Interactive Brokers Group, Inc. (IBKR) Q3 2022 Earnings Report, Transcript and Summary

Hello. Thank you for standing by, and welcome to the Interactive Brokers Group’s Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Nancy Stuebe, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, and thank you for joining us for our third quarter 2022 earnings conference call. Once again, Thomas is on the call, but asked me to present his comments on the business. Also joining us today are Milan Galik, our CEO; and Paul Brody, our CFO. After prepared remarks, we will have a Q&A. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. Our 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. This quarter showed the strength of the Interactive Brokers business model, automating substantial parts of the brokerage business in order to keep costs low and global product offerings and opportunities high even as unfavorable market conditions continued to extend into this quarter and beyond. While we were able to maintain our commission income just barely, it is understandable that in these mostly one way markets, only very few retail clients feel any urge to open new brokerage accounts. This has a large and unfavorable implication for the growth of our business and we expect this to continue into the early part of next year. In spite of that, by this time next year, we expect that our accounts will be about 30% higher than today due to some new larger introducing broker relationships we have mentioned earlier. Preparing to onboard these accounts is a very slow process and it is unlikely that any sign of these will show before the spring. Account number growth comes on the retail end from direct and introducing broker customers. A much of our commission income comes from hedge funds and proprietary trading groups. An average hedge fund account generates 67 times as much revenue as an average individual account, and for prop trading accounts, the small supplier is around 10 times. Hedge funds and proprietary trading accounts are less affected by the direction of the markets and are therefore our emphasis has turned more in their direction lately. As most recent prep and statistics illustrate, for the past three consecutive years, the number of hedge funds on our platform has grown faster than at any other leading banker broker. IBKR is now the sixth largest provider of prime brokerage services by number of funds, and we feel fairly confident about moving to the number four in the current year, right behind Morgan Stanley, Goldman and JPMorgan. This growth in hedge fund accounts is happening even though we still do not provide some of the products hedge funds used, like non-exchange listed products outside of cash ForEx, or first-hand research organization of meetings and introductions to corporate CEOs or CFOs. Our reversion toward non-exchange listed products is due to our fear of taking on counterparty credit risk that often turns out to be the source for existential difficulties in the business. But these products also create opportunities for outsized trading gains as they are usually exchanged listed options dressed in different cloth, i. e. different custom made terms, but they are always ultimately hedged by exchange listed products. Since their terms are unique, they cannot be directly compared to anything to ensure reasonable pricing. While we are not going to change our stance with respect to OTC products, we do not feel the same way about other products like research and corporate introductions. And as we continue to grow in this business, that is something we may consider in the future. The point is that ever since we started in the brokerage business we said that we will build our platform for the most demanding investors and we automate it so that we can easily make it available for anyone who may care to use it. We were often told that, that was not a realistic approach. You must choose your target audience. Relying on our growing hedge fund customer base, we are now able to turn this logic around and market the platform to the more sophisticated individual investors by saying to them to get better results, get a better platform. The best informed investors choose Interactive Brokers. We are planning to use this as our tagline and our branding efforts. Another welcome development during the quarter was the growth of our bond platform. For many years, this platform has been growing very slowly, recording about 1,000 trades a day. Suddenly, with more active bond market volumes, this now reaches 3,000 transactions a day. Given the relevance of bonds, our bonds marketplace has a search tool where you can scan by maturity date, yield to worst and duration to analyze and compare issuers and save your scan to run again at any time. Many of our customers realize that they can achieve better execution prices by sending us limit orders between the prevailing bids and offers. We go out to numerous other platforms to show these orders, but if no trade occurs and we get an offsetting order, we match the two. We also have order types that instruct us to keep the order internally and wait for a match. This way, the client is not driving the quote in the market against yourself. Despite the slower growth in accounts, we welcomed our 2 millionth customer in September, less than two years after adding our 2 millionth customer and ended the quarter with a record 2,012,000 accounts, an increase of 31% from last year. We saw account growth in all client segments and all geographic regions with particular strength 43% and 31% in Europe and Asia, which together represent the majority of our accounts. Account growth once again occurred in all five of the client types that we service. Individual account growth was fastest at 38%, followed by proprietary traders at 28%, introducing brokers at 20%, financial advisers at 14% and hedge funds at 13%. Commission for DART continues to rise as our clients continue to be active in options and especially in futures, which carry a higher commission, although the bulk of that goes to exchange fees. In equities, higher commission per DART was driven by a mix with fewer penny stock orders, where we limit our commissions not to exceed 1% of trade value. Higher futures commissions include very high exchange and regulatory fees, which in part explain our higher execution and clearing direct expense. An advantage of providing many product types to worldwide customers is the ability to capture opportunities when one product or another becomes active. This quarter, while stock share volumes were below those of last year, options and particularly future volumes remain strong. We are always looking to find opportunities to grow our business. We've been letting investors know that Interactive Brokers pays its clients 2.58% on their cash balances. And if the Federal Reserve raises rates again by 75 basis points, then their rate will also rise by 75 basis points to 3.33%. We recently introduced our options wizard, a tool where you can enter your outlook about the future of the underlyings price movement and the wizard will provide some standard strategies that can be filtered by aggressiveness or by probability of profit or you can set-up your own strategy. Continuing high inflation is a catalyst that convinces people that holding on to their money as cash will not earn them any return. Investing in securities worldwide will be necessary for a chance to earn a positive rate-of-return, which is why we have focused on investor educational materials like our Traders’ Academy courses, our webinars, podcasts and blogs to inform our customers and make our platform the platform of choice for successful investors. The $2 million we have and the millions more we hope to have. With that, I will turn the call over to our CFO, Paul Brody, who will go through the numbers for the quarter. Paul?

Thank you, Nancy and thanks everyone as usual for joining the call. We will review the third quarter operating results and then we'll open it up for questions. Starting with our revenue items on page three of the release, we recorded another strong quarter with record net revenues and pretax income on an adjusted basis. With customer account growth at 31% year-over-year, we continued to expand our potential for both commission and interest revenues in the future. Commissions were strong reaching $320 million, despite weak equity markets worldwide. Futures volume outpaced the third quarter of 2021, options volume was roughly unchanged and while stock share volumes declined from last year's quarter, the drop in notional dollar value of stock trade was generally in line with the drop in regional equity indices around the world. Net interest income of $473 million reflected higher-margin loan interest despite lower balances, thanks to increases in benchmark rates and higher interest earned on our segregated cash portfolio as U.S. rates have moved from an average effective rate of 9 basis points last year to 218 basis points in this year's quarter. These gains were partially offset by higher interest we paid on customer credit balances, as we pass-through rate hikes above 50 basis points to our customers on their qualified fund. Other fees and services generated $45 million with biggest contributors being market data fees of $19 million unchanged and options exchange liquidity payments of $9 million, down 18% from the prior year. Risk exposure fee revenues were $5 million, down 38% in the current risk-off environment. Other income includes gains and losses on our investments, our currency diversification strategy and principal transaction. Note that many of these non-core items are excluded in our adjusted earnings and without these excluded items, other income was $9 million for the quarter. Turning to expenses, execution, clearing and distribution costs rose 41% from last year, led by lower liquidity rebates, higher futures volumes which carry higher fees and an increase in the SEC fee rate on U.S. stocks and option. As a percent of commission revenues, execution and clearing costs which are driven by a combination of trading volume exchange rebates and changing fee schedules were 21% this quarter versus 18% in the second quarter. Note that market data expense, a pass-through item, is included in execution, clearing and distribution fees, while the corresponding market data revenue is reported in other fees and services rather than in commission. So to align the volume-driven expenses with commissions, we look at pure execution and clearing costs excluding market data expense. Compensation and benefits expense rose $14 million or 14% over the prior year in line with hiring, while up in dollar terms for the quarter, comp and benefits expense fell to 13% of our adjusted net revenues, somewhat below its historical level. Our headcount at quarter-end was 2,752. G&A expenses were down $7 million or 16% versus last year's third quarter on lower legal expenses from a higher than typical number last year. Our adjusted pretax margin was a record 68%, automation remains our key means maintaining high margins, as well as continued expense control while we hire talented people and invest in the future of our business. Income taxes of $40 million, reflects the sum of the public company's $23 million and the operating company's $17 million. Moving to our balance sheet on page five of the release. Our total assets were $115 billion at the end of the quarter, with growth over the last year driven by increases in our segregated cash and securities, partially offset by a reduction in customer margin loans. We maintain a balance sheet aimed at supporting our growing business and providing ample financial resources during volatile markets. We have no long-term debt. In our operating data on pages six and seven, our contract volumes for all customers were strong about even with the strong prior year quarter and options and the third highest ever in futures up 37%. Stock share volume was down significantly versus last year's active third quarter and the drop-off is largely attributable to trading in pink sheet and other very low-priced stocks. Of note, the notional dollar value of shares traded dropped less than a number of shares traded, reflecting this shift away from low-priced stocks, which tends to raise the average commission per order. On page seven, you can see that our account growth remains robust with nearly 90,000 net account adds in the quarter and total accounts exceeding $2 million, up 31% over the prior year. Total customer DARTs were 1.9 million trades per day, down 15% from the strong prior year quarter. Our cleared IBKR pro customers paid an average of $2.96 commission per cleared commission of order, up 20% from last year as our clients' volume mix included higher per order contributions from stocks and options. Page eight presents our net interest margin numbers. Total GAAP net interest income was $473 million for the quarter, up 73% from the year-ago quarter, reflecting stronger margin loan and segregated cash interest, partially offset by higher interest expense on customer cash balances. The Federal Reserve raised interest rates twice in the quarter by 75 basis points in late July and by a further 75 points in late September, with about a week left in the quarter. The latter raised had a minor positive impact in a 12-week quarter, but will have a fuller positive impact in the third quarter. Many other Central Banks also raised rates this quarter. This group includes the U.K., Canada, Australia and Hong-Kong, as well as the Eurozone and Switzerland, which are now out of negative rate territory for the first time since 2014. Margin loan interest was up 125% to $317 million, despite average margin loan balances that were down 9% from last year's third quarter. Higher rates in the U.S. and internationally continue to bode well for our margin interest income. Net interest on segregated cash was $228 million, primarily due to Federal Reserve rate hikes, but also to our managing to short-duration on invested funds, which has allowed us to pickup benchmark rate increases quickly. At September 30, our U.S. portfolio duration was 42 days, so the investments roll-over into new higher rates with fairly short lag time. Securities’ lending net interest was $114 million, down 7% from the year-ago quarter. It's worth noting that while securities lending opportunities maintain a relatively strong pace, it is also the case that as benchmark rates rise, a greater portion of the revenue generated by securities lending is reflected in interest on segregated cash, because the cash collateral received is invested as segregated fund. We estimate this impact to be about $24 million for the quarter versus the year-ago quarter. Interest on customer credit balances or the interest we pay our customers grew as higher rates in many currencies led to our paying interest on qualifying account as we pass-through rate increases. We paid $248 million to our customers on these balances in the third quarter. Now for our estimates of the impact of increases in rates. Given market expectations and more rates rate hikes to come, we estimate the effect of increases in the Fed funds rate to produce an additional annual net interest income as follows; at 25 basis points, an increase of $55 million; at 50 basis points, an increase of $110 million; at 75 basis points, an increase of $166 million; and at 100 basis points, an increase of $221 million. Note that our starting point for these estimates is September 30 with the Fed funds effective rate at 3.08% and based on balances at that date. These estimates don't take into account any change in how we may adjust our investment strategy to take advantage of newly higher rates or any change in our assets. About 20% of our customer segregated cash is not in U.S. dollars, so estimates of U.S. rate change impact exclude those currencies. We estimate a 25 basis point increase in all the relevant non-USD benchmark rates would produce an additional annual net interest income of $14 million and rising to about $56 million at a 100 basis point rate increase. In conclusion, the Company generated another solid performance in the third quarter, reflecting our continued ability to grow our customer-base, deliver on our core services to customers, while continuously adding new features and products all at a low-cost and managing the business effectively with strong expense control. And with that we will open it up for questions.

Thank you. [Operator Instructions] Our first question comes from Richard Repetto with Piper Sandler. You may proceed.

Yes, good evening, Thomas. Good evening, Paul. I guess the question -- first question is on account growth. You know, you -- Thomas you had sort of won that you're starting to feel or a slowdown, but if you look at the quarter, you had a couple months at about 20,000, 25,000 then one August excuse me, 38,000. So can you give us what do you feel like is the run-rate going forward and what happened? Why August it seemed like it was 35% to 50% higher than the other months? And just a little bit of color on -- I guess the delay, I guess just administrative delays with these introducing brokers?

So look the account growth is very lumpy, sometimes we get introducing brokers or larger RIAs who bunch up and will come to us in the same months and other months we have much fewer of those. But you generally understand that in these markets, people are not as anxious to open account with new account with a brokerage firm as they are enough markets, right. So I mean that's I think that's pretty clear to everybody. And so -- and things I expect the market to continue to go down for a while I expect the new account openings to become either slower or going forward, but as we have said -- indicated before that we have two large introducing broker accounts that we are going to onboard, probably early next year. And to tell you frankly, I am -- maybe Milan could talk a little bit about that, but all the complexities are right. It takes such a long time.

Sure. So, there are really two different things going on, one of them has to do with the fact that we are dealing with larger organizations and to just to arrive an agreement that we can both live with takes a while they are. There is an army of lawyers involved on their end, there is a smaller group of lawyers involved on our end and we have to hammer out the contract in a way that is acceptable to both of us, what the liabilities are. What the economics are et cetera, et cetera. So that's on the legal side. On the technology side, two things have to happen, first the I broker has to choose the way they're going to interact with us. How they're going to integrate? Are the clients going to use our platform? Or is the I broker going to provide their's. Is there going to be fixed connectivity involved? How are the accounts going to be opened, all these details first have to be figured out and they have to choose the right solution for them and then the integration work starts. We have to do some software customization for them, they have to do a lot of interfacing work on their end and this typically takes a while.

Got it. Thank you that's very helpful Milan and Thomas. And I guess a follow-up question for Paul would be on this stock loan, like I'm trying to understand what you meant the $24 million that was paid on segregated cash? Is that really a subtraction of what would be revenue allocated to securities lending. Is that what you're trying to communicate?

It's just -- purely a matter of which line item the income is reported on. So as rates go up, when you lend stock and take-in cash collateral on behalf of the customer that cash gets put into segregated bank accounts and treasuries and so forth. And so that simply gets the interest earned is reported as segregated cash interest and as the rates go up, more interest goes there and stable amount of securities lending revenue stays in securities lending.

Okay. So it actually would be -- if you just had to net out the revenue from securities lending, whether it'd be paid in interest on segregated cash, it would probably be -- it's not $114 compared to -- I think it was pretty flat year-over-year, it would be down is that what you say? I mean, it makes the difference, can you -- yes.

Yes, think of it this way when you lend stock and take in cash collateral, there is a base interest rate, a benchmark rate to call it Federal funds rate, right? There is a fee for borrowing the stock that the borrower pays to the lender -- we are the lender. The fee is always reflected as securities lending. In the U.S. however, the fee is embedded into an all-in rate that includes interest paid on the cash collateral and the fee charged to the lender. But only the fees should show-up in securities lending, it's an accounting convention if you will, but in reality because the cash side of the transaction must go into segregated cash as the rates go up. The interest income in a sense migrates from the securities lending reporting line for the segregated cash reporting line.

Got it. Understood. It's really -- your net interest income definitely showed the sensitivities that you put out, so it's not really material I guess. Thank you.

Thank you, one moment for questions. Our next question comes from Craig Siegenthaler with Bank of America. You may proceed.

Good evening, Thomas and congratulations on eclipsing 2 million accounts.

Thank you.

So for these 30% account growth target over the next 12 months, roughly how much of that do you see coming from the three large introducing broker wins? Are they driving 75% of that?

Yes, 65% to 75% yes.

Got it. And then just to confirm, I think Nancy said no account inflows from those before the spring so April. So I'm guessing, we'll see none of the --

We're not sure about April, I mean, maybe. So at the beginning maybe they will open some accounts for the employees themselves to -- we have and then one of these banks is going to bring up accounts country-by-country and we don’t exactly know in what order that is going to take place. So what I would say is the earliest maybe February and the latest maybe April.

Great. Thomas, thank you for taking my questions.

Thank you for asking them.

Thank you, one moment for questions. Our next question comes from Ben Budish with Barclays. You may proceed.

Hi guys, thanks so much for taking my question. I wanted to kind of follow-up on the introducing broker topic, but maybe instead of talking about kind of the pipeline of new accounts. Could you perhaps talk a little bit about the pipeline of introducing brokers. So you mentioned that retail investors may be reluctant to open a new account environment, but are you finding the same sort of sentiment from potential new partners, banks and other financial institutions that may be a year from now, you may be telling us about the next wave of introducing progress. So I guess the question is how is the sentiment with that customer group?

So obviously, the sentiment is probably very similar across different brokers. And then we are talking about onboarding large introducing brokers we're basically talking about the existing accounts.

Okay. Makes sense. Maybe one more -- one follow-up, if I could. Could you maybe talk a little bit about the hedge fund business since that seems to be where you're going to be a little bit more focused kind of in the near-term? Maybe just kind of help us understand a little bit the cost structure. I think you gave some helpful stats around the average revenue for your hedge fund and market banking clients. But is it in terms of the kind of net margin there? Is it more costly to serve? Or is it kind of a higher margin group just given the individual.

I was not talking about the cost. I was talking about revenues. So I took the revenues and coming from H1 and took the revenues coming from individual customers, it's true that 67 individual accounts generate as much revenue as an average hedge fund account in our case, right? And in our case, among the individual accounts, they are small accounts and large accounts and along the H1 accounts, there are also smaller accounts and large accounts. But so I'm just working with the averages here.

Okay, great. Thanks so much for taking my questions.

Thank you. One moment for questions. Our next question comes from Daniel Fannon with Jefferies.

We can’t hear you.

Daniel Fannon, if your line is on mute, please unmute. You may ask your question. One moment for questions. Our next question comes from Craig Siegenthaler here with Bank of America. You may proceed.

Great. Thanks for taking the follow-up. I had a follow-up on the hedge fund prime commentary that you gave earlier in the call. Are you starting to win business more from larger hedge funds? Or is the growth mostly from kind of smaller funds where I believe most of your business sit? And also where are you stealing this share from within the prime industry. And also, can you just comment on -- in terms of how this is going to drive earnings growth longer term, just given the size differential?

So yes, we have almost all smaller hedge funds come to us now and as far as we believe. And larger hedge funds are beginning to look at us and they usually work with two, three, maybe even four different custodians or at least executing brokers. And these larger fronts are talking to us more seriously and are giving us a little bit of their business. But we're very happy to take a little bit because we figured that as they begin to use us, they will see the advantages that we can offer relative to the custodian -- other custodians they are using.

Thomas, and it sounds like, since you're very focused on growing this business. I believe that they're somewhat sensitive to the amount of capital you have. So maybe can you talk about when you'll feel more comfortable, I know probably not buying back stock just given the stock liquidity, but maybe raising the dividend or returning more capital to shareholders just because I believe a lot of those hedge funds are sensitive to how much capital you have?

I completely agree with you, and we are not going to increase the dividend. We are just going to grow the capital.

Thomas thanks for taking my follow-ups.

Thank you.

Thank you. One moment for questions. Our next question comes from Ryan Bailey with Goldman Sachs. You may proceed.

Hi, everyone. Paul, in the right guidance for a few quarters now, you've mentioned that the guide is based on no change in strategy to take advantage of higher rates? I was wondering, is there a consideration to change some of the strategy around rate sensitivity?

We don't have any immediate plans. We have stayed short-term, because of the uncertainty in the markets. And certainly, with rates going up, we're able to capture that the upswing much quicker than had we been invested further out. If there wasn't a yield curve for a long time, it's sort of developing, but it's still only developing out through a year. So I think we're unlikely to make any meaningful changes there. Thomas, if you'd like to add anything to that, please feel free.

Yes, I'd like to point out that we pay our customer -- our interest on the idle cash of our customers more than anybody else that we know. And so we have -- we basically have had a 50 basis point spread that we earn on customers' idle cash. So that puts us into a position that -- where we have to be extremely careful about how we invest this cash, because when interest rates go up, we immediately raise the amount that we pay to our customers. So if we were to invest let’s say, two years forward and suddenly interest rates are up, we would immediately have to increase the cash we pay out, but the amounts we taking would not increase immediately, right? So we cannot put ourselves into a position when we are very much mismatched.

Right. Understood. Thank you. Thank you for the color. And maybe sort of taking that last point. I apologize if I missed it, but can you give us an update on where the sort of non-rate sensitive cash sits today, what that account looks like? And as we get through some of these introducing brokers, does that have any impact on what those cash balances could look like?

I don't know if any of you understand the question. Please answer it, I do not.

So Ryan, you're asking about the fully sensitive balances?

The other side of it. So the balances were, I think, it's below $10,000 in cash per account that you're not paying rates on.

Right. So that's certainly the bulk of it, and there are a few other categories there totaling about $20 billion out of our total, which allows us to earn rate increases. And on the rest, we are locked into our spreads. So the net interest income increases will come from growing balances, but not from growing spreads.

Understood. Okay, thank you.

Thank you. One moment for questions. Our next question comes from Chris Allen with Citi. You may proceed.

Good afternoon, guys. Appreciate taking the questions. I guess just following up a little bit on the introducing broker, the ones that are coming over next year. Are these going to be fully disclosed or omnibus, I'm assuming fully disclosed, given the account impact?

Yes. So they are going to be bringing us individual accounts. So it's going to be a structure with a master account at the top and lots of sub-accounts underneath. As to fully disclosed, it's not going to be a fully disclosed relationship, so the end client will not know unless they try to research it who the ultimate provider of the services is. They will have the contract with their introducing broker. But to answer your question most directly, it's going to be lots of accounts, not an omnibus.

Understood. And just on the outlook for hedge funds moving up to number four. Is that some analysis [Technical Difficulty] that you've done? Or is this based on kind of industry stats. Just trying to understand, just to dig little deeper, it seems to be a real nice opportunity moving forward?

Yes, it's industry stats, and we see our -- the rate at which we're getting in new funds. We're doing very well getting in new funds currently.

Got it. Thank you, guys. That’s it from me.

Thank you. One moment for questions. Our next question comes from Daniel Fannon with Jefferies. You may proceed.

Thanks. Thanks. I'm going to try this again. Can you hear me?

Yes.

Great. So a question just on expenses came in a little bit better in this quarter and thinking about the fourth quarter and into next year, just the progression of spend, if there's -- as you bring on some of these larger introducing brokers, should we anticipate some additional expenses for that process and/or any change in priority as you think about spend into next year that you're contemplating at this point?

So no, these introducing brokers are not -- can you hear me?

Yes.

These introducing brokers are not expecting to lag has a terrible equity, I'm sorry. So we try to remove my headphone, so that I do not hear myself. What I was going to say that we do not expect to hire a large number of people to service these high brokers. Then we are going to use the technology that we have been developing over the past few decades to the extent that we have a very large number of subaccounts that we have to service. The number of customer service representatives will have to increase a little bit, but we expect the I Brokers to provide the customer service themselves. On the compliance side, the situation is little different, because we are responsible for doing the surveillance of their money mode, as well as the trading activity. So there is going to be some number of surveillance analysts that we will have to hire. But that number of analysts would be required, whether we grow the number of accounts as direct accounts of our clients or I broker clients.

And as far as expenses, I would like to add the fact that you are aware of the high rate of inflation and we have to increase our compensation [indiscernible] in line with inflation rate.

Great. And then just in terms of broadly account growth in the regions, you mentioned the subsegments of your customer base. Is it from a geographic perspective? Are there areas that you are having greater success? Or you're seeing more pullback understanding that broadly, as you said earlier, the sentiment isn't great for new account growth?

So yes, I mean Asia fell off the cliff about a year ago. And Europe joined soon after Russia went into the Ukraine. So yes, the slowdown is -- and as we go along, the European slowdown is becoming more and more apparent. And so in the United States, in the Americas, in general, the slowdown is less apparent than in Europe and Asia.

Great. Thank you.

Thank you. One moment for questions. Our next question comes from Kyle Voigt with KBW. You may proceed.

Hi, good evening. Thanks for taking my question. Maybe just one for Paul, and sorry if this was addressed earlier, I dropped off. The other net interest income increased to $65 million in the quarter. Was just the majority of that increase driven by higher interest on corporate cash balances? I know there is some other items in there, too, including the FDIC suite. So I just wanted to get some clarity there.

Yes, that's right. It's primarily the corporate cash, which as you know, with rates near zero, was earning near zero. So therefore, we're now earning commensurate with the current benchmarks.

Got it. And then the -- is there just any update you can give us on the percentage of your balances or is it just absolute level the cash balances that are -- or the credit balances that are non-rate sensitive or, I guess, non-interest bearing?

Yes. Actually, we did mention that before. It's about $20 billion out of the total.

Okay, perfect. Thank you.

That's a convention of fully rate-sensitive and partially rate sensitive.

Perfect. Thank you. And then I just wanted to ask a clarification question regarding the introducing broker onboardings. I think last quarter, you mentioned several relationships that you expect to begin onboarding. And Thomas, I think you mentioned two large IB specifically. I just wanted to clarify was there any potential introducing broker clients that decided not to move forward with the relationship? Or is this just purely a timing issue and the pipeline hasn't changed at all in terms of number of clients?

There is no change in terms of number of clients.

Okay, great. Thank you very much.

Thank you. One moment for questions. Our next question comes from Richard Repetto with Piper Sandler. You may proceed.

Yes. Hi, Thomas, I was just going to quickly follow-up. I know you're very conservative on the account growth. And if I just did the math and if the introducing brokers of 65% to 75% of your goal of 30% account growth overall. It just puts your -- I don't know what you would call it, organic account growth at numbers that certainly lower than what we've seen in the -- since the pandemic started. And I guess the question is, is that how you see the sort of a near-term year next year or two account growth slowing back to 2019 levels? And introducing, okay, okay, sorry.

Yes. I think that because, as I said, I expect the market not to be very buoyant. So I think that individual clients are going to dry up more and more and more as we go into next year.

Got it. Understood. Thank you.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over 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 website, and we will also be posting a clean version of our transcript on the site tomorrow. Thank you again, and we will talk to you next quarter end.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.