Chris M. Harris – Wells Fargo Securities LLC Richard H. Repetto – Sandler O'Neill & Partners LP Niamh Alexander – Keefe, Bruyette & Woods, Inc. Macrae Sykes – Gabelli & Company, Inc. Sean Brown – Teton Capital Partners, L.P.

Good day, everyone, and welcome to the Interactive Brokers' Third 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.

Thanks, operator and welcome everyone. Hopefully, by now you’ve seen our third quarter earnings release which was released today after the market closed, and which 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 questions. Just to remind everyone, today's call may include forward-looking statements which represent the Company's belief regarding future events, which by the 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’d ask you to refer to disclaimers in our press release. And you should also review a description of 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 evening, everyone and thank you joining us to review our third quarter performance. This was another strong quarter for our Brokerage business which continues to grow at an impressive rate relative to our peers, in terms of customer trading activity, number of accounts, customer equity and margin balances. I will elaborate on these as I get into the segment discussions. But first I would like to provide you with a clean picture of our third quarter results without currency or tax effects. For the quarter our pretax income excluding currency effects was $150 million. This is composed of $108 million of Brokerage, $41 million in Market Making and $1 million in Corporate. For the nine months period to-date the corresponding numbers are $470 million comprised of $343 million for Electronic Brokerage, $123 million for Market Making and $4 million for Corporate. The operating environment was not nearly as robust as it was in the second quarter when we saw a pickup in exchange share volumes and record customer DARTs. However despite slightly subdued summer activity levels, our customers were much more active this quarter than the same period last year, with total DARTs of 21% higher year-on-year. This growth rate exceeds that of other large e-brokers. It continues to be the case that our customers are more active even while industry volumes dropped. As a result, we remained the largest U.S. Electronic broker as measured by total number of revenue trades which averaged 471,000 per day in the third quarter. In our Market Making segment, lackluster market conditions continued to weigh on our profits. Although our trading gains were strongly amplified due to currency movements as the dollar weakened against our global currency basket. As you know, we’ve based our equity in GLOBALs, our self defined basket of 16…

Thank you, Thomas. Thanks everyone for joining the call. As usual I will first review the summary results and give segment highlights and then we'll take questions. Third quarter results showed continuing strength in the brokerage business and slightly lower earnings in the Market Making segment as Thomas said. As compared to the year ago quarter, net revenues this quarter were driven by rising brokerage commissions and net interest income, partially offset by declines in trading gains. Market Making profits though lower were supported by currency translation gains on the weaker U.S. dollar. 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. These are reported in the statement of comprehensive income. In light of the weakening of the U.S. dollar relative to a number of other currencies adding OCI to net income increased our reported earnings per share by $0.07 for the quarter. Overall operating metrics for the latest quarter were mixed, volumes were up in futures and stocks and down in option versus the year ago quarter. Average overall daily trade volume was 987,000 trades per day, up 14% from the third quarter of 2012. Electronic Brokerage metrics shows healthy increases in the number of customer accounts and customer equity. Total include customer DARTs were both up from the year ago quarter, though down from the highly active second quarter, in line with industry options, volume declines. Orders in cleared customer who clear and carry their positions in cash with us and contribute more revenue accounted for 90% of total DARTs holding fairly steady with the recent quarters. Market Making trade volume…

Thank you. (Operator Instructions) And the first question comes from Chris Harris of Wells Fargo Securities. Your line is open. Chris M. Harris – Wells Fargo Securities LLC : Thanks, good evening guys.

Hello, Chris. Chris M. Harris – Wells Fargo Securities LLC : So first question I guess is on the growth of the broker, Thomas, you’ve talked a little bit about some of the things you guys are doing, to kind of make a bigger push in some of these other customer groups, I’m just wondering some of these other customer groups like the RIAs and the hedge funds it seems to me that perhaps these customers might require a little bit more on the customer service side, and just wondering if that’s true or not and if it is as you guys penetrate a little bit deeper, should we expect cost to maybe kind of inflate a little bit?

Chris M. Harris – Wells Fargo Securities LLC : I see, is there a big differentiation between the profitability in your various customer groups or are you guys really agnostic to where you’re getting the account growth from?

Well, I will tell you frankly, the individual customers seem to be the most profitable, because they are professional ones. They never need to call us for anything, they’ve been with us for years, they understand the system, they – we’ve almost never have to interact with them, and so that’s our sweet spot. Chris M. Harris – Wells Fargo Securities LLC : Yeah, okay, that makes sense, that what I would I guess expect. Okay, then on the trading side, you guys had nice growth, but I think with you guys, it’s kind of a special case, because you are having such strong growth in accounts, meanwhile you are also having strong growth in trading. It’s sometimes hard for us to differentiate whether the growth in trading is been driven by the accounts or if it’s been driven by kind of a cyclical recovery in trading activity. So I wonder if you could share any of your thoughts there. Do you think volumes are still kind of cyclically depressed, are you seeing some improvement and how your customers are behaving, are they kind of engaging more, trading more, anything you can share there would be helpful?

Yeah, you see, if I could find the number of trades per account then that would be immediately obvious…

Yeah, do you have the average DARTs per account?

Yes. Chris M. Harris – Wells Fargo Securities LLC : Yeah, it’s up 3% year-on-year. You guys said that in your…

So that should answer your questions, right? Chris M. Harris – Wells Fargo Securities LLC : Yeah, okay. That could be isolated to specific customer groups or what have you, I was just more thinking broadly across the whole franchise, but all right.

It’s prop trading clients are obviously the most – they have the highest volumes per account and followed by hedge funds and the lowest volume per account we get from financial advisors and introducing brokers. Chris M. Harris – Wells Fargo Securities LLC : Okay. My last question, that is on the charge or the anticipated charge for the fourth quarter. How are you guys going to account for that do you think or you are going to write off all $68 million or this is just going to be some portion of that?

At this point, it’s too early for us to tell how much we can recover how soon, right. Chris M. Harris – Wells Fargo Securities LLC : Yeah.

So as we go into the quarter, we will make a decision by the end of the next quarter and we will make a conservative decision. So we will probably write down more than we really think and then hope that we get some of it back. Chris M. Harris – Wells Fargo Securities LLC : Okay. Because my understanding with how those margin accounts work is that they are really the only collateral that was securing and is the securities that were actually in the account?

No, I mean people are personally liable for these debts and these are well-known industrialists indeed. So they have large positions, not only in these companies, but others also. So let’s see. Chris M. Harris – Wells Fargo Securities LLC : Okay, got it. Thank you, guys.

Thank you. The next question is from Rich Repetto of Sandler O'Neill. Your line is open. Richard H. Repetto – Sandler O'Neill & Partners LP : So my first question would be the $68 million, I am assuming that’s pretax and could you also say, when you said a group, how many industrialists or how you refer to them are there?

Roughly seven individuals involved and of course, yes, the loss is pretax if it ends up a loss here. Richard H. Repetto – Sandler O'Neill & Partners LP : Okay. So is it –let’s just say in the worst case scenario would be tax effected and it’d be much less than even 3% of your brokerage equity, is that sort of the worst case scenario?

Yeah, that’s correct, yes. Richard H. Repetto – Sandler O'Neill & Partners LP : Okay. And then I am looking at just equity overall for the company, now $5.1 billion and I thought you said, at one point that the Market Maker was 2.4 and you have the Brokerage segment in the earnings release it’s 2.4. And while you say surpassed 2.4, could that be – is the brokerage all of the rest of the 2.4 you said at the Market Maker?

Well we also have some corporate and Paul, this is your area.

Yes, it is. Well it’s mostly split between the two segments Rich. Richard H. Repetto – Sandler O'Neill & Partners LP : Okay. And then the – on the comp you had extremely low comp, could you just - Paul, could you just give the break out of the compensation between Market Making and Brokerage to see whether we got it clearly?

Well, yes, in general terms the headcount is being cut back in the Market Making side and increased in the Brokerage side, so overall there wasn’t too much change. In the Market Making side, we tend to accrue according to our performance.

Yes, but the way you keep these books is that you also have – what you call general administrative overhead, which really has a lot of – most of that is – practically all of that is really compensation.

Well, it’s spread and in fact it’s…

And that is because of the development staff that is being shared so they basically allocate their charges to the two segments and so they come across as administrative overhead rather than compensation.

Right, and that’s why I said in my remarks, that it’s not just a trade effect but also devoting less software development resources ends up in reducing the cost of Market Making segment. Richard H. Repetto – Sandler O'Neill & Partners LP : Okay. And one last final one, we are approaching, getting closer to year-end and you did a special dividend last year. If you look at capital, I believe – how do you think is that even started to enter into your thoughts as we approach year-end or what do you look at, how does this year…?

I basically am following what is going on in the banking and brokerage business as far as demand for higher capital is set aside from the various regulators both in Europe and the United States, and I still keep thinking that as a result of that certain lucrative areas will emerge for brokers with who have substantial excess capital like we do. Richard H. Repetto – Sandler O'Neill & Partners LP : I understood. So you’re looking at it as opportunities out there.

Right. Richard H. Repetto – Sandler O'Neill & Partners LP : Potentially.

Right. Richard H. Repetto – Sandler O'Neill & Partners LP : Okay. Thank you.

Thank you. The next question is from Niamh Alexander of KBW. Your line is open. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : Thanks for taking my question. Thomas, I'm going to go back to the potential charge and then thanks for giving us the heads up in here, but help me understand how could this happen with seven customers, was it all overnight? Did you let them kind of run the positions because usually, I mean, your risk controls is one of your strongest characteristics. So I'm trying to get comfortable at, it just won't happen again. And you've got so many customers 70 million almost from just seven. Now I know their extreme stock movements, but can you walk me through what happened and help me understand if it could happen again or what's changed in the sense, so it cannot happen again.

Right, so these seven customers have – were invested in four specific stocks, trading under Singapore Stock Exchange. The stocks on first Friday of October started to fall precipitously in price and the Exchange closed, suspended trading in them. So while they were trading around $2.70 or so, they fell to the region of around $0.80 and were suspended. And on Monday, the stocks were reopened and they immediately traded in around $0.10 to $0.15. So okay, where we made our error is that these stocks were at a fairly low levels similar to where they are today several months ago. They were running up in price over the last couple of – two or three months, and we had made the error of not noticing that. So suddenly – it’s basically – you know, they're in a way like say Tesla, right? And as they rose, these customers were getting more and more margin and buying more and more of the stock. But we have now put in rules or are in the process of putting in rules that will not allow us to lend margin of the same extent on rapidly rising stocks. So I think that those rules will diminish the chances for something like this to happen again. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : And what about – I guess you couldn’t have stop them out earlier because it happened on Friday and it opened up lower on Monday…

No, we ran into liquidation, but they were all for a very short period of time, and we then didn’t actually know if our liquidation was pushing the price or not. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : Yes, yes, yes. So, it's not like you sat on it for days or anything like that. You liquidated it pretty quickly, but there wasn't much left. These are kind of industrialists and they have other accounts with you, but you can’t cut…

No, they do not have other accounts with us. They do have other accounts with other brokers and they are known to the exchange. It's a different world. It will take us some time to figure out what is the best way of recovering these monies. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : So right now the change you made against the kind of when there is a lot of volatility in the stock and a lot of price movement you're going to limit the margin and that's across the board, not just specific to that market?

That’s correct. This will go across all issues. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : Okay, okay well that’s helpful. Thank you for expanding on it. And then if I could just to go back to the compensation cost, Paul, if I could. I mean, the 44 was a big drop and I know you kind of said that, look we accrue bonuses part of the unit, but is there a bit of a catch up kind of reverse accrual in here or is this a good run rate to think about as we go forward the quarters, because we're trying to drop the number in the model, but are we going to get a bit surprised if it comes back up next quarter. I'm just wondering if there was a catch up in the third quarter there.

Well, I wouldn't characterize it as catch up, but neither would I say that it's indicative of a run rate going forward. For example, one component of comp expense is the stock incentive plan shares and when someone leaves the company, there is a forfeiture involved there. And that can bring previously recognized expense back to us, right, and depending on the size of each quarter that can have some impact. So it's hard to predict that kind of run rate because it's sort of particular to the actual staff that are staying and going. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : Okay, so I guess, it will shake out somewhere between where you've been tracking. Then I guess the other thing is, Thomas, if I could go back to you. You had mentioned earlier, you brought on your strategy – you were expanding in a strategy to get more business from the institution brokers in the U.S. What are you going to do differently there to attract the business and then just other thing you had mentioned, you hired a VP of Securities Lending. What do you expect them to do differently than what you've been doing before?

I think Paul, should answer the second question.

Sure. You want me to do that first.

Please, please.

Absolutely well, we are putting a whole new focus on improving our capabilities to support customers who want a short stock and we have a multi pronged approach there starting with increasing the inventory we have available to us, and that means reaching out to counter parties on the street and agent lenders and the large banks and so forth. And then extending the other way to bring better tools to customers to allow them to analyze what we have available and when it becomes available and we have a real time system, so that when they indicate an interest to sell something sure that it’s not yet available, we immediately go to the street and we try to find it and we feed that information back to them. So where the process is developing more and more of these tools that will just enhance the process, the offering to the customer. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : And does the new VP come from the street, there is some relationships that you haven't had before that you could build or …?

Our new guys name is Bruce Turner and he came from Quadriserv where he was heading up the operations Quadriserv AQS, which is an automated securities lending platform of which we actually have an investment in, we've disclosed that before. We still hope that platform does very well. It's an interesting part of the industry that's hard to automate. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : Okay, thank you.

As far as introducing brokers are concerned, this has been a long ambition in my mind that as technology is growing in the overall economy, it certainly is growing in the brokerage business and smaller outfits find it extremely difficult to keep up with their technology needs. And as I have said to some of your firms along with others is that if your executives put their mind to it, they would realize that there are immense savings of getting rid of much of the technology infrastructure that you're using, and you would come on to our platform or maybe on other like ours although I don't know any that is as efficient and inexpensive. So I think that's the song of the future. Brokerage firms, will specialize either in providing technology or providing relationships like the kind of relationships that you're building with your customers. Niamh Alexander – Keefe, Bruyette & Woods, Inc. : Okay, fair enough. I’ll get back in line. Thank you.

Thank you. The next question is from Mac Sykes from Gabelli. Your line is open. Macrae Sykes – Gabelli & Company, Inc. : Good afternoon gentlemen. Not to harp on the Singapore issue, but just more broadly for the margin balances. I guess in general would you say that there the margin balances are diversified across your base or are there still some concentrations there? It just seems like this loss was a big outlier from your average account?

Well, I am not the person that studied this. We have a department that studies this and I'm told that we have 70 accounts roughly that have fairly large – over $10 million exposure, and the top one is roughly $200 million. Macrae Sykes – Gabelli & Company, Inc. : Okay. And on the positive note, I was kind of curious about your comments on getting account referrals. So would it be incorrect to assume that as new account growth gets bigger, then in fact, your new account growth percentage could actually increase?

I'm sorry, you're cutting out, I can't… Macrae Sykes – Gabelli & Company, Inc. : Sorry, Thomas. So you talked about how a lot of the new account ads are coming from referrals.

Referrals, yes. Macrae Sykes – Gabelli & Company, Inc. : Right. So as your base of accounts gets bigger, would it be wrong to assume that your actual growth rate could also get bigger.

Of course, yes. We get new customers. Macrae Sykes – Gabelli & Company, Inc. : Great, thank you.

Okay.

Thank you. The next question is from Sean Brown of Teton Capital. Your line is open. Sean Brown – Teton Capital Partners, L.P. : Hi guys, two quick ones. First one is just a follow-up to the gentleman from Gabelli, you said, you have 70 accounts with fairly large exposure; $10 million plus exposure, the top one $200 million. What exactly is that exposure to, if you could clarify exactly what you mean by exposures, that's its overall accounts size.

We analyzed our accounts with 30% move in the assets that the accounts hold. And then we said that against the amount of money in the account and our biggest exposure is to an account that if the market were to move 30% and we couldn't liquidate, if it suddenly opened 30% lower, we would lose $200 million on that account. Sean Brown – Teton Capital Partners, L.P. : Got it. Okay, I understand that the concept is much better now. And then my second question is, you mentioned a bit about outside U.S. growth when you touched on the good performance of the introducing broker business line. And I'm just wondering if you could give any more kind of color on how the business is doing outside the U.S., either in Asia or Europe or other regions?

Well, our biggest introducing broker customers are in Europe specifically. I'm not sure if it's still the biggest. I think now, by now it's in Asia, we have three fairly large introducing brokers in Asia and we have one extremely large one in Europe, and we have about 50 or 60 smaller ones. These are all brokers that recently have come online and they are just driving up. So it looks good. Sean Brown – Teton Capital Partners, L.P. : And is there a lot of potential to either increase penetration within those brokers or interest in adding new brokers from those regions as they sort of start to hear about Interactive Brokers?

Well, that's why we have a sales force that goes around to more or likely smaller brokers and tries to talk them into converting to our systems. Sean Brown – Teton Capital Partners, L.P. : Got it. And are the economics in terms of pretax profit margin or gross margin for Interactive Brokers, attractive similarly to the existing book of business?

If we break it up by – so overall, our direct expenses comprise roughly 23% of our commission income. And as far as we’ve discussed it – introducing brokers that happens to be 25%. So, it's slightly less profitable but not in any way out of line. Sean Brown – Teton Capital Partners, L.P. : Yeah, and I guess because you have such a large fixed cost base on an incremental basis, a lot of that just drops down to the bottom line. So, it sounds like on an incremental basis, it's actually very profitable?

That is the idea. Sean Brown – Teton Capital Partners, L.P. : All right, great. Thanks guys.

Thank you. There are no further questions at this time. I will turn the call back over for closing remarks.

Great. Thanks everyone for joining us today. And just a quick reminder, this call will be available for replay on our website and we'll be posting a clean version of the transcript on our website tomorrow as well. Thanks again for your time and have a great evening.

Ladies and gentlemen, this concludes today’s program. You may now disconnect. Good day.