Good day, everyone, and welcome to the Interactive Brokers' Second Quarter 2013 Earnings Results Conference Call. This call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ms. Deborah Liston, Director of Investor Relations. Please go ahead.

Thank you, operator and welcome everyone. Hopefully, by now you have seen our second quarter earnings release which was released today after the market closed, and is also available on our website. Our speakers today are Thomas Peterffy, our Chairman and CEO and Paul Brody, our Group CFO. We’ll start the call with some prepared remarks about the quarter and then we'll take Q&A. Today's call may include forward-looking statements which represent the Company's belief regarding future events and by their nature are not certain and outside the Company's control. Our actual results and financial condition may differ possibly materially from what's indicated in these forward looking statements. We just ask that you refer to disclaimer in our press release. And you should also review a description of the risk factors contained in our financial reports filed with the SEC. And now I'd like to turn the call over to Thomas Peterffy.

Good afternoon and thank you for joining us to review our second quarter results. Before I get into all the complexities, I want to simply state operating results without any currency and tax impact. For the quarter, our pretax income excluding currency effects was $176 million. This is composed of $123 million in Brokerage, $51 million in market making and $2 million in Corporate. Our currency losses are $75 million which corresponds to 1.5% decrease in the volume of the GLOBAL relative to the US dollar on our capital of $4.8 billion. And now to the details. I am pleased to report that this was another record breaking quarter for our Brokerage segment which achieved pre-tax profit of $123 million, a 37% increase from a year ago and our pre-tax profit margin climbed to a new high of 58%. This performance is obscured in our consolidated results due to the lackluster performance of the Market Making unit which earned only $7.6 million. However, after removing currency effects which I'll explain shortly, Market Making still earned a respectable $51 million in pre-tax earnings. Our results in this segment have suffered for the past several quarters due to competitive pressure to such an extent that the future of this segment has become quite a hot topic of discussion among our investors, and we continue to evaluate what is in the best interest of our business as a whole and shareholder value. I will discuss more on this later. But first I would like to highlight our achievement in the Brokerage segment. In addition to record profit, we also achieve record DARTs or Daily Average Revenue Trades of 506,000 this quarter, a 9% increase over the first quarter and 19% increase over the prior year quarter. Total customer equity grew 31% to $37.4…

Thank you, Thomas. Thanks everyone for joining the call today. And as usual I will first review our summary results and then I'll talk about segment highlights before we take questions. In the second quarter we saw the continuing trend of robust growth in our Brokerage business and tepid results in the Market Making segment. Net revenues this quarter were driven by rising brokerage commissions and net interest income, partially offset by declines in trading gains which were exacerbated by translation losses on the strength of the U.S. dollar relative to other currencies. As a reminder our financial statements include the GAAP accounting presentation known as comprehensive income. Comprehensive income reports all currency translation gains and losses, including those that reflect changes in the U.S. dollar value of the Company's non-U.S. subsidiaries, known as Other Comprehensive Income or OCI and these are reported in the statement of comprehensive income. In light of the strengthening of the U.S. dollar against a number of other currencies adding OCI to net income decreased our reported earnings per share by $0.07 for the quarter. Overall operating metrics for the latest quarter were somewhat mixed, volumes were up in futures and stocks and down in option versus the year ago quarter. Average overall daily trade volume was just shy of 1.1 million trades per day, up 16% from the second quarter of 2012. Electronic Brokerage metrics had a healthy increase in a number of customer accounts and a strong increase in customer equity. Total and cleared customer DARTs were both up from the year ago quarter and sequentially. Orders in cleared customer who clear and carry their position in cash with us and contribute more revenue accounted for 92% of total DARTs holding fairly steady with the recent quarters. Market Making trade volumes was up…

(Operator Instructions) And our first question comes from Rich Repetto from Sandler O'Neill

My first question is on Brokerage. So the interest rate sensitivity that you talked about Paul, with 25 basis points equaling $50 million, I calculate you know on that 25 basis point increase you’d take somewhere around 20 basis points of that to get the $50 million, is that - or can you give us sort of how the split would be on first and second increases?

I can tell you in broad strokes; we take most of it on the first 25 because many currencies - a lot of holdings are in currencies with low interest rate like the dollar right now. As a result the credit rate to the customers is generally zero in those currencies, and hence as the rate drives the first 25 basis points we capture most or all of that. As the rate continues to rise, if you look at our website for example, it will show you that we base our credit interest to our customers on the benchmark rate minus some spread at 50 basis points. So while we will capture most of it, at some points we cease to capture all of it, and then we are pegged in the spread - 50 basis points spread environment. The only other thing I would add to that is that in some currencies like Australian Dollar or Canadian Dollar, the interest rates are already higher so as rates go up we may earn more but we also pay more immediately to those customers.

Got it, that's helpful, thank you. And then on the Brokerage, so you allocated, looks like around 300,000 more capital to the broker and I am just wondering why you would like the margin loan balances stayed pretty flat up slightly, I am just trying to understand the capital - the Brokerage part of the capital allocation strategy here.

We do not allocate capital. The capital ends up in the segment where it is earned.

Got it, that makes sense. And then the last question, so obviously this is a question you are going to get - everybody else can ask you too. But on the Market Maker so if you have seen, I calculated somewhere capital declining because of the dividend and so forth, about 8% quarter-to-quarter, down 230,000. So I guess the question is…

230, what are you saying 230,000?

The capital was, if you just look on page one of your earnings release there is…

You mean 2.3 billion?

Well, it's 2.6, you had 4.9 in total equity, and 2.3 to the broker, that leaves 2.6.

Right.

Last quarter it was 2.83. So rough numbers and it's probably rounding issues but down about 230,000 quarter-to-quarter

$230 million.

Excuse me, $230 million, my mistake; you're absolutely right, $230 million. So I guess the question is if that's about an 8% decrease or around there, quarter-to-quarter, at what level - and we know we have been very, it has been important to keep the Market Maker over capitalized. I gave the number that $2 billion in excess capital for the Brokerage in the BD, but the question is, at what level does it become you can't sustain, I don’t think you can go down to $200 million or $500 million. At what level, do you have to say the Market Maker should no longer operate because the capital level is too low?

Right. As I said in my prepared remarks that we are shrinking the number of products, and the number of exchanges that we are making market. So as those products decrease, the required capital decreases. So basically we could be making, we could maintain the Market Maker on a few hundred million dollar worth of capital, on a very limited number of products.

And so that would be like that would be the strategy then just to continue this slow decline in capital rather than at some point say enough and return capital to shareholders and cease operating…

Unless something unusual happens that is what we have been doing, and that is what we are going to continue to do. If suddenly there are great opportunities we can imagine two things; taking some capital from the broker and put in the Market Maker. And if it really becomes a hopeless situation then we could take all the money out of the Market Maker, right?

Understood, I got it. Thank you, and sorry about the mistake on the units there on the capital.

Thank you. And our next question comes from Sean Brown from Teton Capital

Yeah, hey guys, congratulation on the very good quarter. I just had a quick housekeeping question around the share count here at IBG Inc level. I saw that it's up some from Q1 maybe about like 1.4 million shares. I know that share grants are sort lumpy there, and I am just wondering is that from share grants or is that from people I guess transferring or converting their IBG holding stock over their Inc. level. Teton Capital: Yeah, hey guys, congratulation on the very good quarter. I just had a quick housekeeping question around the share count here at IBG Inc level. I saw that it's up some from Q1 maybe about like 1.4 million shares. I know that share grants are sort lumpy there, and I am just wondering is that from share grants or is that from people I guess transferring or converting their IBG holding stock over their Inc. level.

So Sean, it's the former. In our stock incentive plan there is the vesting period over six and a half years, and the vesting occurs every May which is we would agree in the second quarter, so every second quarter you are going to see the effect of shares vesting and becoming part of the public flow.

Got it. So it was basically restricted stock before and now it's just common stock?

It was restricted stock units inside the stock incentive plan, which have vested and become common stock, that's exactly right.

Thank you. Our next question comes from Mac Sykes from Gabelli & Company. Macrae Sykes – Gabelli & Company : Hello, good afternoon gentlemen. I was wondering Thomas if you could comment on brokerage markets outside the U.S., where you are most optimistic about the firm's positioning.

As far as deal [revenue goes] [ph] it’s [dilution] [ph] or brokerage accounts have grown most in Asia and secondarily in the United States. Macrae Sykes – Gabelli & Company : So then you've done a terrific job with the brokerage balances and you talked about the margin rates. I was just curious as to what the inputs really are for your customers in terms of maintaining the margin balances, i.e. what's the risk of decreased balances. I mean are they more sensitive to the market declines, volatility, perhaps higher interest rates, competitive aspects, I just wanted to try and figure out so what are the sticky…

We did find when the market fell that balances have come down and then as the market rises they, it tends to, balances tend to rise again. I would think that the more people come, you see many people do not believe that we really only charge for [inaudible]. So the more people come to believe that I expect that these balances are going to rise.

Thank you. And our next question comes from Niamh Alexander from KBW. Niamh Alexander – KBW: If I could stick on the broker piece and Thomas or Paul, can you share with me what the strategy is for the institutional client group at the broker because it seems like it's growing and you gave us the order in which you are growing clients but can you help me understand how you are selling to that group, how you are marketing to that group and what if anything has changed in your marketing strategy there for that group?

Well, not a lot has changed. We are obviously - you see we are product driven. So we always start with product development and then we train our sales force to understand what the new aspects of the product are, and then they go out and try to push that product. So instead of being marketing driven, we are product driven and maybe that doesn't work as well in the institutional marketplace as it has worked in other things that we have done. But believe me we are working at it very hard. Niamh Alexander – KBW: No signs of you hiring a few Wall Street sales people then there.

Sorry. Niamh Alexander – KBW: You might like to hire a few Wall Street sales people?

I don't want to get into the issue of multi-million dollar compensations… Niamh Alexander – KBW: Okay.

…of sales people. I don’t like the taste of it and I do not like the potential repercussions. Niamh Alexander – KBW: Okay, okay. So it's kind of, is this the same as you have been doing before, it's kind of build the platform and let it sell [itself to] [ph] the world kind of recommendations and going so forth from there. And also can I go back to one of your comments on the Market Maker because clearly you are making money in the Market Maker and then you are kind of trying to lay out and articulate the strategy. But you did make a comment about potential opportunities with capital changes for banks and what not because some of your biggest competitors in the market making space are the banks. And do you see an opportunity there or [if assuming you had to] [ph] kind of start reallocating capital, is that one of the reasons that you are kind of doing this at a slower pace.

So yes, in the market making space some of our biggest competitors are banks. And I think that the returns as we so well demonstrate are not so very big in market making in exchange traded product. And I assume that if capital would become more dear to them then they would consider maybe leaving that business. Secondarily, some of the smaller market makers use the same banks as clearing organizations. And the banks take capital hits on the loan they make with these market makers. So if they had to raise those interest rates then maybe those market makers will leave the business. Niamh Alexander – KBW: Okay, so I guess that's maybe something that plays out over the next couple of years as opposed to couple of quarters but it’s something kind of it seems like you see this potential opportunity.

That's correct. Niamh Alexander – KBW: Okay, fair, enough thank you. And then the only other thing just on the FX, I guess it does have quite a big impact on the volatility in the earnings that you’re reporting and kind of clouds all the strength in the Brokerage a little bit, so I am just wondering if it's worth may be reporting just non-GAAP earnings number that excludes FX on an ongoing basis. We could chat about that offline again.

I think (inaudible) [exclusively] [ph] for the earnings in GLOBAL.

It would certainly be less volatile in GLOBAL. What we intend to do is show the various measures and leave it up to investors and analysts like yourself to determine which ones they want to follow but we do say that - we have been saying as a business philosophy we maintain our equity and this basket of currencies, and so you can do that as part of the core activity or not part of core activity.

(Operator Instructions)

Thank you, very much.

Thanks everyone for participating today. And just to remind you this call will be available for a replay on our website, and we’ll also be posting a clean version of the transcript on our website tomorrow as well. Thank again for your time and have a great evening.

Ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect and have a wonderful day.