Interactive Brokers Group, Inc. (IBKR) Q4 2019 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Interactive Brokers Group Fourth Quarter and Full-Year Financial Results Conference Call. At this time all participants are in listen only mode. [Operator Instructions] As a reminder, today's program may be recorded. And I'd now like to introduce your host for today's program, Nancy Stuebe, Director of Investor Relations. Please go ahead.

Good afternoon and thank you for joining us for our year-end 2019 earnings conference call. Once again, Thomas is on the call, and will handle the Q&A, but asked me to present the rest of his comments. As a reminder, today's call may include forward-looking statements, which represents the company's belief regarding future events, which by their nature are not certain and are outside of the company's control, or actual results and financial condition may differ possibly materially from what is indicated in these forward-looking statements. We ask that you refer to the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC. Interactive Brokers again ended the year with record numbers with client equity up 35% to over $174 billion, double that of 2016. Accounts were 690,000, up 15%, and brokerage pre-tax margin was 65%. On the balance sheet side, margin loans rose to $31 billion, tying our previous record, while our total equity is now over $7.9 billion. Importantly, our net revenues adjusted for our usual non-core items of currency translation and treasury portfolio marks were up 1% to $503 million in the fourth quarter, despite events that people believed were likely to lead to a decrease in revenue, such as lower volatility, lower interest rates, and the introduction of zero commission. Despite the Federal Reserve lowering interest rates three times this year, our net interest income rose 18%. Commission revenue was $205 million, down 18%, which is to be expected in a quarter where average volatility, which has a big effect on how much our clients trade fell 33%. There are now two ways for clients to trade at Interactive Brokers, our IBKR Pro platform offers our full capabilities and technology with best price execution, and our extremely low commission and margin rates ranging from 1.85% to 3.05% based on loan size, or you can use IBKR Lite, which we introduced in September, where we offer clients zero commissions and low margin rates, currently 4.05%, but we let them know that we will route their orders to high frequency traders in return for payment. So far, we have about 5,600 Lite customers, 3,600 of whom switched from Pro, and about 10% have chosen to switch from Lite to Pro in the less than three months since the introduction of Lite. Because we tend to have a more sophisticated client base that is well aware of the benefits to performance of best price execution on orders, they have chosen to stay with IBKR Pro, and we have not seen a major impact on our business. We are very pleased that third-party information firm, IHS Markit analyzed U.S. stock executions and has once again shown Interactive Brokers execution advantage. We executed orders at $0.43 per round lot better, meaning cheaper than the industry average. That translates to major savings for our IBKR Pro customers, who experienced better performance by lowering their trading costs. For the calculation, we include all our market orders over 100 shares. We do not pick and choose data. We achieved this price improvement for IBKR Pro through our superior technology and our founding practice of never selling our customers' orders. Instead, we searched through many venues for the best available price, which is often hidden as traders do not want to reveal their buying or selling intentions. During our search, we constantly refresh accumulated statistical information about the likelihood of finding a better price for any specific stock at any specific venue. This software is expensive to develop and maintain, but it pays for itself in generating loyal customers who tend to trade more often, and accordingly benefit the most from superior executions. Our business is now primarily electronic brokerage, and in 2019 the Brokerage segment earned a record $1.2 billion in pre-tax profits, and achieved a 65% pre-tax margin. There is no other broker who comes close to our levels of profitability, and we achieved this while offering state-of-the-art technology, low margin rates, and high interest rates on customer cash. Because we are automated and can program for the different currencies, regulations, and requirements of other countries, Interactive Brokers has always been an international company. More than 60% of our accounts come from outside the Americas. Over the last year, while our accounts grew 15%, by country that growth was just over 6% in the U.S., 9.5% in China, and 23% everywhere else. So, everywhere else is a place where we see ourselves growing more in future. As the majority of our new customers come to us by recommendation of existing customers, the more we do to give our customers a successful experience, the more people who sign up as clients, and the more likely they will enthusiastically recommend our platform to others. This helps us achieve faster growth. The more new clients we onboard now, the more customers they will bring to us in the following weeks and months. Now, I will go over our five client segments. Individual customers posted the strongest account growth in 2019, up 18% over last year, and make up 50% of our accounts, 35% of our client equity, and half of our annual commissions. This is a lucrative and well-diversified customer segment that had client equity growth of 36% for the year. So, as would be expected with significantly lower volatility, stock commissions declined 9% for the year. The worldwide increase in securities markets in the fourth quarter helped our customers’ account performance, and we were pleased to see particularly strong account growth internationally. Introducing brokers posted account growth of 16% and are 31% of our overall accounts. Client equity grew 47% over the past year, and is 23% of our total, while commissions saw a slight decline of 2%, and are 9% of our total. Smaller and mid-sized brokers as well as international ones continue to find it difficult both to justify building and maintaining their own technology and to offer the global access their customers want. So, they come to us to white brand our state-of-the-art technology and capitalize on our low costs. As competitive pressures increase, and as agencies in various countries increase their compliance oversight of the financial services industry, the commitment and costs required to only grow over time encouraging more brokers to come to us. We have not yet seen any change in the ability of our Mainland China accounts to fund. Up until the end of last year, we had extremely fast account growth in China, and then it suddenly slowed significantly. We hear that there are roughly 8,000 people a week who try to open an account with us, and only about 15% of them are able to fund. We do not have any reason to believe this will change in the near future. Hedge funds constitute 1% of our accounts, 9% of our client equity, and 9% of our commissions as of December 31. For the year, we saw growth of 4% in hedge fund accounts and 30% in client equity. Growth achieved despite the hedge fund industry overall experiencing outflows. Hedge fund commissions declined 14%, again due to lower market volatility, which can limit trading opportunities. Hedge funds remain a large multi-trillion dollar global market, and we continue to have tremendous room to grow in this area. Proprietary trading firms are 2% of our accounts and 11% of our client equity, and 15% of our commissions. For the year, this group grew 14% in accounts and 41% in client equity, while their commissions fell 7%. Despite already being well-penetrated in the segment, the growth here shows that our platform continues to demonstrate value and appeal for sophisticated traders and their larger accounts. Finally, we have financial advisors. They are 15% of our accounts, 22% of our customer equity, and 16% of our commissions. Accounts in this group grew by 8%, client equity by 24%, while commissions declined 12% for the year. Two factors will continue to drive this business. Our Greenwich Compliance Group, which provides registration and compliance assistance for new and existing RIAs continues to sign up RIAs who you want to open their own businesses or move away from an existing clearing firm. Going independent means RIAs can keep all the fees they earn in an environment where more advisors are looking to become independent, our low commission, and financing rates, high rates of interest paid on cash and the availability of Greenwich Compliance's services all contributes to growth in this segment. Second, with consolidation among our competitors, we have heard from many advisors who do not want to compete for clients with their clearing firm, or be subject to the hidden fees that always seem to sprout up. We welcome all of them with transparent pricing, no competing in-house advisors, free portfolio performance reporting, a free CRM, and global market access. There is a lot that we're looking forward to in 2020 to improve and enhance the customer experience. You will first see our newly-launched Bond Scanner, where our clients can enjoy low fully transparent commissions on bonds with no mark up on bond prices. We offer a full universe of U.S. government securities, as well as over 33,000 CDs, 38,000 corporate bonds, and 1.4 million municipal securities. You can search our inventory, or compare available yields against those of other brokers. We also offer filters that can help you select the yield or ratings you want. For all this, we will only charge 2.5 to 10 basis points on a corporate bond, and as always, we pass through the highest bids and lowest offers available at the electronic venues we access with no mark ups. We also have new markets, new improvements to our platform, and new product categories we will soon offer, all with the same experience Interactive Brokers team, who was told me not to say any more about our future plans. With that, I will turn the call over to our CFO, Paul Brody, who will go through the numbers for the quarter.

Thank you, Nancy. Thanks everyone for joining the call. As usual, I'll review our fourth quarter and the full-year results, and the main factors that drove those numbers and then we'll open it up to questions. Beginning with this quarter, we will report non-GAAP measures in our earnings release, including the impact of our global currency diversification strategy, mark-to-market on our treasury portfolio, and other material non-core items. We have been describing the effects of these items, which we consider to be outside our core brokerage performance in our quarterly earnings calls for some time. We think this new presentation will illuminate these effects in a straightforward manner. Tables can be found at the end of our earnings release. Also, comprehensive income measures, which similarly reflected non-core currency effects, are no longer stated in our headline numbers. However, they can still be found at the end of the income statement presentation. Turning to operating data, despite lower market volatility and interest rates, gains in net revenues and pre-tax income are driven by strong net interest income built on solid growth and client cash balances. Total accounts grew to 690000, up 15% year-over-year. Along with rising equity markets around the world account growth contributes to client equity growth of 36%. We saw growth in all customer segments particularly individuals, proprietary traders, and introducing brokers. Lower market volatility led to lighter trading volumes and lower commissions versus the strong quarter last year when volatility is measured by the average VIX, rose to a multi-year high of 20.8. This quarter, the average VIX fell to 14, down 33%, contributing to an 18% decline in commission. However, despite lower benchmark U.S. interest rate, our net interest income rose 18% versus fourth quarter of 2018, primarily on 17% growth in customer cash balance. Lower volatility led to decline in options, futures, and stock volumes. These were not out of line with overall industry volumes in the U.S., which were down in all three categories. And FX dollar volumes fell as well. Measured against our all-time high in the fourth quarter of 2018, our total DARTs for the quarter fell 16%. However, our average commission per DART fell only 5% to $3.61, reported by larger average trade sizes and stocks and options. Results for the full-year reflected the continued momentum and operational leverage of our core brokerage business. Full-year commission's declined 9% on lower volatility and trade volumes, while net interest income grew 17% driven by higher customer cash balances and strong security slightly. Lower volumes were seeing in most product categories echoing overall industry volume trend. For the full-year, total DARTs fell 3% and average commission for DART fell 5%, as volatility declined consistently over the course of the year and never reached the ties of 2018. Net interest margin table shows that our NIM widened in the fourth quarter to 1.70% from 1.65% in the year ago period. For the year NIM was also 1.70%, up from 1.62% last year. Despite lower interest benchmark rates in the U.S. higher segregated cash balances including FDIC suites and our securities lending business drove this increase. The Federal Reserve lowered rates three times over the course of 2019, nearly reversing all the rate hikes of 2018. During the year, we kept a relatively short duration on our U.S. treasury portfolio. In the falling rate environment, we recorded the mark-to-market gain of $7 million for the year including a modest $1 million loss in the fourth quarter. As always, we plan to hold these securities to maturity, so these gains and losses are temporary, but as brokers unlike banks, gap rules require us to mark these securities to market and our financial reporting. This is one of our non-GAAP items that we consider to be non-core. Outside the U.S., interest rates changes were mixed, as about 24% of customer credit balances are not in U.S. dollars. Changes in our net interest income are not fully correlated to U.S. rate changes. Higher customer cash balances and strong securities lending generates more net interest income. Segregate cash interest income rose 21% over the year-ago quarter, primarily due to higher balance. Our FDIC Insured Bank Deposit Suite Program reached $2.2 billion and continues to grow and contribute to higher net interest income. This program offers high interest rates than FDIC insurance on up to $2.5 million of cash in our customers account in addition to the $250,000 coverage. Note that this revenue is reported in other income on the income statement, but is reported with interest income in the NIM table. Margin loan interest declined 18% in the year-ago quarter due to a combination of factors including lower balances for much of the year, as well as lower benchmark rate. The rising margin lending towards the end of the year reflects our growing ability to support the needs of larger customers as opportunities present themselves. Securities lending interest income was up 60% this quarter, and 19% for the year as we took advantage of continued opportunities to satisfy demand for hard to borrow high rate securities. Customer short stock value was up 43% from the prior-year end. Our estimate of the impact of the next 25 basis point increase in U.S. rate is as follows. Market expectations of rate changes are typically built into the yields of the instruments in which we invest. Therefore, in our calculation, we attempt to isolate the impact to our earnings of an unexpected rise or falling rates, separate from the impact of rate hikes or cuts that have already been baked into prices of these instruments. We would therefore expect the next 25 basis point unanticipated increase or decrease in rate to result in $22 million higher or lower respectively net interest income at the yearly run rate and for the immediately following four quarters as our segregated cash is reinvested at the new rate, this would be $20 million higher for a rate hike and $17 million lower for a rate cut. Turning to the segments, Electronic Brokerage produced gains to net interest income for both the fourth quarter and full-year period while commissions declined due to lower trade volumes. For the fourth quarter, brokerage net revenues were $486 million down 1%, pre-tax income was $314 million up 1% for a 65% pre-tax margin. In the expense categories execution, clearing and distribution fell 19% to $56 million in line with trade volumes. Fixed expense were $117 million up 8% including modestly higher levels of compensation in occupancy as well as increased legal and compliance expenses and contribution to reserve. Customer bad debt expense was a gain of $1 million this quarter reflecting recoveries of prior period bad debt. For the full-year, brokerage net revenues rose to a record $1.92 billion up 4% with pre-tax income also reaching a record $1.20 billion up 2% for a 62% pre-tax margin. Fixed expenses rose 9% to $442 million adjusted for non-core items, pre-tax margin was 64%. Market making consisted of the customer facilitation activities we will retain and options market making in three markets outside the U.S. now down to two as we have wound up operations in Canada. For the quarter, net revenues were $15 million of which $7 million were trading gains and the rest was net interest income. Market making pre-tax income was $5 million. And for the year, net revenues were $67 million and pre-tax income was $30 million. Expenses from the activities we are keeping are largely offset by related revenue and such activities should have minimal impact on margin if they are later absorbed in brokerage. The Corporate segment reflects the effects of our currency diversification strategy. We carry our equity in proportion to a basket of 14 currencies we call the Global best reflect the international scope of our business. As the U.S. Dollar weakened against most other major currencies this quarter, we incurred an overall gain from our strategy of $50 million of which $12 million is included in earnings and $38 million is reported as other comprehensive income. We estimate the total increase in comprehensive earnings per share from currency effects to be $0.11 with $0.02 reported in other income and $0.09 as OCI. For the year, the overall loss from our currency strategy was $36 million, of which a loss of $60 million is included in earnings and a gain of $24 million is reported as OCI. The total decrease in comprehensive earnings per share from currency effects for the year was $0.06 with $0.12 loss reported as other income and $0.06 gain as OCI. Taking a look at the income statement, for the fourth quarter net revenues were $500 million up 2% over the year-ago quarter and adjusted for non-core items, net revenues were $503 million for the quarter up 1% over last year. Non-core items include $12 million gain on our currency strategy and a $7 million loss on our investment in Tiger Brokers. Commission revenue declined 18% on lower volumes in all product categories, the 5% decline in the overall average cleared commission per DART to $3.61 reflected a mix of average trade sizes larger in stocks and options, smaller in futures and ForEx, of $287 million net interest income brokerage produced 97%. Other income which includes our GLOBAL currency strategy, Treasury marks, and other fees and income we received was $38 million modestly higher than last year. For the full-year, net revenues were $1.94 billion up 2% over the prior-year and full-year adjusted net revenues were $1.98 billion up 4% over last year. Non-core items for 2019 include the $60 million loss on our currency strategy, the $7 million gain from Treasury marks and a $6 million net gain on our other investments including Tiger Brokers. In 2018, the primary non-core items were $19 million loss on the GLOBAL and a $9 million gain from Treasury marks. Non-interest expenses were $188 million for the quarter up 3% from last year, increases reflect support for the continued growth of brokerage business with higher compensation and G&A expenses, including legal and compliance costs and reserved partially offset by lower execution, clearing and distribution fees and bad debt expenses. For the full-year, non-interest expenses were $780 million up 10% driven primarily by higher compensation and G&A expenses as well as higher customer bad debt on the event we've previously disclosed in the first quarter. At year-end, our total headcount stood at 1,643 up 16% from last year, we have been hiring most aggressively in the areas of client services, client assistance development. And to this end, we have continued to build-up our operations in India. For the fourth quarter, pre-tax income was $312 million up 1% over last year, and on an adjusted basis, pre-tax income was $315 million also up 1% representing an adjusted pre-tax margin of 63%. For the full-year, pre-tax income was $1.16 billion down 3% and adjusted for non-core items was $1.25 billion up 3% for a pre-tax margin of 63%. Diluted earnings per share were $0.57 for the quarter and $0.58 adjusted for non-core items both even with the prior-year. For the year, diluted earnings per share were $2.10, adjusted for non-core items diluted earnings per share were $2.27 for 2019 versus $2.28 last year. Comprehensive diluted earnings per share, which includes all currency effects was $0.66 for the quarter versus $0.56 last year and for 2019, they were $2.16 versus $2.09 last year. To help investors better understand our earnings, taxes and the split between the public shareholders and the non-controlling interest, fourth quarter numbers are as follows. Starting with income before income taxes of $312 million, we then deduct $7 million from mostly foreign income taxes paid by our operating company at least $305 million of which 81.5% for that $250 million reported on our income statement is attributable to non-controlling interest. The remaining 18.5% or $55 million is available for the public company shareholders. But as this is a non-GAAP measure, it is not reported on our income statement. After we deduct remaining taxes of $11 million, the public company's net income available for common stockholders is the $44 million you see reported on our income statement. The income tax expense line of $18 million on our income statement consists of this $11 million plus $7 million of taxes paid by the operating company. Our balance sheet remains highly liquid with low leverage with $7.94 billion in consolidated equity, we are well capitalized from a regulatory standpoint and are deploying our equity capital in the brokerage business as it continues to grow, we hold excess capital in order to take advantage of opportunities, such as support for additional customer financing, as well as demonstrate strength and depth of our balance sheet. We continue to carry no long-term debt and at December 31 margin debit peaked at $31 billion, an increase of 16% from last year although average margin debits were off 9% for the year. We continue to expect swings in margin lending balances due to our success in attracting institutional hedge fund customers who are more opportunistic in taking on leverage. As the end of the year activity demonstrates, we are increasingly well-positioned to satisfy customers' willingness to take on leverage when market yields present opportunities. Out of our consolidated equity capital at December 31, 2019 of $7.94 billion, $6.77 billion was held in brokerage, $940 million in market making and customer facilitation activities and the remainder in corporate. Now, I'll turn the call back over to the moderator, and we can take questions.

Certainly. [Operator Instructions] Our first question comes from the line of Rich Repetto from Piper Sandler. Your question, please?

Yes, good evening, Thomas, and Paul, and Nancy. I guess going right back to the beginning of the call, I just missed some of the numbers on IBKR Pro and Lite. I thought you said 5,600 Lite customers, 3,600 came from Pro, and you said 10% moved back. That's -- the last part is what I didn't get. I'm just trying to understand those numbers, and what's the explanation behind the movement, I guess?

So, let me -- the numbers are so little that it is very difficult to generalize from them. So, I gave you the numbers as of last night. As of last night, at the close of business we had 8,000 Lite accounts. So, approximately 25% of new accounts are Lite. Roughly, of the 8,000 accounts, 1,200 or so have switched from Pro, and rest were new applicants. So, it is still very early to tell. As far as profitability is concerned, as we have said before, we think that the profitability between Lite and Pro is roughly even, but it's very difficult to generalize because as you know, our commissions are tiered and the more you trade the less commissions you pay on the next trade. So, as a result, the smaller infrequently trading accounts would pay more commissions on their Pro than what we receive in payment for order flow. On the other hand, the more frequently trading accounts pay less commission than what we receive in payment for order flow. In addition, the Lite accounts receive 1% less interest on cash than the Pro accounts, and they pay 1% more margin, interest than the Pro accounts. So, all-in-all, it's pretty even as we accumulate more and more Lite accounts, maybe we'll be able to discern a difference.

Okay. Thanks, Thomas. I guess another question is, I guess, on the commercial bank license, can you sort of talk about where that stands and what sort of an impact it will have?

So we feel that the question-and-answer phase, and as far as impact, it is going to start up very gradually, the impact will be very gradual. First, we'll take FDIC insured deposits and time deposits, we will enter into some non-purpose secured loans, and we're going to build it up very slowly and carefully.

And last question, Thomas, wherever else where the growth is coming from these days, I guess can you talk, is the advantage there -- we know you have a technology advantage, but is it grown in the same way like through introducing brokers predominantly like you did in Asia when it was growing fast, and just a little bit more color on the high growth you are seeing in this wherever else region?

So, actually the highest growth, individuals, yes, I mean individual growth has been around 24% outside of the Americas, and hedge funds are -- there are very few hedge funds outside of Americas. [Indicsernible] growth has picked up a little bit in Asia, and financial advisors are growing faster outside of Europe than inside because of course we have less competition there, and our brokers are also more outside of the United States and outside of Americas.

Okay. Thank you very much, Thomas.

Thank you. Our next question comes from the line of Kyle Voigt from KBW. Your question, please?

Hi, good evening. First question is just on China, you noted that the accounts are growing 9% year-over-year in China. I just wanted to clarify, is that from Mainland, China specifically, and…?

Yes.

Okay. And then, second part of that question is just related to the funding rate, I think you previously disclosed a 5% funding rate, so 5% of the accounts that were attempted to be opened were actually being funded, it sounds like that's moved up to 15%, so…

Sorry, that's 5% must have been -- so the question is whether you look at accounts that -- applications that start versus account applications that complete. So, completed account applications roughly 15% successfully fund. Now, nothing…

Okay. So, there's been no change in those…

[Multiple speakers] account application and never finish, but that's got nothing to do with the inability to fund.

Understood. So, there's been no change in that funding rate over, let's say, the past couple of quarters?

No, that's roughly equal. I mean, it fluctuates from week-to-week and months-to-months, but no, I mean there hasn't been a big change either way over the last six months, right.

Understood.

Over the last nine months, there hasn't been much of a change.

Second question for you just on your ownership stake, I think - the trading plan was set to begin selling some of your shares in July of last year on a daily basis, just wondering why that hasn't gone into effect yet, and when we could expect those share sales to commence?

I haven't – I’m just not ready, but I will be very soon.

That has to do with the share price or…?

It's an emotional thing.

Okay. And then, the last one from me is just on expenses. I think the fixed expenses in the broker were up 9% year-over-year in 2019 for the full-year, just wondering as we're looking out to 2020, should we think about a similar pace of expense growth for 2020?

Yes.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Will Nance with Goldman Sachs. Your question, please?

Hi, everyone. Good afternoon. Maybe can I start on the net interest margin? I know last quarter, there was a bit of a lag impact of rates on some of the earn rates that you saw in the quarter, and just wanted to kind of clarify how much of a lag impact is in there this quarter, if any, and I guess holding SEC lending constant because that bounces around just how do you think about where the NIM kind of levels out, and you know, fully factors in all the rate cuts that we've seen?

Paul, go ahead.

Yes, sure. So, well, you're right to identify and what we've spoken about some lag time. That lag time, especially in the decreasing rate environment, we've kept very short. So, our duration has been, I'd say, typically less than 60 days. As far as the outlook, you can tell me what the Feds is going to do, I might be able to comment on that, if it stays constant with no rate changes, and no -- expect, and basically not much of a yield curve, you're probably going to see similar results to what we've gotten in the next quarter.

Got it. That's helpful. And then, maybe just a quick one, I think you've had this disclosure in the earnings release about responding to inquiries from various regulators due to kind of Bank Secrecy Act, anti-money laundering-related practices. I was just wondering if there's any color you can provide on the status of these issues or what they relate to just to give us a sense for what's driving that disclosure?

We expect to wind it up this quarter.

Great. All right, thank you for taking all my questions.

Thank you. Our next question comes from a line of Chris Allen from Compass Point. Your question, please?

Good evening, everyone. I wanted to follow-up a little bit on the growth outside of China and the Americas, I was wondering if you give us any granularity in terms of specific markets or -- that are driving the growth, and where you may be seeing accelerations versus maybe a year ago.

We don't know I get any more granularity than we are, because there is no point in giving more information to competitors.

Fair enough. And then, pivoting on the expense side, at the Goldman conference, you talked about a three-year project and rebuilding compliance and surveillance, it looks like they're starting to come to an end. Some of it was a fairly large project, and I'm assuming it's part of the driving -- part of the acceleration on the expense side in recent periods. Would there be an impact in terms of that falling off in terms of the expense trajectory, or do you have other projects coming on as they are likely to sustain the expenses?

So, unlike most other companies, we do not go by project. We try to hire as many developers as we can, and we always have more work for them than we can get done. So, that you will not see -- we hope that the expenses will keep on growing because that means that we are doing more and more development. So that's where we are.

Now, just a quick one on the -- within the other income, the mark-to-market impact of $15 million, it was $7 million for the Tiger, $1 million on the government, I'm just wondering what the other piece was, the missing $7 million there?

And I'm sorry, in other income?

Yes, the mark-to-market impact of $15 million…

Right.

-- that you have in the reconciliation, I'm just wondering, $7 million was Tiger, $1 million U.S. government, and I'm just wondering what the other $7 million was?

Casually?

Well, in other income as a category it's spread across many different categories, like market data and exposure fees, and so forth. And that makes up the remainder of the other income of the category.

I got to follow-up after the month. Thanks.

Thank you. Our next question comes from the line of Chris Harris from Wells Fargo. Your question, please?

Thanks, guys. So, the Schwab Ameritrade merger has the potential to create some disruptions for the customers of those firms. I think you guys had mentioned having some increased conversations with some financial advisors about the potential for those two companies combining and what it could mean for their businesses, how big of an opportunity, do you think that potential disruption could be for Interactive? And do you guys think that your advisor platform is like a destination that an average Schwab advisor might consider and average Ameritrade advisor might consider?

Well, so we are generally great concerned about the merger among many of the registered investment advisors. They worry about less competition and less innovation. Many believe that TD's technology is better than Schwab's, and they hope that the most entities will -- on the most entities platform they'll be able to continue to use TD's technology. Some RIA is worried that Schwab has internally-employed RIAs who will compete with them. I don't really think that's the case, but that's what we hear. We get basically most of the inquiries are one of two kind. Some people who used to be on the Schwab platform and went over for whatever reason to Ameritrade are not worried about having to go back, and they say, "No, I don't want to go back. So, show me what you got." And the other type is that many of the larger RIAs use both Schwab and Ameritrade and Fidelity, and now that one of them will fall out, they are looking to us as a substitute. How big? I don't know.

Okay. Thank you. That's helpful. And just one follow-up, I'm curious about stock lending, another really strong quarter for that part of your business. Are there a handful of stocks that are driving the results there? If so, what are they? And if not, you don't have to mention all of them. And then, I'm just wondering how we should think about sustainability in that part of your business?

There are always a handful that are more in demand than the others. So, yes, we're lucky enough to have them. That matters a lot, but I think what is most important is that we have automated the entire process. So, people who are our clients can see our automated presentation of how much inventory we have, how much really to borrow our stock for, and how much we lend it for. So, they basically see a borrow online market, constantly online, and that brings us interesting customers. So, yes, we expect it to grow in the future.

Okay, great. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line Mac Sykes from Gabelli. Your question, please?

Good evening, everyone. Just to circle back to China a little bit, could you just talk about what you're seeing in terms of product geography demand from those clients that are funding new accounts, is there -- just kind of nuances for some of the things that they're accessing in your platform?

I'm sorry. I'm unable to answer your question. I don't know. The answer is I don't know.

Okay. And then, I think you've talked about kind of this new zero trading commission environment and sort of the investor education and understanding of the true cost of trading, I was wondering if you've adjusted kind of your advertising at all around as to kind of differentiate yourselves with respect to those two platforms?

Well, I don't know if you've seen our ad, what we're basically saying that, look, come to us and you can experience both sides and decide for yourself which one is better for you.

Okay. Thank you.

We are great believers that the Pro execution is better by more than the commission that we charge, but that is -- again, it's not a 100%, I mean you know, on different rates it may work out differently.

Thank you.

Thank you. And this does conclude the question-and-answer session of today's program. I would like to hand the program back to Nancy Stuebe for any further remarks.

Thank you everyone for participating today. As a reminder, this call will be available for replay on our Web site. We will also be posting a clean version of our transcript on our site tomorrow. Thank you again, and we will talk to you next quarter end.

Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.