2016-10
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Revenue from Contracts with Customers (Topic 606):
Identifying Performance Obligations and Licensing.
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Effective for annual reporting periods beginning after December 15, 2017.
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ASU 2016-12
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Revenue from Contracts with Customers (Topic 606):
Narrow-Scope Improvements and Practical Expedients.
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Effective for annual reporting periods beginning after December 15, 2017.
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ASU 2016-13
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Financial InstrumentsCredit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments.
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Effective for fiscal years beginning after December 15, 2019.
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Notes to Consolidated Financial Statements (Continued)
2. Significant Accounting Policies (Continued)
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Affects
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Status
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ASU 2016-15
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Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments.
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Effective for fiscal years beginning after December 15, 2017.
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ASU 2016-16
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Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory.
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Effective for annual reporting periods beginning after December 15, 2017.
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ASU 2016-17
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Consolidation (Topic 810):
Interests Held through Related Parties That Are under Common Control.
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Effective for fiscal years beginning after December 15, 2016.
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ASU 2016-19
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Technical Corrections and Improvements.
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Effective upon issuance.
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ASU 2016-20
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Technical Corrections and Improvements to Topic 606:
Revenue from Contracts with Customers.
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Effective for annual reporting periods beginning after December 15, 2017.
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ASU 2017-01
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Business Combinations (Topic 805):
Clarifying the Definition of a Business.
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Effective for annual periods beginning after December 15, 2017.
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ASU 2017-04
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IntangiblesGoodwill and Other (Topic 350)
: Simplifying the Test for Goodwill Impairment.
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Effective for fiscal years beginning after December 15, 2019.
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Adoption
of those ASUs that became effective during 2016 and 2017, prior to the issuance of the Company's consolidated financial statements, did not have a material effect on these financial
statements.
The
Company early adopted ASU 2016-09 CompensationStock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting, as of April 1, 2016. This early adoption
did not have a material impact on the Company's consolidated financial statements.
3. Trading Activities and Related Risks
The Company's trading activities include providing securities market making and brokerage services. Trading activities expose the Company to market and credit risks. These risks are managed in
accordance with established risk management policies and procedures. To accomplish this, management has established a risk management process that includes:
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a regular review of the risk management process by executive management as part of its oversight role;
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defined risk management policies and procedures supported by a rigorous analytic framework; and
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articulated risk tolerance levels as defined by executive management that are regularly reviewed to ensure that the Company's risk-taking is
consistent with its business strategy, capital structure, and current and anticipated market conditions.
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Notes to Consolidated Financial Statements (Continued)
3. Trading Activities and Related Risks (Continued)
Market Risk
The Company is exposed to various market risks. Exposures to market risks arise from equity price risk, foreign currency exchange rate fluctuations and
changes in interest rates. The Company seeks to mitigate market risk associated with trading inventories by employing hedging strategies that correlate rate, price and spread movements of trading
inventories and related financing and hedging activities. The Company uses a combination of cash instruments and exchange traded derivatives to hedge its market exposures. The Company does not apply
hedge accounting. The following discussion describes the types of market risk faced:
Equity Price Risk
Equity
price risk arises from the possibility that equity security prices will fluctuate, affecting the value of equity securities and other instruments that derive their value from a particular
stock, a defined basket of stocks, or a stock index. The Company is subject to equity price risk primarily in financial instruments. The Company attempts to limit such risks by continuously
reevaluating prices and by diversifying its portfolio across many different options, futures and underlying securities and avoiding concentrations of positions based on the same underlying security.
Currency Risk
Currency
risk arises from the possibility that fluctuations in foreign exchange rates will impact the value of financial instruments. The Company manages this risk using spot (i.e., cash)
currency transactions, currency futures contracts and currency forward contracts. As a global electronic broker and market maker trading on exchanges around the world in multiple currencies, the
Company is exposed to foreign currency risk. The Company actively manages its currency exposure using hedging strategies that are based on a defined basket of 15 currencies internally referred to as
the "GLOBAL." These strategies minimize the fluctuation of the Company's net worth as expressed in GLOBALs, thereby diversifying its risk in alignment with these global currencies, weighted by the
Company's view of their
importance. As the Company's financial results are reported in U.S. dollars, the change in the value of the GLOBAL as expressed in U.S. dollars affects the Company's earnings. The impact of this
currency diversification strategy in the Company's earnings is included in other income in the consolidated statements of comprehensive income. As a result of a periodic assessment, the Company
changed the composition of the GLOBAL by adding the Chinese renminbi (specifically, the offshore currency known by the symbol CNH), removing the South Korean won (KRW) and Brazilian real (BRL)
components, and realigning the relative weights of the U.S. dollar (USD) and Japanese yen (JPY). The new composition of the GLOBAL went into effect as of the close of business on June 30, 2016.
Interest Rate Risk
Interest
rate risk arises from the possibility that changes in interest rates will affect the value of financial instruments. The Company is exposed to interest rate risk on cash and margin balances,
positions carried in equity and fixed income securities, options, and futures and on its borrowings. These risks are managed through investment policies and by entering into interest rate futures
contracts.
99
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
3. Trading Activities and Related Risks (Continued)
Credit Risk
The Company is exposed to risk of loss if an individual, counterparty or issuer fails to perform its obligations under contractual terms ("default risk").
Both cash instruments and derivatives expose the Company to default risk. The Company has established policies and procedures for mitigating credit risk on principal transactions, including reviewing
and establishing limits for credit exposure, maintaining collateral, and continually assessing the creditworthiness of counterparties.
The
Company's credit risk is limited in that substantially all of the contracts entered into are settled directly at securities and commodities clearing houses and a small portion is settled through
member firms and banks with substantial financial and operational resources. The Company seeks to control the
risks associated with its customer margin activities by requiring customers to maintain collateral in compliance with regulatory and internal guidelines.
In
the normal course of business, the Company executes, settles, and finances various customer securities transactions. Execution of these transactions includes the purchase and sale of securities
which exposes the Company to default risk arising from the potential that customers or counterparties may fail to satisfy their obligations. In these situations, the Company may be required to
purchase or sell financial instruments at unfavorable market prices to satisfy obligations to customers or counterparties. Liabilities to other brokers and dealers related to unsettled transactions
(i.e., securities fails to receive) are recorded at the amount for which the securities were purchased, and are paid upon receipt of the securities from other brokers or dealers. In the case of
aged securities fails to receive, the Company may purchase the underlying security in the market and seek reimbursement for any losses from the counterparty.
For
cash management purposes, the Company enters into short-term securities purchased under agreements to resell and securities sold under agreements to repurchase transactions ("repos") in addition
to securities borrowing and lending arrangements, all of which may result in credit exposure in the event the counterparty to a transaction is unable to fulfill its contractual obligations. Repos are
collateralized by securities with a market value in excess of the obligation under the contract. Similarly, securities lending agreements are collateralized by deposits of cash or securities. The
Company attempts to minimize credit risk associated with these activities by monitoring collateral values on a daily basis and requiring additional collateral to be deposited with or returned to the
Company as permitted under contractual provisions.
Concentrations of Credit Risk
The Company's exposure to credit risk associated with its trading and other activities is measured on an individual counterparty basis, as well as by groups
of counterparties that share similar attributes. Concentrations of credit risk can be affected by changes in political, industry, or economic factors. To reduce the potential for risk concentration,
credit limits are established and exposure is monitored in light of changing counterparty and market conditions. As of December 31, 2016, the Company did not have any material concentrations of
credit risk outside the ordinary course of business.
100
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
3. Trading Activities and Related Risks (Continued)
Off-Balance Sheet Risks
The Company may be exposed to a risk of loss not reflected in the consolidated financial statements to settle futures and certain over-the-counter contracts
at contracted prices, which may require repurchase or sale of the underlying products in the market at prevailing prices. Accordingly, these transactions result in off-balance sheet risk as the
Company's cost to liquidate such contracts may exceed the amounts reported in the Company's consolidated statements of financial condition.
4. Equity and Earnings per Share
In connection with IBG, Inc.'s initial public offering of Class A common stock ("IPO") in May 2007, it purchased 10.0% of the membership interests in IBG LLC from IBG
Holdings LLC ("Holdings"), became the sole managing member of IBG LLC and began to consolidate IBG LLC's financial results into its financial statements. Holdings owns all of
IBG, Inc.'s Class B common stock, which has voting rights in proportion to its ownership interests in IBG LLC. The table below shows the amount of IBG LLC membership
interests held by IBG, Inc. and Holdings as of December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
IBG, Inc.
|
|
Holdings
|
|
Total
|
|
Ownership %
|
|
|
16.6
|
%
|
|
83.4
|
%
|
|
100.0
|
%
|
Membership interests
|
|
|
67,989,967
|
|
|
341,444,304
|
|
|
409,434,271
|
|
These
consolidated financial statements reflect the results of operations and financial position of IBG, Inc., including consolidation of its investment in IBG LLC and its subsidiaries.
The noncontrolling interests in IBG LLC attributable to Holdings are reported as a component of total equity in the consolidated statements of financial condition.
Recapitalization and Post-IPO Capital Structure
Immediately prior to and immediately following the consummation of the IPO, IBG, Inc., Holdings, IBG LLC and the members of IBG LLC
consummated a series of transactions collectively referred to herein as the "Recapitalization." In connection with the Recapitalization, IBG, Inc., Holdings and the historical members of
IBG LLC entered into an exchange agreement, dated as of May 3, 2007 (the "Exchange Agreement"), pursuant to which the historical members of IBG LLC received membership interests
in Holdings in exchange for their membership interests in IBG LLC. Additionally, IBG, Inc. became the sole managing member of IBG LLC.
In
connection with the consummation of the IPO, Holdings used the net proceeds to redeem 10.0% of members' interests in Holdings in proportion to their interests. Immediately following the
Recapitalization and IPO, Holdings owned approximately 90% of IBG LLC and 100% of IBG, Inc.'s Class B common stock, which has voting power in IBG, Inc. in proportion to
Holdings' ownership of IBG LLC.
Since
consummation of the IPO and Recapitalization, IBG, Inc.'s equity capital structure has been comprised of Class A and Class B common stock. All shares of common stock have a
par value of $0.01 per share and have identical rights to earnings and dividends and in liquidation. As of December 31, 2016 and December 31, 2015, 1,000,000,000 shares of Class A
common stock were authorized, of which 68,119,412 and 64,121,150 shares have been issued; and 67,984,973 and 63,985,335 shares were outstanding, respectively. Class B common stock is comprised
of 100 authorized shares, of
101
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
4. Equity and Earnings per Share (Continued)
which
100 shares were issued and outstanding as of December 31, 2016 and December 31, 2015, respectively. In addition, 10,000 shares of preferred stock have been authorized, of which no
shares are issued or outstanding as of December 31, 2016 and December 31, 2015, respectively.
As
a result of a federal income tax election made by IBG LLC applicable to the acquisition of IBG LLC member interests by IBG, Inc., the income tax basis of the assets of
IBG LLC acquired by IBG, Inc. have been adjusted based on the amount paid for such interests. Deferred tax assets were recorded as of the IPO date and in connection with subsequent
redemptions of Holdings member interests in exchange for common stock. These deferred tax assets are included in other assets in the Company's consolidated statements of financial condition and are
being amortized as additional deferred income tax expense over 15 years from the IPO date and from the additional redemption dates, respectively, as allowable under current tax law. As of
December 31, 2016 and December 31, 2015, the unamortized balance of these deferred tax assets was $273 million and $288 million, respectively.
IBG, Inc.
also entered into an agreement (the "Tax Receivable Agreement") with Holdings to pay Holdings (for the benefit of the former members of IBG LLC) 85% of the tax savings that
IBG, Inc. actually realizes as the result of tax basis increases. These payables to Holdings are reported as payable to affiliate in the Company's consolidated statements of financial
condition. The remaining 15% is accounted for as a permanent increase to additional paid-in capital in the Company's consolidated statements of financial condition.
The
cumulative amounts of deferred tax assets, payables to Holdings and additional paid-in capital arising from stock offerings from the date of the IPO through December 31, 2016 were
$472 million, $401 million, and $71 million, respectively. Amounts payable under the Tax Receivable Agreement are payable to Holdings annually following the filing of
IBG, Inc.'s federal income tax return. The Company has paid Holdings a cumulative total of $116 million through December 31, 2016 pursuant to the terms of the Tax Receivable
Agreement.
The
Exchange Agreement, as amended, provides for future redemptions of member interests and for the purchase of member interests in IBG LLC by IBG, Inc. from Holdings, which could result
in
IBG, Inc. acquiring the remaining member interests in IBG LLC that it does not own. On an annual basis, members of Holdings are able to request redemption of their interests.
At
the time of IBG, Inc.'s IPO in 2007, three hundred sixty (360) million shares of authorized common stock were reserved for future sales and redemptions. From 2008 through 2010,
Holdings redeemed 5,013,259 IBG LLC interests with a total value of $114 million, which redemptions were funded using cash on hand at IBG LLC. Upon cash redemption these
IBG LLC interests were retired. From 2011 through 2015, IBG, Inc. issued 11,047,295 shares of common stock (with a fair value of $306 million) directly to Holdings in exchange for
an equivalent number of member interests in IBG LLC.
On
July 28, 2016, the Company filed a Supplemental Prospectus on Form 424B5 (File Number 333-192275) with the SEC to issue 1,596,200 shares of common stock in exchange for an
equivalent number of shares of member interests in IBG LLC. This issuance of shares increased the Company's ownership in IBG LLC from 16.2% to 16.6%.
102
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
4. Equity and Earnings per Share (Continued)
As
a consequence of these redemption transactions, and distribution of shares to employees (see Note 10), IBG, Inc.'s interest in IBG LLC has increased to approximately 16.6%,
with Holdings owning the remaining 83.4% as of December 31, 2016. The redemptions also resulted in an increase in the Holdings interest held by Mr. Thomas Peterffy and his affiliates
from approximately 84.6% at the IPO to approximately 89.1% as of December 31, 2016.
Earnings per Share
Basic earnings per share is calculated utilizing net income available for common stockholders divided by the weighted average number of shares of
Class A and Class B common stock outstanding for that period.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions, except share or per share amounts)
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
|
Net income available for common stockholders
|
|
$
|
84
|
|
$
|
49
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
66,013,147
|
|
|
61,042,971
|
|
|
56,492,281
|
|
Class B
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,013,247
|
|
|
61,043,071
|
|
|
56,492,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
1.28
|
|
$
|
0.80
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share are calculated utilizing the Company's basic net income available for common stockholders divided by diluted weighted average shares outstanding with no adjustments to net
income available to common stockholders for potentially dilutive common shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions, except share or per share amounts)
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
|
Net income available for common stockholders
|
|
$
|
84
|
|
$
|
49
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
|
|
|
|
|
|
|
|
Issued and outstanding
|
|
|
66,013,147
|
|
|
61,042,971
|
|
|
56,492,281
|
|
Potentially dilutive common shares
|
|
|
|
|
|
|
|
|
|
|
Issuable pursuant to employee stock incentive plans
|
|
|
1,286,166
|
|
|
1,466,725
|
|
|
1,217,287
|
|
Class B
|
|
|
100
|
|
|
100
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,299,413
|
|
|
62,509,796
|
|
|
57,709,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
1.25
|
|
$
|
0.78
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
4. Equity and Earnings per Share (Continued)
Member Distributions and Stockholder Dividends
During the three years ended December 31, 2016, 2015, and 2014, IBG LLC made distributions totaling $267 million, $267 million,
and $324 million, to its members, of which IBG, Inc.'s proportionate share was $43 million, $40 million, and $45 million, respectively. The Company paid quarterly
cash dividends of $0.10 per share of common stock, totaling $26 million, $25 million, and $23 million during 2016, 2015, and 2014, respectively.
On
January 17, 2017, the Company declared a cash dividend of $0.10 per common share, payable on March 14, 2017 to stockholders of record as of March 1, 2017.
5. Comprehensive Income
The following table presents comprehensive income and earnings per share on comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions, except share or per share amounts)
|
|
Comprehensive income available for common stockholders
|
|
$
|
80
|
|
$
|
39
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share on comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.21
|
|
$
|
0.64
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.19
|
|
$
|
0.62
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
66,013,247
|
|
|
61,043,071
|
|
|
56,492,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
67,299,413
|
|
|
62,509,796
|
|
|
57,709,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Financial Assets and Financial Liabilities
Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables set forth, by level within the fair value hierarchy (see Note 2), financial assets and liabilities, measured at fair value on a
recurring basis as of December 31, 2016 and December 31, 2015.
104
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Financial Assets and Financial Liabilities (Continued)
As
required by ASC Topic 820, financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the respective fair value
measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets At Fair Value as of
December 31, 2016
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(in millions)
|
|
Securities segregated for regulatory purposes
|
|
$
|
7,398
|
|
$
|
|
|
$
|
|
|
$
|
7,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments owned, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
|
1,821
|
|
|
|
|
|
|
|
|
1,821
|
|
Options
|
|
|
1,804
|
|
|
|
|
|
|
|
|
1,804
|
|
Warrants and discount certificates
|
|
|
43
|
|
|
|
|
|
|
|
|
43
|
|
U.S. and foreign government securities
|
|
|
363
|
|
|
|
|
|
|
|
|
363
|
|
Corporate and municipal bonds
|
|
|
|
|
|
2
|
|
|
1
|
|
|
3
|
|
Currency forward contracts
|
|
|
|
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments owned, at fair value
|
|
|
4,031
|
|
|
5
|
|
|
1
|
|
|
4,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at fair value
|
|
$
|
11,429
|
|
$
|
5
|
|
$
|
1
|
|
$
|
11,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities At Fair Value as of
December 31, 2016
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(in millions)
|
|
Financial instruments sold, but not yet purchased, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
$
|
839
|
|
$
|
|
|
$
|
|
|
$
|
839
|
|
Options
|
|
|
1,286
|
|
|
|
|
|
|
|
|
1,286
|
|
Warrants and discount certificates
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
Currency forward contracts
|
|
|
|
|
|
19
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments sold, but not yet purchased, at fair value
|
|
|
2,126
|
|
|
19
|
|
|
|
|
|
2,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities at fair value
|
|
$
|
2,126
|
|
$
|
19
|
|
$
|
|
|
$
|
2,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Assets At Fair Value as of
December 31, 2015
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(in millions)
|
|
Securities segregated for regulatory purposes
|
|
$
|
15,214
|
|
$
|
|
|
$
|
|
|
$
|
15,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial instruments owned, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
|
1,650
|
|
|
|
|
|
|
|
|
1,650
|
|
Options
|
|
|
1,156
|
|
|
|
|
|
|
|
|
1,156
|
|
Warrants and discount certificates
|
|
|
81
|
|
|
|
|
|
|
|
|
81
|
|
U.S. and foreign government securities
|
|
|
527
|
|
|
|
|
|
|
|
|
527
|
|
Corporate and municipal bonds
|
|
|
|
|
|
3
|
|
|
|
|
|
3
|
|
Currency forward contracts
|
|
|
|
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments owned, at fair value
|
|
|
3,414
|
|
|
6
|
|
|
|
|
|
3,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets at fair value
|
|
$
|
18,628
|
|
$
|
6
|
|
$
|
|
|
$
|
18,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Financial Assets and Financial Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities At Fair Value as of
December 31, 2015
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(in millions)
|
|
Financial instruments sold, but not yet purchased, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
$
|
1,565
|
|
$
|
|
|
$
|
|
|
$
|
1,565
|
|
Options
|
|
|
1,042
|
|
|
|
|
|
|
|
|
1,042
|
|
Warrants and discount certificates
|
|
|
1
|
|
|
|
|
|
|
|
|
1
|
|
Currency forward contracts
|
|
|
|
|
|
9
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial instruments sold, but not yet purchased, at fair value
|
|
|
2,608
|
|
|
9
|
|
|
|
|
|
2,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities at fair value
|
|
$
|
2,608
|
|
$
|
9
|
|
$
|
|
|
$
|
2,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers between Level 1 and Level 2
Transfers of financial assets and financial liabilities at fair value to or from Levels 1 and 2 arise where the market for a specific financial
instrument has become active or inactive during the period. The fair values transferred are ascribed as if the financial assets or financial liabilities had been transferred as of the end of the
period. During the years ended December 31, 2016 and 2015, there were no transfers between levels for financial assets and liabilities, at fair value.
Level 3 Financial Assets and Financial Liabilities
The Company's Level 3 financial assets are comprised of delisted and illiquid securities reported within financial instruments owned, at fair value in
the consolidated statements of financial condition. During the year ended December 31, 2016 financial assets included $1 million of Level 3 securities which were transferred from
Level 2 as a result of a security becoming illiquid.
Trading Gains from Market Making Transactions
Trading gains and losses from market making transactions reported in the statements of comprehensive income, by major product type, are comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended
December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions)
|
|
Equities
|
|
$
|
155
|
|
$
|
254
|
|
$
|
247
|
|
Fixed income
|
|
|
|
|
|
1
|
|
|
21
|
|
Foreign exchange
|
|
|
8
|
|
|
14
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total trading gains, net
|
|
$
|
163
|
|
$
|
269
|
|
$
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
These
transactions are related to the Company's financial instruments owned and financial instruments sold, but not yet purchased, at fair value and include both derivative and non-derivative
financial instruments, including exchange traded options and futures. These gains and losses also include market making related dividend and fixed income trading related interest income and expense.
106
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Financial Assets and Financial Liabilities (Continued)
The
gains (losses) in the table above are not representative of the integrated trading strategies applied by the Company, which utilizes financial instruments across various product types. Gains and
losses in one product type frequently offset gains and losses in other product types.
Financial Assets and Liabilities Not Measured at Fair Value
The following tables represent the carrying value, fair value, and fair value hierarchy category of certain financial assets and liabilities that are not
recorded at fair value in the
Company's consolidated statements of financial condition. The following table excludes certain financial instruments such as equity investments and all non-financial assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Carrying
Value
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
(in millions)
|
|
Financial assets, not measured at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,925
|
|
$
|
1,925
|
|
$
|
1,925
|
|
$
|
|
|
$
|
|
|
Cash and securities segregated for regulatory purposes
|
|
|
16,619
|
|
|
16,619
|
|
|
5,624
|
|
|
10,995
|
|
|
|
|
Securities borrowed
|
|
|
3,629
|
|
|
3,629
|
|
|
|
|
|
3,629
|
|
|
|
|
Securities purchased under agreements to resell
|
|
|
111
|
|
|
111
|
|
|
|
|
|
111
|
|
|
|
|
Receivables from customer
|
|
|
19,409
|
|
|
19,409
|
|
|
|
|
|
19,409
|
|
|
|
|
Receivables from broker, dealers, and clearing organizations
|
|
|
1,040
|
|
|
1,040
|
|
|
|
|
|
1,040
|
|
|
|
|
Interest receivable
|
|
|
57
|
|
|
57
|
|
|
|
|
|
57
|
|
|
|
|
Other assets
|
|
|
28
|
|
|
32
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets, not measured at fair value
|
|
$
|
42,818
|
|
$
|
42,822
|
|
$
|
7,549
|
|
$
|
35,273
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities, not measured at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
74
|
|
$
|
74
|
|
$
|
|
|
$
|
74
|
|
$
|
|
|
Securities loaned
|
|
|
4,293
|
|
|
4,293
|
|
|
|
|
|
4,293
|
|
|
|
|
Payables to customer
|
|
|
41,731
|
|
|
41,731
|
|
|
|
|
|
41,731
|
|
|
|
|
Payables to brokers, dealers and clearing organizations
|
|
|
239
|
|
|
239
|
|
|
|
|
|
239
|
|
|
|
|
Interest payable
|
|
|
6
|
|
|
6
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities, not measured at fair value
|
|
$
|
46,343
|
|
$
|
46,343
|
|
$
|
|
|
$
|
46,343
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Financial Assets and Financial Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Carrying
Value
|
|
Fair
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
(in millions)
|
|
Financial assets, not measured at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,601
|
|
$
|
1,601
|
|
$
|
1,601
|
|
$
|
|
|
$
|
|
|
Cash and securities segregated for regulatory purposes
|
|
|
6,095
|
|
|
6,095
|
|
|
5,533
|
|
|
562
|
|
|
|
|
Securities borrowed
|
|
|
3,924
|
|
|
3,924
|
|
|
|
|
|
3,924
|
|
|
|
|
Securities purchased under agreements to resell
|
|
|
195
|
|
|
195
|
|
|
|
|
|
195
|
|
|
|
|
Receivables from customer
|
|
|
17,050
|
|
|
17,050
|
|
|
|
|
|
17,050
|
|
|
|
|
Receivables from broker, dealers, and clearing organizations
|
|
|
692
|
|
|
692
|
|
|
|
|
|
692
|
|
|
|
|
Interest receivable
|
|
|
63
|
|
|
63
|
|
|
|
|
|
63
|
|
|
|
|
Other assets
|
|
|
28
|
|
|
31
|
|
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial assets, not measured at fair value
|
|
$
|
29,648
|
|
$
|
29,651
|
|
$
|
7,134
|
|
$
|
22,517
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities, not measured at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities loaned
|
|
$
|
2,894
|
|
$
|
2,894
|
|
$
|
|
|
$
|
2,894
|
|
$
|
|
|
Payables to customer
|
|
|
37,084
|
|
|
37,084
|
|
|
|
|
|
37,084
|
|
|
|
|
Payables to brokers, dealers and clearing organizations
|
|
|
423
|
|
|
423
|
|
|
|
|
|
423
|
|
|
|
|
Interest payable
|
|
|
3
|
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities, not measured at fair value
|
|
$
|
40,404
|
|
$
|
40,404
|
|
$
|
|
|
$
|
40,404
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Netting of Financial Assets and Financial Liabilities
It is the Company's policy to net securities borrowed and securities loaned, and securities purchased under agreements to resell and securities sold under
agreements to repurchase that meet the offsetting requirements prescribed in ASC Topic 210-20. In the tables below, the amounts of financial instruments that are not offset in the consolidated
statements of financial condition, but could be netted against cash or financial instruments with specific counterparties under master netting agreements, according to the terms of the agreements,
including clearing houses (exchange traded
options, warrants and discount certificates) or over the counter currency forward contract counterparties, are presented to provide financial statement readers with the Company's net payable or
receivable with counterparties for these financial instruments.
108
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Financial Assets and Financial Liabilities (Continued)
The
following tables set forth the netting of financial assets and of financial liabilities as of December 31, 2016 and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Not
Offset
in the
Consolidated
Statement of
Financial
Condition
|
|
|
|
|
|
Gross Amounts
of Financial
Assets and
Liabilities
Recognized
|
|
Amounts
Offset in the
Consolidated
Statement of
Financial Condition(2)
|
|
Net Amounts
Presented in
the Consolidated
Statement of
Financial Condition
|
|
|
|
|
|
Cash or Financial
Instruments
|
|
Net Amount
|
|
|
|
(in millions)
|
|
Offsetting of Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities segregated for regulatory purposespurchased under agreements to resell
|
|
$
|
10,995
|
(1)
|
$
|
|
|
$
|
10,995
|
|
$
|
(10,995
|
)
|
$
|
|
|
Securities borrowed
|
|
|
3,629
|
|
|
|
|
|
3,629
|
|
|
(3,488
|
)
|
|
141
|
|
Securities purchased under agreements to resell
|
|
|
111
|
|
|
|
|
|
111
|
|
|
(111
|
)
|
|
|
|
Financial Instruments owned, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,804
|
|
|
|
|
|
1,804
|
|
|
(1,230
|
)
|
|
574
|
|
Warrants and discount certificates
|
|
|
43
|
|
|
|
|
|
43
|
|
|
(1
|
)
|
|
42
|
|
Currency forward contracts
|
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
16,585
|
|
$
|
|
|
$
|
16,585
|
|
$
|
(15,825
|
)
|
$
|
760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities loaned
|
|
$
|
4,293
|
|
$
|
|
|
$
|
4,293
|
|
$
|
(4,158
|
)
|
$
|
135
|
|
Financial instruments sold, but not yet purchased, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,286
|
|
|
|
|
|
1,286
|
|
|
(1,230
|
)
|
|
56
|
|
Warrants and discount certificates
|
|
|
1
|
|
|
|
|
|
1
|
|
|
(1
|
)
|
|
|
|
Currency forward contracts
|
|
|
19
|
|
|
|
|
|
19
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,599
|
|
$
|
|
|
$
|
5,599
|
|
$
|
(5,389
|
)
|
$
|
210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Financial Assets and Financial Liabilities (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Not
Offset
in the
Consolidated
Statement of
Financial
Condition
|
|
|
|
|
|
|
|
Amounts
Offset in the
Consolidated
Statement of
Financial
Condition(2)
|
|
|
|
|
|
|
|
Gross Amounts
of Financial
Assets and
Liabilities
Recognized
|
|
Net Amounts
Presented in
the Consolidated
Statement of
Financial Condition
|
|
|
|
|
|
Cash or Financial
Instruments
|
|
Net Amount
|
|
|
|
(in millions)
|
|
Offsetting of Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities segregated for regulatory purposespurchased under agreements to resell
|
|
$
|
562
|
(1)
|
$
|
|
|
$
|
562
|
|
$
|
(562
|
)
|
$
|
|
|
Securities borrowed
|
|
|
3,924
|
|
|
|
|
|
3,924
|
|
|
(3,816
|
)
|
|
108
|
|
Securities purchased under agreements to resell
|
|
|
195
|
|
|
|
|
|
195
|
|
|
(195
|
)
|
|
|
|
Financial Instruments owned, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,156
|
|
|
|
|
|
1,156
|
|
|
(1,032
|
)
|
|
124
|
|
Warrants and discount certificates
|
|
|
81
|
|
|
|
|
|
81
|
|
|
(1
|
)
|
|
80
|
|
Currency forward contracts
|
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,921
|
|
$
|
|
|
$
|
5,921
|
|
$
|
(5,606
|
)
|
$
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities loaned
|
|
$
|
2,894
|
|
$
|
|
|
$
|
2,894
|
|
$
|
(2,773
|
)
|
$
|
121
|
|
Financial instruments sold, but not yet purchased, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
1,042
|
|
|
|
|
|
1,042
|
|
|
(1,032
|
)
|
|
10
|
|
Warrants and discount certificates
|
|
|
1
|
|
|
|
|
|
1
|
|
|
(1
|
)
|
|
|
|
Currency forward contracts
|
|
|
9
|
|
|
|
|
|
9
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,946
|
|
$
|
|
|
$
|
3,946
|
|
$
|
(3,806
|
)
|
$
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
As
of December 31, 2016 and December 31, 2015, the Company had $11.0 billion and $0.6 billion, respectively, of securities purchased
under agreements to resell that were segregated to satisfy regulatory requirements. These securities are included in "Cash and securitiessegregated for regulatory purposes" in the
consolidated statements of financial condition.
-
(2)
-
The
Company did not have any balances eligible for netting in accordance with ASC Topic 210-20 at December 31, 2016 and 2015.
110
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Financial Assets and Financial Liabilities (Continued)
Secured Financing TransactionsMaturities and Collateral Pledged
The following tables present gross obligations for securities loaned transactions by remaining contractual maturity and class of collateral pledged as of
December 31, 2016 and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Remaining Contractual Maturity
|
|
|
|
Overnight
and Open
|
|
Less than
30 days
|
|
30 - 90
days
|
|
Over 90
days
|
|
Total
|
|
|
|
(in millions)
|
|
Securities Loaned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
$
|
4,269
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
4,269
|
|
Corporate bonds
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,293
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
4,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Remaining Contractual Maturity
|
|
|
|
Overnight
and Open
|
|
Less than
30 days
|
|
30 - 90
days
|
|
Over 90
days
|
|
Total
|
|
|
|
(in millions)
|
|
Securities Loaned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
$
|
2,873
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
2,873
|
|
Corporate bonds
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,894
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
2,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Collateralized Transactions
The Company enters into securities borrowing and lending transactions and agreements to repurchase and resell securities to finance trading inventory, to obtain securities for settlement and to earn
residual interest rate spreads. In addition, the Company's customers pledge their securities owned to collateralize margin loans. Under these transactions, the Company either receives or provides
collateral, including equity, corporate debt and U.S. government securities. Under many agreements, the Company is permitted to sell or repledge securities received as collateral and use these
securities to secure securities purchased under agreements to resell, enter into securities lending transactions or deliver these securities to counterparties to cover short positions.
The
Company also engages in securities financing transactions with and for customers through margin lending. Customer receivables generated from margin lending activity are collateralized by
customer-owned securities held by the Company. Customers' required margin levels and established credit limits are monitored continuously by risk management staff using automated systems. Pursuant to
the Company's policy and as enforced by such systems, customers are required to deposit additional collateral or reduce positions, when necessary to avoid automatic liquidation of their positions.
111
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
7. Collateralized Transactions (Continued)
Margin
loans are extended to customers on a demand basis and are not committed facilities. Factors considered in the acceptance or rejection of margin loans are the amount of the loan, the degree of
leverage being employed in the customer account and an overall evaluation of the customer's portfolio to ensure proper diversification or, in the case of concentrated positions, appropriate liquidity
of the underlying collateral. Additionally, transactions relating to concentrated or restricted positions are limited or prohibited by raising the level of required margin collateral (to 100% in the
extreme case). Underlying collateral for margin loans is evaluated with respect to the liquidity of the collateral positions, valuation of securities, volatility analysis and an evaluation of industry
concentrations. Adherence to the Company's collateral policies significantly limits the Company's credit exposure to margin loans in the event of a customer's default. Under margin lending agreements,
the Company may request additional margin collateral from customers and may sell securities that have not been paid for or purchase securities sold but not delivered from customers, if necessary. As
of December 31, 2016 and December 31, 2015, approximately $19.4 billion and $17.0 billion, respectively, of customer margin loans were outstanding.
The
following table summarizes the amounts related to collateralized transactions as of December 31, 2016 and December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
Permitted
to Repledge
|
|
Sold or
Repledged
|
|
Permitted
to Repledge
|
|
Sold or
Repledged
|
|
|
|
(in millions)
|
|
Securities lending transactions
|
|
$
|
13,768
|
|
$
|
3,621
|
|
$
|
12,131
|
|
$
|
2,229
|
|
Securities purchased under agreements to resell transactions(1)
|
|
|
11,117
|
|
|
11,117
|
|
|
757
|
|
|
743
|
|
Customer margin assets
|
|
|
17,773
|
|
|
7,172
|
|
|
14,905
|
|
|
6,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
42,658
|
|
$
|
21,910
|
|
$
|
27,793
|
|
$
|
9,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
As
of December 31, 2016, $11.0 billion or 99% (as of December 31, 2015, $0.6 billion or 76%) of securities acquired through agreements to
resell that are shown as repledged have been deposited in a separate bank account for the exclusive benefit of customers in accordance with SEC Rule 15c3-3.
In
the normal course of business, the Company pledges qualified securities with clearing organizations to satisfy daily margin and clearing fund requirements. As of December 31, 2016 and
December 31, 2015, the majority of the Company's U.S. and foreign government securities owned were pledged to clearing organizations.
Financial
instruments owned and pledged as collateral, including amounts pledged to affiliates, where the counterparty has the right to repledge, as of December 31, 2016 and December 31,
2015 are presented in the following table:
|
|
|
|
|
|
|
|
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
(in millions)
|
|
Stocks
|
|
$
|
1,574
|
|
$
|
915
|
|
U.S. and foreign government securities
|
|
|
359
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,933
|
|
$
|
1,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
8. Short-Term Borrowings
Short-term borrowings consist primarily of collateralized borrowing facilities with clearing banks in multiple currencies that bear interest at variable overnight rates based on interbank funds rates
prevailing in the respective currencies. In addition, the Company has available secured and unsecured overnight bank loan facilities. All short-term borrowings outstanding as of December 31,
2016 and 2015 were either repaid on the next business day or rolled forward and, accordingly, their carrying values approximated fair values.
As
of December 31, 2016 and 2015, short-term borrowings consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
Principal
|
|
Weighted
Average
Rates
|
|
Principal
|
|
Weighted
Average
Rates
|
|
|
|
(in millions)
|
|
|
|
(in millions)
|
|
|
|
Overnight borrowing facilities
|
|
$
|
74
|
|
|
1.53
|
%
|
$
|
|
|
|
0.51
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
74
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense on short term borrowings for each of the three years ended December 31, 2016, 2015, and 2014 was $0 million, $0 million, and $1 million, respectively.
9. Other Income
The components of other income for the years ended December 31, 2016, 2015, and 2014 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions)
|
|
Payments for order flow
|
|
$
|
14
|
|
$
|
17
|
|
$
|
25
|
|
Market data fees
|
|
|
35
|
|
|
30
|
|
|
24
|
|
Account activity fees
|
|
|
18
|
|
|
16
|
|
|
14
|
|
Risk exposure fees
|
|
|
19
|
|
|
21
|
|
|
6
|
|
Gains (losses) on financial instruments, at fair value and other investments, net
|
|
|
35
|
|
|
(18
|
)
|
|
(5
|
)
|
Gains (losses) from currency diversification strategy, net
|
|
|
(40
|
)
|
|
(206
|
)
|
|
(185
|
)
|
Other, net
|
|
|
13
|
|
|
18
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
94
|
|
$
|
(122
|
)
|
$
|
(111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
for order flow are earned from various options exchanges based upon options trading volume originated by the Operating Companies. Market data fees are charged to customers based upon market
data services provided and are largely offset by the related cost to obtain the underlying market data from third party vendors. Risk exposure fees are earned from a small minority of customer
accounts with positions on which market risk exceeds certain thresholds. Account activity fees are charged to customers that generate commissions below the minimum level in any given month. The fee is
based on the difference between the minimum monthly required commission and the actual commissions generated by the customer's account. Gains and losses on financial instruments, at fair value and
other investments include realized and unrealized gains and losses on financial instruments that are not held for the Company's market making operations or from securities that are subject to
restrictions, and the
Company's interests in the earnings of equity method investees and dividends received on cost-basis investments.
113
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
10. Employee Incentive Plans
Defined Contribution Plan
The Company offers substantially all employees of U.S.-based Operating Companies who have met minimum service requirements the opportunity to participate in
defined contribution retirement plans qualifying under the provisions of Section 401(k) of the Internal Revenue Code. The general purpose of this plan is to provide employees with an incentive
to make regular savings in order to provide additional financial security during retirement. This plan provides for the Company to match 50% of the employees' pre-tax contribution, up to a maximum of
10% of eligible earnings. The employee is vested in the matching contribution incrementally over six years of service. Included in employee compensation and benefits expenses in the consolidated
statements of comprehensive income were $3 million of plan contributions for the three years ended December 31, 2016, 2015, and 2014, respectively.
2007 ROI Unit Stock Plan
In connection with the IPO, the Company adopted the IBG, Inc. 2007 ROI Unit Stock Plan ("ROI Unit Stock Plan"). An aggregate of 1,271,009 shares of
restricted common stock (consisting of 1,250,000 shares issued under the ROI Unit Stock Plan and 21,009 shares under the 2007 Stock Incentive Plan, as described below), with a fair value at the date
of grant of $38 million were issued to IBG LLC and held as treasury stock.
As
of December 31, 2016, the Company has 4,994 shares of common stock remaining to be distributed to former employees under the ROI Unit Stock Plan.
2007 Stock Incentive Plan
Under the Company's 2007 Stock Incentive Plan (the "Stock Incentive Plan"), up to 30 million shares of the Company's common stock may be granted and
issued to directors, officers, employees, contractors and consultants of the Company. The purpose of the Stock Incentive Plan is to promote the Company's long-term financial success by attracting,
retaining and rewarding eligible participants.
As
a result of the Company's organizational structure, a description of which can be found in "BusinessOur Organizational Structure" in Part I Item 1 of this Annual Report
on Form 10-K, there is no dilutive effect upon ownership of common stockholders of issuing shares under the Stock Incentive Plan. The issuances do not dilute the book value of the ownership of
common stockholders since the restricted stock units are granted at market value, and upon their vesting and the related issuance of shares of common stock, the ownership of IBG, Inc. in
IBG LLC, increases proportionately to the shares issued. As a result of such proportionate increase in share ownership, the dilution upon issuance of common stock is borne by IBG LLC's
majority member (i.e., noncontrolling interest), Holdings, and not by IBG, Inc. or its common stockholders. Additionally, dilution of earnings that may take place after issuance of
common stock is reflected in EPS reported in the Company's financial statements. The EPS dilution can be neither estimated nor projected, but historically it has not been material.
114
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
10. Employee Incentive Plans (Continued)
The
Stock Incentive Plan is administered by the Compensation Committee of the Company's Board of Directors. The Compensation Committee has discretionary authority to determine the eligibility to
participate in the Stock Incentive Plan and establishes the terms and conditions of the stock awards, including the number of awards granted to each participant and all other terms and conditions
applicable to such awards in individual grant agreements. Awards are expected to be made primarily through grants of restricted common stock. Stock Incentive Plan awards are subject to issuance over
time. All previously granted but not yet earned awards may be cancelled by the Company upon the participant's termination of employment or violation of certain applicable covenants prior to issuance,
unless determined otherwise by the Compensation Committee.
The
Stock Incentive Plan provides that, upon a change in control, the Compensation Committee may, at its discretion, fully vest any granted but not yet earned awards under the Stock Incentive Plan, or
provide that any such granted but not yet earned awards will be honored or assumed, or new rights substituted by the new employer on a substantially similar basis and on terms and conditions
substantially comparable to those of the Stock Incentive Plan.
The
Company expects to continue to grant awards on or about December 31 of each year to eligible participants as part of an overall plan of equity compensation. Shares of common stock vest, and
become distributable to participants in accordance with the following schedule:
-
-
10% on the first vesting date, which is on or about May 9 of each year; and
-
-
an additional 15% on each of the following six anniversaries of the first vesting, assuming continued employment with the Company and
compliance with non-competition and other applicable covenants.
Awards
granted to external directors vest, and are distributed, over a five-year period (20% per year) commencing one year after the date of grant. A total of 22,996 shares have been granted to the
external directors cumulatively since the plan inception.
Stock
Incentive Plan share grants (excluding 21,009 shares issued pursuant to the ROI Unit Stock Plan described above) and the related fair values since the plan inception are presented in the table
below:
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Fair Value at
Date of Grant
($ millions)
|
|
Prior periods (since inception)
|
|
|
19,178,500
|
|
$
|
348
|
|
December 31, 2014
|
|
|
1,709,968
|
|
|
49
|
|
December 31, 2015
|
|
|
1,211,533
|
(1)
|
|
52
|
|
December 31, 2016
|
|
|
1,445,479
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
23,545,480
|
|
$
|
504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Stock
Incentive Plan number of granted shares related to 2015 was adjusted by 12,454 additional shares during the year ended December 31, 2016.
115
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
10. Employee Incentive Plans (Continued)
Estimated
future grants under the Stock Incentive Plan are accrued for ratably during each year (see Note 2). In accordance with the vesting schedule, outstanding awards vest and are
distributed to participants yearly on or about May 9 of each year. At the end of each year, there are no vested awards that remain undistributed.
Compensation
expense related to the Stock Incentive Plan recognized in the consolidated statements of comprehensive income was $51 million, $50 million, and $41 million for the
years ended December 31, 2016, 2015, and 2014, respectively. Estimated future compensation costs for unvested awards, net of credits for cancelled awards, as of December 31, 2016 are
$39 million.
The
following summarizes the Stock Incentive Plan and ROI Unit Stock Plan activities from December 31, 2013 through December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Incentive Plan
Shares
|
|
Intrinsic Value
of SIP Shares
which Vested
and were Distributed
($ millions)(1)
|
|
ROI Unit
Stock Plan
Shares
|
|
Balance, December 31, 2013
|
|
|
11,647,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,709,968
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(535,085
|
)
|
|
|
|
|
15,518
|
(2)
|
Distributed
|
|
|
(2,445,200
|
)
|
$
|
56
|
|
|
(5,904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
10,376,800
|
|
|
|
|
|
9,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,211,533
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(163,221
|
)
|
|
|
|
|
|
|
Distributed
|
|
|
(2,487,127
|
)
|
$
|
86
|
|
|
(3,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
8,937,985
|
|
|
|
|
|
6,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,445,479
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(69,340
|
)
|
|
|
|
|
|
|
Distributed
|
|
|
(2,402,062
|
)
|
$
|
88
|
|
|
(1,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
|
|
7,912,062
|
|
|
|
|
|
4,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Intrinsic
value of SIP shares distributed represents the compensation value reported to the participants.
-
(2)
-
ROI
Unit Stock Plan number of cancelled unearned shares related to prior years was adjusted by 15,518 shares during the period
Awards
previously granted but not yet earned under the stock plans are subject to the plans' post-employment provisions in the event a participant ceases employment with the Company. Through
December 31, 2016, a total of 447,374 shares have been distributed under these post-employment provisions. These distributions are included in the table above.
116
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
11. Income Taxes
Income tax expense for the three years ended December 31, 2016, 2015, and 2014 differs from the U.S. federal statutory rate primarily due to the taxation treatment of income attributable to
noncontrolling interests in IBG LLC. These noncontrolling interests are subject to U.S. taxation as partnerships. Accordingly, the income attributable to these noncontrolling interests is
reported in the consolidated statements of comprehensive income, but the related U.S. income tax expense attributable to these noncontrolling interests is not reported by the Company as it is the
obligation of the individual partners. Income tax expense is also affected by the differing effective tax rates in foreign, state and local jurisdictions where certain of the Company's subsidiaries
are subject to corporate taxation.
Deferred
income taxes arise primarily due to the amortization of the deferred tax assets recognized in connection with the common stock offerings (see Note 4), differences in the valuation of
financial assets and liabilities, and for other temporary differences arising from the deductibility of compensation and depreciation expenses in different time periods for book and income tax return
purposes.
For
the three years ended December 31, 2016, 2015, and 2014, the provision for income taxes consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended
December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions)
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
1
|
|
$
|
4
|
|
$
|
1
|
|
State and local
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
34
|
|
|
24
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
35
|
|
|
28
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
30
|
|
|
14
|
|
|
21
|
|
State and local
|
|
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
(3
|
)
|
|
1
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
27
|
|
|
15
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62
|
|
$
|
43
|
|
$
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
reconciliation of the statutory U.S. Federal income tax rate of 35% to the Company's effective tax rate for the three years ending December 31, 2016, 2015, and 2014 is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
U.S. Statutory Tax Rate
|
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Less: rate attributable to noncontrolling interests
|
|
|
(28.2
|
)%
|
|
(28.2
|
)%
|
|
(28.6
|
)%
|
State, local and foreign taxes, net of federal benefit
|
|
|
1.3
|
%
|
|
2.6
|
%
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.1
|
%
|
|
9.4
|
%
|
|
9.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
11. Income Taxes (Continued)
Significant
components of the Company's deferred tax assets and liabilities, which are reported in other assets and in other liabilities and accrued expenses, respectively, in the consolidated
statements of financial condition, as of December 31, 2016, 2015, and 2014 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions)
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
Arising from the acquisition of interests in IBG LLC
|
|
$
|
273
|
|
$
|
288
|
|
$
|
279
|
|
Deferred compensation
|
|
|
6
|
|
|
5
|
|
|
6
|
|
Other
|
|
|
18
|
|
|
18
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
297
|
|
|
311
|
|
|
293
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
|
|
Foreign, primarily THE
|
|
|
2
|
|
|
3
|
|
|
3
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
294
|
|
$
|
308
|
|
$
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of and for the years ended December 31, 2016 and 2015, the Company had no unrecognized tax and no valuation allowances on deferred tax assets were required. The Company is subject to
taxation in the U.S. and various states and foreign jurisdictions. As of December 31, 2016, the Company is no longer subject to U.S. Federal and State income tax examinations for tax years
prior to 2010, and to non-U.S. income tax examinations for tax years prior to 2006.
As
of December 31, 2016, accumulated earnings held by non-U.S. subsidiaries totaled $1.0 billion (as of December 31, 2015 $1.0 billion). Of this amount, approximately
$0.3 billion (as of December 31, 2015 $0.4 billion) is attributable to earnings of the Company's foreign subsidiaries that are considered "pass-through" entities for U.S. income
tax purposes. Since the Company accounts for U.S. income taxes on these earnings on a current basis, no additional U.S. tax consequences would result from the repatriation of these earnings other than
that which would be due arising from currency fluctuations between the time the earnings are reported for U.S. tax purposes and when they are remitted. With respect to certain of these subsidiaries'
accumulated earnings (approximately $0.2 billion and $0.3 billion as of December 31, 2016 and December 31, 2015, respectively), repatriation would result in additional
foreign taxes in the form of dividend withholding tax imposed on the recipient of the distribution or dividend distribution tax imposed on the payor of the distribution. The Company has not provided
for its proportionate share of these additional foreign taxes as it does not intend to repatriate these
earnings in the foreseeable future. For the same reason, the Company has not provided deferred U.S. tax on cumulative translation adjustments associated with these earnings.
118
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
11. Income Taxes (Continued)
The
remainder of the accumulated earnings are attributable to non-U.S. subsidiaries that are not considered "pass-through" entities for U.S. tax purposes. The Company's U.S. tax basis in the stock of
most of these entities exceeds its book basis. Establishing a deferred tax asset pursuant to ASC Topic 740 is not permitted as this difference will not reverse in the foreseeable future. In the
instances in which the Company's book basis were to exceed its U.S. tax basis, no deferred tax liability would be established as the Company would consider the earnings of those entities to be
indefinitely reinvested.
12. Property, Equipment and Intangible Assets
Property, equipment and intangible assets, which are included in other assets in the consolidated statements of financial condition, consist of leasehold improvements, computer equipment, software
developed for the Company's internal use, office furniture, equipment and acquired technology. As of December 31, 2016 and 2015, property, equipment and intangible assets consisted of:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
2015
|
|
|
|
(in millions)
|
|
Leasehold improvements
|
|
$
|
6
|
|
$
|
16
|
|
Computer equipment
|
|
|
14
|
|
|
9
|
|
Office furniture and equipment
|
|
|
2
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
27
|
|
Lessaccumulated depreciation and amortization
|
|
|
(9
|
)
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
13
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Internally developed software
|
|
|
49
|
|
|
47
|
|
Intangible assets (acquired technology)
|
|
|
7
|
|
|
8
|
|
Lessaccumulated amortization
|
|
|
(28
|
)
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
|
28
|
|
|
30
|
|
|
|
|
|
|
|
|
|
Total property, equipment, and intangible assets, net
|
|
$
|
41
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization of $25 million, $22 million, and $20 million, for the three years ended December 31, 2016, 2015, and 2014, respectively, is included in
occupancy, depreciation and amortization expenses in the consolidated statements of comprehensive income. Amortization expense related to intangible assets is expected to be approximately
$16 million, $9 million, and $3 million, for years ended December 31, 2017, 2018, and 2019, respectively.
13. Commitments, Contingencies and Guarantees
Claims against Customers
On January 15, 2015, due to the sudden move in the value of the Swiss franc that followed an unprecedented action by the Swiss National Bank, which
removed a previously instituted and repeatedly reconfirmed cap of the currency relative to the Euro, several of the Company's customers who held currency futures and spot positions suffered losses in
excess of their deposits with the Company. The Company took immediate action to hedge its exposure to the foreign currency receivables from these customers. The Company estimates the cumulative losses
related to this event, net of hedging activity
119
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
13. Commitments, Contingencies and Guarantees (Continued)
and
debt collection efforts, to be approximately $118 million. The Company is actively pursuing collection of the debts. The ultimate effect of this incident on the Company's results will
depend upon the outcome of the Company's debt collection efforts.
Litigation
The Company is subject to certain pending and threatened legal actions which arise out of the normal course of business. Litigation is inherently
unpredictable, particularly in proceedings where claimants seek substantial or indeterminate damages, or which are in their early stages. The Company has not been able to quantify the actual loss or
range of loss related to such legal proceedings, the manner in which they will be resolved, the timing of final resolution or the ultimate settlement. Management believes that the resolution of these
actions will not have a material effect, if any, on the Company's business or financial condition, but may have a material impact on the results of operations for a given period.
The
Company accounts for potential losses related to litigation in accordance with FASB ASC Topic 450, "Contingencies." As of December 31, 2016 and 2015, reserves provided for potential
losses related to litigation matters were not material.
Trading Technologies Matter
On February 3, 2010, Trading Technologies International, Inc. ("Trading Technologies") filed a complaint in the U.S. District Court for the
Northern District of Illinois, Eastern Division, against IBG, Inc., IBG LLC, Holdings, and IB LLC. Thereafter, Trading Technologies dismissed IBG, Inc. and Holdings from
the case, leaving only IBG LLC and IB LLC as defendants ("Defendants"). The operative complaint, as amended, alleges that the Defendants have infringed and continue to infringe twelve
U.S. patents held by Trading Technologies. Trading Technologies is seeking, among other things, unspecified damages and injunctive relief ("the Litigation").
The
Defendants filed an answer to Trading Technologies' amended complaint, as well as related counterclaims. The defendants deny Trading Technologies' claims, assert that the asserted patents are not
infringed and are invalid, and assert several other defenses as well.
Trading
Technologies also filed patent infringement lawsuits against approximately a dozen other companies in the same court, many of which are still pending. The Litigation was consolidated with the
other lawsuits filed by Trading Technologies.
The
United States Patent and Trademark Office ("USPTO") issued decisions instituting Covered Business Method Review ("CBM Review") on all of the asserted patents and has made a finding that it is more
likely than not that the patents are invalid. The District Court granted the Defendants' motion to stay the Litigation pending the CBM Reviews. On February 17, 2017, the USPTO issued two
decisions finding that the claims of one patent are patentable and the claims of another patent are not patentable. On February 28, 2017, the USPTO issued a decision finding that most of the
claims of another patent are not patentable and finding three claims of the same patent to be patentable. The Defendants plan to appeal to the extent any claims were held to be patentable.
It
is difficult to predict the outcome of the matter, however, the Company believes it has meritorious defenses to the allegations made in the complaint and intends to defend itself vigorously against
them.
120
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
13. Commitments, Contingencies and Guarantees (Continued)
However,
litigation is inherently uncertain and there can be no guarantee that the Company will prevail or that the Litigation can be settled on favorable terms.
Class Action Matter
On December 18, 2015, a former individual customer filed a purported class action complaint against IB LLC, IBG, Inc., and Thomas Frank,
PhD, the Company's Executive Vice President and Chief Information Officer, in the U.S. District Court for the District of Connecticut. The complaint alleges that the former customer and members of the
purported class of IB LLC's customers were harmed by alleged "flaws" in the computerized system used by the Company to close out (i.e., liquidate) positions in customer brokerage
accounts that have margin deficiencies. The complaint seeks, among other things, undefined compensatory damages and declaratory and injunctive relief.
On
February 19, 2016, the Company filed a motion to dismiss the class action complaint. On September 28, 2016, the Court issued an order granting the Company's motion to dismiss and
dismissing the complaint in its entirety, and without providing plaintiff leave to amend. On October 5, 2016, the Court entered judgment in the Company's favor. On October 12, 2016,
plaintiff filed motions for leave to file an amended complaint and to vacate or amend judgment, which the Company opposed. The Court has not yet ruled on these motions. We believe that the proposed
amended complaint, like the original complaint, lacks merit. Further, even if the complaint ultimately were to survive a motion to dismiss, we do not believe that a purported class action is
appropriate given the great differences in portfolios, markets and many other circumstances surrounding the liquidation of any particular customer's margin-deficient account. IB LLC and the
related defendants intend to continue to defend themselves vigorously against the case and, consistent with past practice in connection with this type of unwarranted action, any potential claims for
counsel fees and expenses incurred in defending the case shall be fully pursued against the plaintiff.
Leases
Operating Companies have non-cancelable operating leases covering office space. All but one of the office space leases are subject to escalation clauses based
on specified costs incurred by the respective landlords and contain renewal elections. Rent expense calculated on a straight-line basis for the Company was $16 million, $14 million and
$13 million for the three years ended December 31, 2016, 2015, and 2014, respectively, and is included in occupancy, depreciation and amortization expenses in the consolidated statements
of comprehensive income. As of December 31, 2016, the Company's minimum annual lease commitments totaled $49 million, as follows:
|
|
|
|
|
Year
|
|
(in millions)
|
|
2017
|
|
$
|
14
|
|
2018
|
|
|
13
|
|
2019
|
|
|
4
|
|
2020
|
|
|
4
|
|
2021
|
|
|
4
|
|
Thereafter
|
|
|
10
|
|
|
|
|
|
|
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
13. Commitments, Contingencies and Guarantees (Continued)
Guarantees
Certain of the Operating Companies provide guarantees to securities and commodities clearing houses and exchanges which meet the accounting definition of a
guarantee under FASB ASC Topic 460, "Guarantees." Under standard membership agreements, clearing house and exchange members are required to guarantee collectively the performance of other members.
Under the agreements, if a member becomes unable to satisfy its obligations, other members would be required to meet shortfalls. In the opinion of management, the Operating Companies' liability under
these arrangements is not quantifiable and could exceed the cash and securities they have posted as collateral. However, the potential for these Operating Companies to be required to make payments
under these arrangements is remote. Accordingly, no contingent liability is carried in the consolidated statements of financial condition for these arrangements.
In
connection with its retail brokerage business, IB LLC or other electronic brokerage Operating Companies perform securities and commodities execution, clearance and settlement on behalf of
their customers for whom they commit to settle trades submitted by such customers with the respective clearing houses. If a customer fails to fulfill its settlement obligations, the respective
Operating Company must fulfill those settlement obligations. No contingent liability is carried on the consolidated statements of financial condition for such customer obligations.
Other Commitments
Certain clearing houses, clearing banks and firms used by certain Operating Companies are given a security interest in certain assets of those Operating
Companies held by those clearing organizations. These assets may be applied to satisfy the obligations of those Operating Companies to the respective clearing organizations.
14. Segment and Geographic Information
The Company has two operating business segments: electronic brokerage and market making. These segments are supported by the corporate segment, which provides centralized services and executes the
Company's currency diversification strategy.
The
Company conducts its electronic brokerage business through certain Interactive Brokers subsidiaries, which provide electronic trade execution and clearing services to customers worldwide. The
Company conducts its market making business principally through its Timber Hill subsidiaries on the world's leading exchanges and market centers, primarily in exchange-traded equities, equity options
and equity-index options and futures.
Significant
transactions and balances between the Operating Companies occur, primarily as a result of certain Operating Companies holding exchange or clearing organization memberships, which are
utilized to provide execution and clearing services to affiliates. Charges for transactions between segments are designed to approximate full costs. Intra-segment and intra-region income and expenses
and related balances have been eliminated in this segment and geographic information to reflect the external business conducted in each segment or geographic region. Corporate items include
non-allocated corporate income and expenses that are not attributed to segments for performance measurement, net gains and losses on positions held as part of our overall currency diversification
strategy, corporate assets and eliminations.
122
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
14. Segment and Geographic Information (Continued)
Management
believes that the following information by business segment provides a reasonable representation of each segment's contribution to total net revenues and income before income taxes for
the years ended December 31, 2016, 2015, and 2014, and total assets as of December 31, 2016, 2015, and 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions)
|
|
Net revenues
|
|
|
|
|
|
|
|
|
|
|
Electronic brokerage
|
|
$
|
1,239
|
|
$
|
1,097
|
|
$
|
952
|
|
Market making
|
|
|
190
|
|
|
298
|
|
|
284
|
|
Corporate
|
|
|
(33
|
)
|
|
(206
|
)
|
|
(193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
1,396
|
|
$
|
1,189
|
|
$
|
1,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
Electronic brokerage
|
|
$
|
756
|
|
$
|
536
|
|
$
|
589
|
|
Market making
|
|
|
44
|
|
|
130
|
|
|
114
|
|
Corporate
|
|
|
(39
|
)
|
|
(208
|
)
|
|
(197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total income before income taxes
|
|
$
|
761
|
|
$
|
458
|
|
$
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions)
|
|
Segment assets
|
|
|
|
|
|
|
|
|
|
|
Electronic brokerage
|
|
$
|
50,072
|
|
$
|
44,421
|
|
$
|
38,280
|
|
Market making
|
|
|
11,765
|
|
|
10,825
|
|
|
12,172
|
|
Corporate
|
|
|
(7,164
|
)
|
|
(6,512
|
)
|
|
(7,067
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
54,673
|
|
$
|
48,734
|
|
$
|
43,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company operates its automated global business in the U.S. and international markets on more than 120 electronic exchanges and market centers. A significant portion of the Company's net revenues
are generated by subsidiaries operating outside the U.S. International operations are comprised of electronic brokerage and market making activities in 24 countries in Europe, Asia and the Americas
(outside the U.S.). The following table presents total net revenues and income before income taxes by geographic area for the years ended December 31, 2016, 2015, and 2014. The geographic
analysis
123
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
14. Segment and Geographic Information (Continued)
presented
below is based on the location of the subsidiaries in which the transactions are recorded. This geographic information does not reflect the way the Company's business is managed.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(in millions)
|
|
Net revenues
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,046
|
|
$
|
832
|
|
$
|
773
|
|
International
|
|
|
350
|
|
|
357
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
1,396
|
|
$
|
1,189
|
|
$
|
1,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
632
|
|
$
|
294
|
|
$
|
425
|
|
International
|
|
|
129
|
|
|
164
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income before income taxes
|
|
$
|
761
|
|
$
|
458
|
|
$
|
506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Regulatory Requirements
As of December 31, 2016, aggregate excess regulatory capital for all of the Operating Companies was $4.2 billion.
IB LLC,
TH LLC and IB Corp are subject to the Uniform Net Capital Rule (Rule 15c3-1) under the Exchange Act and the Commodities and Futures Trading Commission's minimum financial
requirements (Regulation 1.17), and THE is subject to the Swiss Financial Market Supervisory Authority eligible equity requirement. THA and IBA are subject to the Australian Securities Exchange
liquid capital requirement, THLI is subject to the Financial Market Authority Liechtenstein eligible capital requirements, THC and IBC are subject to the Investment Industry Regulatory Organization of
Canada risk adjusted capital requirement, IBUK is subject to the U.K. Financial Conduct Authority Capital Requirements Directive, IBHK is subject to the Hong Kong Securities Futures Commission liquid
capital requirement, IBI is subject to the National Stock Exchange of India net capital requirements and IBSJ is subject to the Japanese Financial Supervisory Agency capital requirements. The
following table summarizes capital, capital requirements and excess regulatory capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Capital/
Eligible Equity
|
|
Requirement
|
|
Excess
|
|
|
|
(in millions)
|
|
IB LLC
|
|
$
|
3,254
|
|
$
|
294
|
|
$
|
2,960
|
|
TH LLC
|
|
|
306
|
|
|
1
|
|
|
305
|
|
THE
|
|
|
577
|
|
|
174
|
|
|
403
|
|
Other regulated Operating Companies
|
|
|
659
|
|
|
96
|
|
|
563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,796
|
|
$
|
565
|
|
$
|
4,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
capital requirements could restrict the Operating Companies from expanding their business and declaring dividends if their net capital does not meet regulatory requirements. Also, certain
Operating Companies are subject to other regulatory restrictions and requirements.
124
Table of Contents
Interactive Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
15. Regulatory Requirements (Continued)
As
of December 31, 2016, all of the regulated Operating Companies were in compliance with their respective regulatory capital requirements.
16. Related Party Transactions
Receivable from affiliate, reported in other assets in the consolidated statement of financial condition, represents amounts advanced to Holdings and payable to affiliate represents amounts payable to
Holdings under the Tax Receivable Agreement (see Note 4).
Included
in receivables from and payables to customers in the consolidated statements of financial condition as of December 31, 2016 and December 31, 2015 were accounts receivable from
directors, officers and their affiliates of $78 million and $85 million and payables of $468 million and $698 million, respectively. The Company may extend credit to these
related parties in connection with margin loans. Such loans are (i) made in the ordinary course of business, (ii) are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable loans with persons not related to the company, and (iii) do not involve more than the normal risk of collectability or present other
unfavorable features.
17. Subsequent Events
As required by FASB ASC Topic 855, "Subsequent Events," the Company has evaluated subsequent events for adjustment to or disclosure in its consolidated financial statements through the date the
consolidated financial statements were issued.
Except
as disclosed in Note 4 and Note 13, no other recordable or disclosable events occurred.
*****
125
Table of Contents
SUPPLEMENTARY DATA
Unaudited Quarterly results
The Company's unaudited quarterly results for 2016 and 2015 reflect the condensed consolidated operating results of IBG, Inc. and its subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Quarterly Data
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
(in millions)
|
|
Revenues
|
|
$
|
507
|
|
$
|
387
|
|
$
|
366
|
|
$
|
215
|
|
Interest expense
|
|
|
18
|
|
|
18
|
|
|
21
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
489
|
|
|
369
|
|
|
345
|
|
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Execution and clearing
|
|
|
62
|
|
|
59
|
|
|
62
|
|
|
61
|
|
Employee compensation and benefits
|
|
|
58
|
|
|
58
|
|
|
58
|
|
|
68
|
|
Other
|
|
|
32
|
|
|
39
|
|
|
42
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expenses
|
|
|
152
|
|
|
156
|
|
|
162
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
337
|
|
|
213
|
|
|
183
|
|
|
28
|
|
Income tax expense
|
|
|
27
|
|
|
13
|
|
|
15
|
|
|
7
|
|
Less net income attributable to noncontrolling interests
|
|
|
277
|
|
|
173
|
|
|
148
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common stockholders
|
|
$
|
33
|
|
$
|
27
|
|
$
|
20
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.52
|
|
$
|
0.41
|
|
$
|
0.30
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.51
|
|
$
|
0.40
|
|
$
|
0.30
|
|
$
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available for common stockholders
|
|
$
|
33
|
|
$
|
27
|
|
$
|
20
|
|
$
|
4
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment, before income taxes
|
|
|
6
|
|
|
(3
|
)
|
|
|
|
|
(7
|
)
|
Income taxes related to items of other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
6
|
|
|
(3
|
)
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) available for common stockholders
|
|
$
|
39
|
|
$
|
24
|
|
$
|
20
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests
|
|
$
|
277
|
|
$
|
173
|
|
$
|
148
|
|
$
|
17
|
|
Other comprehensive income (loss)cumulative translation adjustment
|
|
|
33
|
|
|
(16
|
)
|
|
2
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to noncontrolling interests
|
|
$
|
310
|
|
$
|
157
|
|
$
|
150
|
|
$
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Quarterly Data
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
|
(in millions)
|
|
Revenues
|
|
$
|
187
|
|
$
|
405
|
|
$
|
375
|
|
$
|
289
|
|
Interest expense
|
|
|
15
|
|
|
18
|
|
|
16
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
172
|
|
|
387
|
|
|
359
|
|
|
271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Execution and clearing
|
|
|
55
|
|
|
59
|
|
|
63
|
|
|
54
|
|
Employee compensation and benefits
|
|
|
57
|
|
|
58
|
|
|
56
|
|
|
56
|
|
Other
|
|
|
171
|
|
|
30
|
|
|
38
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-interest expenses
|
|
|
283
|
|
|
147
|
|
|
157
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(111
|
)
|
|
240
|
|
|
202
|
|
|
127
|
|
Income tax expense
|
|
|
(2
|
)
|
|
19
|
|
|
20
|
|
|
6
|
|
Less net income (loss) attributable to noncontrolling interests
|
|
|
(96
|
)
|
|
198
|
|
|
160
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available for common stockholders
|
|
$
|
(13
|
)
|
$
|
23
|
|
$
|
22
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
(0.22
|
)
|
$
|
0.38
|
|
$
|
0.35
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
(0.22
|
)
|
$
|
0.37
|
|
$
|
0.35
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available for common stockholders
|
|
$
|
(13
|
)
|
$
|
23
|
|
$
|
22
|
|
$
|
17
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment, before income taxes
|
|
|
(1
|
)
|
|
4
|
|
|
(8
|
)
|
|
(5
|
)
|
Income taxes related to items of other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
(1
|
)
|
|
4
|
|
|
(8
|
)
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) available for common stockholders
|
|
$
|
(14
|
)
|
$
|
27
|
|
$
|
14
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests
|
|
$
|
(96
|
)
|
$
|
198
|
|
$
|
160
|
|
$
|
104
|
|
Other comprehensive income (loss)cumulative translation adjustment
|
|
|
(9
|
)
|
|
24
|
|
|
(44
|
)
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to noncontrolling interests
|
|
$
|
(105
|
)
|
$
|
222
|
|
$
|
116
|
|
$
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
Table of Contents