Interactive Brokers Group Inc

Previous wording

Interactive Brokers Group, Inc. (the “Company” or “IBG, Inc.”) is a holding company whose primary asset is its ownership of approximately 25.4% of the membership interests of IBG LLC. The remaining approximately 74.6% of IBG LLC membership interests are held by IBG Holdings LLC (“Holdings”), a holding company that is owned by our founder and Chairman, Mr. Thomas Peterffy and his affiliates, management and other employees of IBG LLC, and certain other members. The table below shows the amount of IBG LLC membership interests held by IBG, Inc. and Holdings as of March 31, 2024.

Current wording

Interactive Brokers Group, Inc. (the “Company” or “IBG, Inc.”) is a holding company whose primary asset is its ownership of approximately 25.7% of the membership interests of IBG LLC. The remaining approximately 74.3% of IBG LLC membership interests are held by IBG Holdings LLC (“Holdings”), a holding company that is owned by our founder and Chairman, Mr. Thomas Peterffy and his affiliates, management and other employees of IBG LLC, and certain other members. The table below shows the amount of IBG LLC membership interests held by IBG, Inc. and Holdings as of June 30, 2024.

Previous wording

Our customer base is diverse with respect to geography and type. Currently, approximately 81% of our customers reside outside the United States (“U.S.”) in over 200 countries and territories, and over 80% ofnew customers come from outside the U.S. Approximately 57% of our customers’ equity is in institutional accounts such as hedge funds, financial advisors, proprietary trading firms and introducing brokers. Specialized products and services that we have developed successfully attract these accounts. For example, we offer prime brokerage services, including financing and securities lending, to hedge funds; our model portfolio technology and automated share allocation and rebalancing tools are particularly attractive to financial advisors; and our trading platform, global access and low pricing attract introducing brokers.

Current wording

Our customer base is diverse with respect to geography and type. Currently, approximately 82% of our customers reside outside the United States (“U.S.”) in over 200 countries and territories, and over 80% ofnew customers come from outside the U.S. Approximately 56% of our customers’ equity is in institutional accounts such as hedge funds, financial advisors, proprietary trading firms and introducing brokers. Specialized products and services that we have developed successfully attract these accounts. For example, we offer prime brokerage services, including financing and securities lending, to hedge funds; our model portfolio technology and automated share allocation and rebalancing tools are particularly attractive to financial advisors; and our trading platform, global access and low pricing attract introducing brokers.

Previous wording

Global trading volumes. Worldwide, equities volumes reported by most major exchanges declined (except for Japan) in the current quarter, while major market indexes reached all-time highs. Within U.S. equities, the dominance of a small number of technology stocks (the so-called “Magnificent 7”) moderated, as these stocks were responsible for about half of market index gains during the current quarter, down from 75% in the prior-year quarter. While stock trading volumes remained higher than pre-pandemic levels, they were lower versus the prior-year quarter as investors chose to maintain their holdings in these technology stocks. In the U.S., according to industry data, average daily volume in exchange-listed equity-based options increased by 3%, while futures and listed cash equities volumes decreased by 2% and 0.3%, respectively, compared to the prior-year quarter. Options trading volumes continue to rise with the growing popularity of shorter-dated options contracts. In futures, while market volumes increased in agriculture, metals and energy products, volumes in the more actively traded equity index and interest rate futures products declined.

Current wording

Global trading volumes. Worldwide, equities volumes reported by most major exchanges increased in the current quarter versus the prior-year quarter. Within U.S. equities, the dominance of a small number of technology stocks (the so-called “Magnificent 7”) continued, as these stocks were responsible for about 95% of the S&P 500 index’s gains during the current quarter, up from 63% in the prior-year quarter. U.S. stock trading volumes were higher versus the prior-year quarter and remained higher than pre-pandemic levels. In the U.S., according to industry data, average daily volume in exchange-listed equity-based options increased by 7%, futures by 14%, and listed cash equities by 9%, compared to the prior-year quarter. Options trading volumes continue to rise with the growing popularity of shorter-dated options contracts. In futures, market volumes increased across all product segments, particularly in commodities such as metals and energy, as well as in interest rate products and foreign exchange.

Previous wording

These factors led to mixed results across our major product types. Our customer options volumes were up 24%, while foreign exchange, stock, and futures volumes declined 33%, 16% and 3%, respectively, compared to the prior-year quarter.

Current wording

These factors led to strong results across our major product types. Our customer options, stock and futures volumes were up 35%, 26% and 10%, respectively, although foreign exchange volumes declined 16%, compared to the prior-year quarter.

Previous wording

Volatility. U.S. market volatility, as measured by the average Chicago Board Options Exchange Volatility Index (“VIX®”), declined 34%, from an average of 20.7 in the prior-year quarter when market concerns about U.S. bank solvency in the face of markedly higher interest rates produced a spike in volatility, to 13.7 in the current quarter. Since the first quarter of 2023, volatility levels have been declining as the world economic outlook has improved and tight monetary policy has moderated. The current level of volatility has dipped below long-term trends.

Current wording

Volatility. U.S. market volatility, as measured by the average Chicago Board Options Exchange Volatility Index (“VIX®”), declined 15%, from an average of 16.5 in the prior-year quarter to 14.0 in the current quarter. Since the fourth quarter of 2022, volatility levels have been declining as the pandemic eased, the world economic outlook has improved, and recession fears have moderated. The current level of volatility is below long-term trends.

Previous wording

Interest Rates. The U.S. Federal Reserve held the benchmark federal funds rate steady in the current quarter, as it has since July of 2023. The U.S. Treasury yield curve remained inverted, with long-term rates lower than short-term. In most countries with developed financial markets, benchmark interest rates were mainly held steady as central banks continue to watch inflation.

Current wording

Interest Rates. The U.S. Federal Reserve held the benchmark federal funds rate steady in the current quarter, as it has since July of 2023. The U.S. Treasury yield curve remained inverted, with long-term rates lower than short-term. Some central banks, including Europe, Canada, and Switzerland, have perceived an easing in inflation and began to lower rates by 25 basis points. In other countries with developed financial markets, such as Australia and the United Kingdom, benchmark interest rates were mainly held steady as central banks continue to watch inflation.

Previous wording

Rising rates also increase our interest expense. For example, in U.S. dollars we pay interest to customers on their qualified cash balances when the federal funds effective rate is above 0.50%, which it has been since May 2022. Central banks in many other countries have also increased their interest rates. We believe the attractive rates we pay on customer cash are among the highest in the industry and are another important feature that draws customers to our platform.

Current wording

Rising rates also increase our interest expense. For example, in U.S. dollars we pay interest to customers on their qualified cash balances when the federal funds effective rate is above 0.50%, which it has been since May 2022. Central banks in many other countries have also held their interest rates at higher levels. We believe the attractive rates we pay on customer cash are among the highest in the industry and are another important feature that draws customers to our platform.

Previous wording

Net interest income on customer cash and margin loan balances increased compared to the prior-year quarter as the average federal funds effective rate increased to 5.33% in the current quarter from 4.51% in the prior-year quarter. During an extended period prior to and including part of 2022, when benchmark rates were at or near zero, the interest we paid on customer cash balances and earned on customer margin loans and investment of customer segregated funds resulted in spreads that were compressed. Now that benchmark interest rates are over 50 basis points and spread compression has been eliminated, we earn higher net interest income.

Current wording

Net interest income on customer cash and margin loan balances increased compared to the prior-year quarter as the average federal funds effective rate increased to 5.33% in the current quarter from 4.99% in the prior-year quarter. During an extended period prior to and including part of 2022, when benchmark rates were at or near zero, the interest we paid on customer cash balances and earned on customer margin loans and investment of customer segregated funds resulted in spreads that were compressed. Today, now that nearly all benchmark interest rates are well over 50 basis points and spread compression is not a factor, we earn higher net interest income.

Previous wording

Higher interest rates contributed to a 17% rise in net interest income from the prior-year quarter. Combined with increases in average interest-earning assets, particularly in customer margin loans, these higher rates led to an increase of our net interest margin from 2.24% in the prior-year quarter to 2.41% in the current quarter.

Current wording

Higher interest rates contributed to a 14% rise in net interest income from the prior-year quarter. Combined with increases in average interest-earning assets, particularly in customer margin loans, these higher rates led to an increase of our net interest margin from 2.34% in the prior-year quarter to 2.42% in the current quarter.

Previous wording

Currency fluctuations. As a global electronic broker trading on exchanges around the world in multiple currencies, we are exposed to foreign currency risk. We actively manage this exposure by keeping our equity in proportion to a defined basket of 10 currencies we call the “GLOBAL” to diversify our risk and to align our hedging strategy with the currencies that we use in our business. Because we report our financial results in U.S. dollars, the change in the value of the GLOBAL versus the U.S. dollar affects our earnings. During the current quarter, the value of the GLOBAL, as measured in U.S. dollars, decreased 0.73% compared to its value at December 31, 2023, which had a negative impact on our comprehensive earnings for the current quarter. A discussion of our approach for managing foreign currency exposure is contained in Part I, Item 3 of this Quarterly Report Form 10-Q entitled “Quantitative and Qualitative Disclosures about Market Risk.”

Current wording

Currency fluctuations. As a global electronic broker trading on exchanges around the world in multiple currencies, we are exposed to foreign currency risk. We actively manage this exposure by keeping our equity in proportion to a defined basket of 10 currencies we call the “GLOBAL” to diversify our risk and to align our hedging strategy with the currencies that we use in our business. Because we report our financial results in U.S. dollars, the change in the value of the GLOBAL versus the U.S. dollar affects our earnings. During the current quarter, the value of the GLOBAL, as measured in U.S. dollars, decreased 0.22% compared to its value at March 31, 2024, which had a negative impact on our comprehensive earnings for the current quarter. A discussion of our approach for managing

Previous wording

Diluted earnings per share were $1.61 for the current quarter, compared to diluted earnings per share of $1.42 for the prior-year quarter. Adjusted diluted earnings per share were $1.64 for the current quarter and $1.35 for the prior-year quarter. The calculation of diluted earnings per share is detailed in Note 4 – “Equity and Earnings per Share” to the unaudited condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Diluted earnings per share were $1.65 for the current quarter, compared to diluted earnings per share of $1.20 for the prior-year quarter. Adjusted diluted earnings per share were $1.76 for the current quarter and $1.32 for the prior-year quarter. The calculation of diluted earnings per share is detailed in Note 4 – “Equity and Earnings per Share” to the unaudited condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

For the current quarter, our net revenues were $1,203 million and income before income taxes was $866 million, compared to net revenues of $1,056 million and income before income taxes of $761 million in the prior-year quarter. Adjusted net revenues were $1,216 million and adjusted income before income taxes was $879 million, compared to adjusted net revenues of $1,015 million and adjusted income before income taxes of $720 million in the prior-year quarter.

Current wording

For the current quarter, our net revenues were $1,230 million and income before income taxes was $880 million, compared to net revenues of $1,000 million and income before income taxes of $652 million in the prior-year quarter. Adjusted net revenues were $1,290 million and adjusted income before income taxes was $940 million, compared to adjusted net revenues of $1,064 million and adjusted income before income taxes of $716 million in the prior-year quarter.

Previous wording

Net interest income increased 17% to $747 million on higher benchmark interest rates, customer margin loans and customer credit balances.

Current wording

Net interest income increased 14% to $792 million on higher benchmark interest rates, customer margin loans and customer credit balances.

Previous wording

Other fees and services increased $16 million, or 37%, to $59 million, driven primarily by an increase of $13 million in risk exposure fees and $2 million in FDIC sweep fees.

Current wording

Other fees and services increased $21 million, or 45%, to $68 million, driven primarily by increases of $14 million in risk exposure fees and $3 million each in payments for order flow from exchange-mandated programs and FDIC sweep program fees.

Previous wording

Execution, clearing and distribution fees expenses increased 6% to $101 million, driven by higher customer trading volumes in options.

Current wording

Execution, clearing and distribution fees expenses increased 24% to $115 million, driven by higher customer trading volumes and an increase in the SEC fee rate during the current quarter.

Previous wording

Pretax profit margin was 72% for both the current quarter and prior-year quarter. Adjusted pretax profit margin for the current quarter was 72%, up from 71% in the prior-year quarter.

Current wording

Pretax profit margin was 72% for the current quarter, up from 65% in the prior-year quarter. Adjusted pretax profit margin for the current quarter was 73%, up from 67% in the prior-year quarter.

Previous wording

Total equity as of March 31, 2024 was $14.7 billion.

Current wording

Total equity as of June 30, 2024 was $15.2 billion.

Previous wording

In connection with our currency diversification strategy, as of March 31, 2024, approximately 24% of our equity was denominated in currencies other than the U.S. dollar. In the current quarter, our currency diversification strategy decreased our comprehensive earnings by $104 million (compared to an increase of $20 million in the prior-year quarter), as the U.S. dollar value of the GLOBAL decreased by approximately 0.73%, compared to its value as of December 31, 2023. The effects of our currency diversification strategy are reported as (1) a component of “Other income” (loss of $2 million) in the consolidated statements of comprehensive income and (2)other comprehensive income (“OCI”) (loss of $102 million) in the consolidated statements of financial condition and the consolidated statements of comprehensive income. The full effect of the GLOBAL is captured in comprehensive income.

Current wording

In connection with our currency diversification strategy, as of June 30, 2024, approximately 24% of our equity was denominated in currencies other than the U.S. dollar. In the current quarter, our currency diversification strategy decreased our comprehensive earnings by $30 million (compared to a decrease of $24 million in the prior-year quarter), as the U.S. dollar value of the GLOBAL decreased by approximately 0.22%, compared to its value as of March 31, 2024. The effects of our currency diversification strategy are reported as (1) a component of “Other income” (loss of $20 million) in the consolidated statements of comprehensive income and (2)other comprehensive income (“OCI”) (loss of $10 million) in the consolidated statements of financial condition and the consolidated statements of comprehensive income. The full effect of the GLOBAL is captured in comprehensive income.

Previous wording

We continue to be exposed to the risks and uncertainties of doing business in international markets, particularly in the heavily regulated brokerage industry. Such risks and uncertainties include political, economic and financial instability, and foreign policy changes. For example, tensions between the U.S. and China have escalated in recent years, and changes in Chinese governmental oversight of Hong Kong and in the Chinese and Hong Kong capital markets could result in adverse effects on our business and loss of assets we hold in the region. Additionally, although our direct and indirect exposures to Russia and Ukraine are not material, the war in Ukraine and related sanctions have created substantial uncertainty in the global economy and financial markets. We continue to monitor the war and assess any potential impact to our business, including effects relating to currency control restrictions imposed by the Central Bank of Russia and restrictions by the Moscow Stock Exchange regarding the sale of assets by non-Russian residents.

Current wording

We continue to be exposed to the risks and uncertainties of doing business in international markets, particularly in the heavily regulated brokerage industry. Such risks and uncertainties include political, economic and financial instability, and foreign policy changes. For example, tensions between the U.S. and China have escalated in recent years, and changes in Chinese governmental oversight of Hong Kong and in the Chinese and Hong Kong capital markets could result in adverse effects on our business and loss of assets we hold in the region. Additionally, although our direct and indirect exposures to Russia and Ukraine are not material, the war in Ukraine and related sanctions have created substantial uncertainty in the global economy and financial markets. We continue to monitor the war and assess any potential impact to our business, including effects relating to currency control restrictions imposed by the Central Bank of Russia and other governments, and restrictions by the Moscow Stock Exchange (“MOEX”) regarding the sale of assets by non-Russian residents, as well as sanctions imposed by the U.S., the U.K., the European Union and other countries against the MOEX, the Russian clearinghouse (National Clearing Centre, or NCC) and Russian Depository (Non-Bank Credit Institution Joint Stock Company National Settlement Depository, or NSD).

Previous wording

Total net revenues, for the current quarter, increased $147 million, or 14%, compared to the prior-year quarter, to $1,203 million. The increase in net revenues was due to higher net interest income, other fees and services, and commissions, partially offset by lower other income.

Current wording

Total net revenues, for the current quarter, increased $230 million, or 23%, compared to the prior-year quarter, to $1,230. The increase in net revenues was due to higher net interest income, commissions, other income, and other fees and services.

Previous wording

Commissions, for the current quarter, increased $22 million, or 6%, compared to the prior-year quarter, to $379 million, driven by higher customer volume in options, partially offset by lower customer trading volumes in futures and stocks. Total customer options volumes increased 24%, while futures contracts and stock share volume decreased 3% and 16%, respectively. Total DARTs for the current quarter, increased 14% to 2.4 million, compared to 2.1 million for the prior-year quarter. Average commission per commissionable order for cleared customers, for the current quarter, decreased 7% to $2.93, compared to $3.16 for the prior-year quarter, due to a mix of smaller average order sizes in stocks and options, partially offset by larger average order size in futures.

Current wording

Commissions, for the current quarter, increased $84 million, or 26%, compared to the prior-year quarter, to $406 million, driven by higher customer volume in options, futures and stocks. Total customer options and futures contract and stock share volumes increased 35%, 10% and 26%, respectively. Total DARTs for the current quarter increased 28% to 2.4 million, compared to 1.9 million for the prior-year quarter. Average commission per commissionable order for cleared customers, for the current quarter, decreased 3% to $3.01, compared to $3.11 for the prior-year quarter, due to a mix of smaller average order sizes in stocks and futures, and lower average commission per contract in options.

Previous wording

Other fees and services, for the current quarter, increased $16 million, or 37%, compared to the prior-year quarter, to $59 million, driven by a $13 million increase in risk exposure fees as customers exhibited more risk-on behavior, a $2 million increase in FDIC sweep fees due to higher benchmark interest rates and customer balances, and a $1 million increase in payments for order flow; partially offset by a $1 million decrease in market data fees.

Current wording

Other fees and services, for the current quarter, increased $21 million, or 45%, compared to the prior-year quarter, to $68 million, driven by a $14 million increase in risk exposure fees as customers exhibited more risk-on behavior, a $3 million increase in FDIC sweep fees due to higher benchmark interest rates and customer balances, and a $3 million increase in payments for order flow from exchange-mandated programs driven by higher customer trading volumes.

Previous wording

We earn interest on margin lending to customers that is secured by marketable securities these customers hold with us; from our investments in U.S. and foreign government securities; from borrowing and lending securities; on deposits (in positive interest rate currencies) with banks; and on certain customers’ cash balances in negative rate currencies. We pay interest on customer cash balances (in sufficiently positive interest rate currencies); for borrowing and lending securities; on deposits (in negative interest rate currencies) with banks; and on our borrowings.

Current wording

We earn interest on margin lending to customers that is secured by marketable securities and currency balances these customers hold with us; from our investments in U.S. and foreign government securities; from borrowing and lending securities; on deposits (in positive interest rate currencies) with banks; and on certain customers’ cash balances in negative rate currencies. We pay interest on customer cash balances (in sufficiently positive interest rate currencies); for borrowing and lending securities; on deposits (in negative interest rate currencies) with banks; and on our borrowings.

Previous wording

Net interest income (interest income less interest expense), for the current quarter, increased $110 million, or 17%, compared to the prior-year quarter, to $747 million. The increase in net interest income was driven by higher benchmark interest rates, customer margin loans and customer credit balances.

Current wording

Net interest income (interest income less interest expense), for the current quarter, increased $98 million, or 14%, compared to the prior-year quarter, to $792 million. The increase in net interest income was driven by higher benchmark interest rates, customer margin loans and customer credit balances.

Previous wording

Net interest income on customer balances, for the current quarter, increased $134 million, compared to the prior-year quarter, driven by an increase in the average federal funds effective rate to 5.33% from 4.51% in the prior-year quarter, a $7.4 billion increase in average customer margin loans, and a $3.7 billion increase in average customer credit balances. See the “Business Environment” section above in this Item 2 for a further discussion about the change in interest rates in the current quarter.

Current wording

Net interest income on customer balances, for the current quarter, increased $128 million, compared to the prior-year quarter, driven by an increase in the average federal funds effective rate to 5.33% from 4.99% in the prior-year quarter, a $12.4 billion increase in average customer margin loans, and a $6.3 billion increase in average customer credit balances. See the “Business Environment” section above in this Item 2 for a further discussion about the change in interest rates in the current quarter.

Previous wording

Yields are generally a reflection of benchmark interest rates in each currency in which the Company and its customers hold cash balances. Because a meaningful portion of customer cash and margin loans are denominated in currencies other than the U.S. dollar, changes in U.S. benchmark interest rates do not impact the total amount of segregated cash and securities, customer margin loans and customer credit balances. Furthermore, because interest, when benchmark rates are at sufficiently high levels, is paid only on eligible cash credit balances (i.e., balances over $10 thousand or equivalent, in securities accounts with over $100 thousand in equity, and in smaller accounts at reduced rates), changes in benchmark interest rates are not passed through to the total amount of customer credit balances. Finally, the Company’s policies with respect to currencies with negative interest rates impact the overall yields on segregated cash and customer credit balances as effective interest rates in those currencies move above or below zero.

Current wording

Yields are generally a reflection of benchmark interest rates in each currency in which the Company and its customers hold cash balances. Because a meaningful portion of customer cash and margin loans are denominated in currencies other than the U.S. dollar, changes in U.S. benchmark interest rates do not impact the total amount of segregated cash and securities, customer margin loans and customer credit balances. Furthermore, because interest, when benchmark rates are at sufficiently high levels, is paid only on eligible cash credit balances (i.e., balances over $10 thousand or equivalent, in securities accounts with over $100 thousand in equity, and in smaller accounts at reduced rates), changes in benchmark interest rates are not passed through to the total amount of customer credit balances. Finally, the Company’s policies with respect to currencies with near zero or negative interest rates impact the overall yields on segregated cash and customer credit balances as effective interest rates in those currencies move above or below zero.

Previous wording

In the current quarter, average securities borrowed balances increased 10%, to $5.4 billion, and average securities loaned balances increased 37%, to $11.7 billion, compared to the prior-year quarter. Net interest earned from securities lending is affected by the level of demand for securities positions held by our customers that investors are looking to sell short. During the current quarter, net interest earned from securities lending transactions decreased $62 million, or 70%, compared to the prior-year quarter, driven by lower demand for selling stocks short, as the stock market rose steadily in the current quarter, and fewer so-called “hard to borrow” stocks industry wide. As noted above, the rise in benchmark interest rates has shifted a portion of the interest reported as generated by lending securities to interest income on segregated cash (see further explanation above). It should be noted that securities lending transactions entered into to support customer activity may produce interest income (expense) that is offset by interest expense (income) related to customer balances.

Current wording

In the current quarter, average securities borrowed balances increased 4%, to $5.9 billion, and average securities loaned balances increased 41%, to $13.7 billion, compared to the prior-year quarter. Net interest earned from securities lending is affected by the level of demand for securities positions held by our customers that investors are looking to sell short. During the current quarter, net interest earned from securities lending transactions decreased $54 million, or 68%, compared to the prior-year quarter, driven by lower demand for selling stocks short, as the stock market rose steadily in the current quarter, and fewer so-called “hard to borrow” stocks industry wide. As noted above, the rise in benchmark interest rates has shifted a portion of the interest reported as generated by lending securities to interest income on segregated cash (see further explanation above). It should be noted that securities lending transactions entered into to support customer activity may produce interest income (expense) that is offset by interest expense (income) related to customer balances.

Previous wording

(3)Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company’s condensed consolidated statements of comprehensive income. For the three months ended March 31, 2024 and 2023, $6 million and $3 million were reported in other fees and services, respectively, and $9 and $0 million were reported in other income, respectively.

Current wording

(3)Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company’s condensed consolidated statements of comprehensive income. For the three months ended June 30, 2024 and 2023, $7 million and $5 million were reported in other fees and services, respectively, and $6 and -$2 million were reported in other income, respectively.

Previous wording

Non-interest expenses, for the current quarter, increased $42 million, or 14%, compared to the prior-year quarter, to $337 million, mainly due to a $17 million increase in employee compensation and benefits, a $14 million increase in general and administrative costs, a $6 million increase in execution and clearing fees, a $2 million increase in occupancy, depreciation and amortization expenses, and a $2 million increase in customer bad debt expense. As a percentage of total net revenues, non-interest expenses were 28% for both the current quarter and the prior-year quarter.

Current wording

Non-interest expenses, for the current quarter, increased $2 million, or 1%, compared to the prior-year quarter, to $350 million, mainly due to a $22 million increase in execution and clearing fees, a $10 million increase in employee compensation and benefits, and a $3 million increase in customer bad debt expense; partially offset by a $33 million decrease in general and administrative expenses. As a percentage of total net revenues, non-interest expenses were 28% for the current quarter and 35% for the prior-year quarter.

Previous wording

Execution, clearing and distribution fees, for the current quarter, increased $6 million, or 6%, compared to the prior-year quarter, to $101 million, mainly driven by higher customer trading volumes in options. As a percentage of total net revenues, execution, clearing and distribution fees were 8% for the current quarter and 9% for the prior-year quarter.

Current wording

Execution, clearing and distribution fees, for the current quarter, increased $22 million, or 24%, compared to the prior-year quarter, to $115 million, mainly driven by higher customer trading volumes and a $9 million increase in SEC regulatory fees due to an increase in the SEC fee rate effective May 22, 2024. SEC fees, as with other regulatory fees, are passed through to customers. As a percentage of total net revenues, execution, clearing and distribution fees were 9% for both the current quarter and the prior-year quarter.

Previous wording

Employee compensation and benefits expenses, for the current quarter, increased $17 million, or 13%, compared to the prior-year quarter, to $145 million, mainly due to inflation and a 3% increase in the average number of employees to 2,942 for the current quarter, compared to 2,846 for the prior-year quarter. As we continue to grow, our focus on automation has allowed us to maintain a relatively small staff. As a percentage of total net revenues, employee compensation and benefits expenses were 12%for both the current quarter and the prior-year quarter. Employee compensation and benefits expenses as a percentage of adjusted net revenues were 12% for the current quarter and 13% for the prior-year quarter.

Current wording

Employee compensation and benefits expenses, for the current quarter, increased $10 million, or 7%, compared to the prior-year quarter, to $146 million, mainly due to inflation and a 2% increase in the average number of employees to 2,951 for the current quarter, compared to 2,890 for the prior-year quarter. As we continue to grow, our focus on automation has allowed us to maintain a relatively small staff. As a percentage of total net revenues, employee compensation and benefits expenses were 12%for the current quarter and 14% for the prior-year quarter. Employee compensation and benefits expenses as a percentage of adjusted net revenues were 11% for the current quarter and 13% for the prior-year quarter.

Previous wording

Communications expenses, for the current quarter increased $1 million, or 11%, compared to the prior-year quarter, to $10 million. As a percentage of total net revenues, communications expenses were 1% for both the current quarter and the prior-year quarter.

Current wording

Communications expenses, for the current quarter, were unchanged from the prior-year quarter at $10 million. As a percentage of total net revenues, communications expenses were 1% for both the current quarter and the prior-year quarter.

Previous wording

General and administrative expenses, for the current quarter, increased $14 million, or 39%, compared to the prior-year quarter, to $50 million, primarily due to higher advertising and legal expenses. As a percentage of total net revenues, general and administrative expenses were 4% for the current quarter and 3% for the prior-year quarter.

Current wording

General and administrative expenses, for the current quarter, decreased $33 million, or 39%, compared to the prior-year quarter, to $52 million, primarily due to the non-recurrence of legal reserves related to thepreviously-disclosed regulatory investigation into the use of unapproved electronic messaging subject to record-keeping requirements in the prior-year quarter; partially offset by higher advertising and legal expenses. As a percentage of total net revenues, general and administrative expenses were 4% for the current quarter and 9% for the prior-year quarter.

Previous wording

Income tax expense, for the current quarter, increased $10 million, or 16%, compared to the prior-year quarter, to $71 million, primarily due to (1) higher income before taxes at our operating subsidiaries outside the U.S. and higher income tax rates in Europe following the adoption of the minimum effective tax rate of 15% on January 1, 2024; and (2) higher income before income taxes subject to U.S. income tax at IBG, Inc., additionally increased by IBG, Inc.’s higher average ownership percentage of IBG LLC, which rose from 24.5% in the prior-year quarter to 25.4% in the current quarter.

Current wording

Income tax expense, for the current quarter, increased $20 million, or 39%, compared to the prior-year quarter, to $71 million, primarily due to (1) higher income before taxes at our operating subsidiaries outside the U.S. and higher income tax rates in Europe following the adoption of the minimum effective tax rate of 15% on January 1, 2024; (2) higher income before income taxes subject to U.S. income tax at IBG, Inc.; and (3) IBG, Inc.’s higher average ownership percentage of IBG LLC, which rose from 24.7% in the prior-year quarter to 25.6% in the current quarter.

Previous wording

Income before income taxes, for the current quarter, increased $105 million, or 14%, compared to the prior-year quarter, to $866 million. Pretax profit margin was 72% for both the current quarter and the prior-year quarter.

Current wording

Income before income taxes, for the current quarter, increased $228 million, or 35%, compared to the prior-year quarter, to $880 million. Pretax profit margin was 72% for the current quarter and 65% for the prior-year quarter.

Previous wording

Comparing our operating results for the current quarter to the prior-year quarter using non-GAAP financial measures, adjusted net revenues were $1,216 million, up 20%; adjusted income before income taxes was $879 million, up 22%; and adjusted pre-tax profit margin was 72% for the current quarter and 71% for the prior-year quarter. See the “Non-GAAP Financial Measures” section below in this Item 2 for additional details.

Current wording

Comparing our operating results for the current quarter to the prior-year quarter using non-GAAP financial measures, adjusted net revenues were $1,290 million, up 21%; adjusted income before income taxes was $940 million, up 31%; and adjusted pre-tax profit margin was 73% for the current quarter and 67% for the prior-year quarter. See the “Non-GAAP Financial Measures” section below in this Item 2 for additional details.

Previous wording

Occupancy, depreciation and amortization expenses, for the current quarter, increased $2 million, or 8%, compared to the prior-year quarter, to $26 million, mainly due to higher costs related to the expansion of our data centers. As a percentage of total net revenues, occupancy, depreciation and amortization expenses were 2% for both the current quarter and the prior-year quarter.

Current wording

Occupancy, depreciation and amortization expenses, for the current six-month period, increased $2 million, or 4%, compared to the prior-year six-month period, to $51 million, mainly due to higher costs related to the expansion of our data centers. As a percentage of total net revenues, occupancy, depreciation and amortization expenses were 2% for both the current six-month period and the prior-year six-month period.

Previous wording

Mark-to-market on investments represents the net mark-to-market gains (losses)on investments in equity securities that do not qualify for equity method accounting which are measured at fair value, on our U.S. government and municipal securities portfolios, which are typically held to maturity, andon certain other investments, including equity securities taken over by the Company from customers related to unusual losses on margin loans. In the event an investment is sold prior to maturity, accumulated gains (losses) are realized and previously accumulated non-GAAP adjustments are reversed in the period of sale.

Current wording

Mark-to-market on investments represents the net mark-to-market gains (losses)on investments in equity securities that do not qualify for equity method accounting which are measured at fair value, on our U.S. government and municipal securities portfolios, which are typically held to maturity, andon certain other investments, including equity securities taken over by the Company from customers as a customer accommodation due to a technical issue at the New York Stock Exchange on the morning of June 3, 2024. In the event an investment is sold prior to maturity, accumulated gains (losses) are realized and previously accumulated non-GAAP adjustments are reversed in the period of sale.

Previous wording

We also report compensation and benefits expenses as a percent of adjusted net revenues, as we believe this measure is useful to investors and analysts in evaluating the growth of our workforce in relation to the growth of our core revenues.

Current wording

We also report compensation and benefits expenses as a percentage of adjusted net revenues, as we believe this measure is useful to investors and analysts in evaluating the growth of our workforce in relation to the growth of our core revenues.

Previous wording

We maintain a highly liquid balance sheet. The majority of our assets consists of investments of customer funds, collateralized receivables arising from customer-related and proprietary securities transactions, and exchange-listed marketable securities, which are marked-to-market daily. Collateralized receivables consist primarily of customer margin loans, securities borrowed and securities purchased under agreements to resell. As of March 31, 2024, total assets were $132.2 billion of which approximately $130.9 billion, or 99.0%, were considered liquid.

Current wording

We maintain a highly liquid balance sheet. The majority of our assets consists of investments of customer funds, collateralized receivables arising from customer-related and proprietary securities transactions, and exchange-listed marketable securities, which are marked-to-market daily. Collateralized receivables consist primarily of customer margin loans, securities borrowed, and securities purchased under agreements to resell. As of June 30, 2024, total assets were $136.6 billion of which approximately $135.3 billion, or 99.0%, were considered liquid.