All right, welcome back to the 20th Annual Global Exchange and FinTech Conference. We're gonna turn the sails here to the e-brokers. It's my pleasure to introduce Thomas Peterffy, the Chairman and Founder of Interactive Brokers. He's also gonna speak today at noon, one of the keynote speakers, along with Vincent Viola. As we talk about pioneers of electronic trading, I'll try to keep sort of that, all the stories that we're gonna talk about with that. Talk more about Interactive Brokers. Thomas brought Interactive Brokers, and we just talked about this, in 2007, public. We didn't know each other then, but we've become good friends since. Anyway, I guess first question, Thomas, I guess is the environment for electronic trading, the environment for retail trading, the environment for options trading? You've been a big proponent. We'll talk about how you automated, and there'll be great stories about how you automated the option markets. You know, what's the general environment that you're seeing out there today in, in option trading and in retail trading? In options trading, just like in stock trading, the attention is focused on the indices and a very few of those big tech stocks. It's a very narrow leadership, and I don't think that on the long run, it's going to be a good thing. Options trading has been gaining prevalence for over 50 years now, and it has really picked up in the last several months because of the daily listing of the weekly options, which give us daily expiration, same-day expirations. It's basically a simple bet. You make a bet at 2:00 P.M., and you get paid at 4:00 P.M. Or you get lost, you lose at 4 P.M. It's just gambling. Would you have thought that the 0 DTE, because zero days to expiration contracts would become as popular? Sure. I mean, yeah. I mean, it's gambling, and your odds are much better than in any other gambling situation because markets are very efficient, commissions are very low. It's, I think that the winners must be at least 40% of the players, right? It's great odds. Of the retail, like you cater to the semi-professional, highly active trader that's because of your technology. Can you talk about, I guess, of that, who is trading? Is it the most active players or? On the one hand, we have the gamblers. On the other hand, we have the professional people who are trying to be on both sides of the market and ending up with a few dollars by the end of the day, right? We have rates going up. We got this 0DTE contract. What happens if we have a turn in the market? I'm not smart enough to predict it, but suppose we get rates that at some point turn around and start coming down. Do you see that as a positive, that the retail trader would stay active because there'll be volatility in the market? What do you see, I guess, as the outlook? I don't think that rates will come down by much because I think that inflation is a persistent trend, having to do with de-globalization on the one hand and increasing deficit spending on the other, which is driven by inflation, which is driven by deficit spending, which is driven by higher interest rates, which is, you know, higher interest rates make the debt service more expensive, which adds to deficit spending, which adds to inflation. We can go in the circle on and on. Although in the near future, or maybe in 2024 or 2025, rates could come down a bit, but on the long run, I don't think that they will. As far as Interactive Brokers is concerned, lower rates would not be positive. On the other hand, maybe the way Interactive Brokers is positioned currently, a drop in interest rates by 1% would hit the company by $200 million a year, earnings by too. It's not that much. The same way, you know, a 1% interest rate rise would add $200 million to the positive way. Unlike other firms, we are paying our customers on their cash holdings 0.5% under the Fed funds rates, and we charge 0.5% over Fed funds for margin, for larger quantities. We are not as sensitive to interest rate changes as other firms are. Although, you know, you would have thought that a rise in interest rates would be good for them, but given the fact that they have lent out their customers' cash for 10-15 years, it's exactly the opposite. To Thomas made a point to email me, to again emphasize that he does share so much of the upside with his better clients, or a good part of your clients. Right. That there wasn't a cash sorting going on. Right. That happened at other brokers. One thing. Well, first, I just wanna make sure you see that I think Thomas was one of the first ones that talked about the fireside, my fireplace, that I didn't have the fire burning. I'm always so cold in the morning. It's been a 15-year burn on. Right. On this fire. What makes Interactive Brokers special, unique, is its international account growth. You know, accounts coming from all, not just the U.S., which most of the other brokers are U.S.-centric. But you get, you know, a big portion, not only from what was Asia- Pac, but also, but now, the Middle East and Europe. Can you just talk about, and you, and you are still growing faster, even though it's maybe a bit slower than the COVID- area, it timeframe. Can you talk about this sort of geographic account growth and what you see, you know, the resilience of it or? Right. Between 20% and 21% of our clients are U.S. As far as activity and the rest of the Americas is concerned, it's about 60%, and 80% of the trades are done in the United States. Even though we have many of our customers are in Asia and in Europe and the Middle East, they are all trading in America, basically. They are also buying the leading seven companies, just like anybody else in the world. That's where all the action is concentrated. Our growth in number of customers goes along with word-of-mouth recommendations. It's roughly around 20%. To the extent that we are trying to market to introducing brokers, that is an additional, and that we have two large introducing brokers that are coming on toward in the second half of the year. The first one of them is coming in starting to onboard in July. We expect a total rate of growth in customers of roughly 30% annualized. If you're growing at 20%, these two introducing brokers could add. 10%. 10%. Yes. I know that's sort of been a frustration to see how these big financial institutions, sort of, how quickly they move or. Yeah. or not quickly. They take a long time to figure out what to do and how to do it, and then the lawyers step in and, you know, they want to change the agreements, and everybody wants to have an input. You're growing the fastest. You have the most active traders. Your margins are strong. They're bumping up or right around the 70% range. 70%+, right? 70%+. Yes. I try not to say too much. Low 70s. Yeah. How do you think about margins? Is that something like, we know you're also, you continue to invest if you. Of course. So we are basically the most efficient platform. Our earnings are accumulating on the bottom line very, very quickly. We are now at a stage where we have to look at either introducing some sort of new product or customer type or taking on some less efficient firms in the business and trying to incorporate that onto our platform. If that happens, then for a limited period of time, the margins would dip below 70% while we assimilate that operation. Once that's done, we'll be well above 70%. That's pretty strong industry-leading margins. Just to step back on a question, 'cause you talked about marketing, and I know how proud you are of the platform. Initially, you can correct me if this is wrong, but initially, you didn't market. You thought. I think it did spread by word of mouth. I know you had a view that people would go to the platform because it was technological. It was a big mistake. I was wrong. I admit. You weren't too wrong at 70% margins in the long, long run. I guess the question is: What changed your mind that it would benefit Interactive Brokers to advertise it and market it? Advertising right now is extremely important because but even with advertising, I don't think that people believe what we say because I mean, it stuns me that, you know, the big banks are paying less than a tenth of 1% in interest, and the big brokers are e-brokers are paying 0.5% or roughly, and we are paying 4.58%. By my logic, everybody should come onto our platform, but they don't. Either they are just inertia or they don't believe it. Maybe not aware until you advertise. We're advertising it, and it's not happening. Right now, we're, you know, if you go watch television or see banner ads all over digital advertising, it's still not happening. They are not coming. They are coming to the extent of 20%, but they should be coming at 200%, right? Thomas, you have high, high standards, high, high targets. We know, or at least, having at least my opinion, having followed the industry, it. There's a lot of uneducated, I wouldn't say that, uninformed. Uninformed, yes. Not uneducated, uninformed, people that enter and open up accounts. That's right. I think your advertising. Certainly points out some of the differences. Right. In your offering. Now, you are advertising. You got a great platform. Options are becoming more popular. You know, what else can, I know you're continuing to invest, and you're optimistic on growth. What other new things can or new products or new areas that you can see Interactive Brokers? Well, we always are working on new products. As you, we experienced in the past, whenever we start something new, everybody copies it. We don't want to announce it until we're ready to introduce it, right? I'm sorry. I thought you'd give me some insight. Right. I understand. I guess one thing when we've talked, you also step back and do all the investor relations. You know, you certainly still guide the firm, but you also have a full-time CEO. Could you talk about, you know? Your. Milan Galik, our CEO, took over three to four years ago, something like that, and his performance is better than I ever expected, and that is evident in the numbers. It's really. It was a very good move. He's still in his early 50s, so he's going to be around for quite a long time. You do have a structure that appears to be working quite effectively. I know you're place a lot of emphasis on not distracting him and allowing him to run the company. That's why he's not here talking to you. We'd rather talk to you anyway. Yeah. Anyway, if you wanna hear him, he's always on the earnings call. Please, come on to our earnings announcements, and then you can hear him. One thing you have stayed involved with, we certainly. We see how regulation is impacting not only crypto, but equities as well. Chair Gensler will be presenting tomorrow afternoon. Any comments on. He does have four rule proposals, and the comment period has ended, and, you know, we'll certainly discuss that in detail as much as he'll talk. Any thoughts on the things that he's proposed or market structure in general in equities? Right. The four proposals, the first one has to do with disclosure of execution statistics, and that's. There is not much argument about those. They are probably positive, although we would prefer if they looked at the quality of overall execution rather than relative to the NBBO, which, you know, you can basically move the NBBO very easily. I think that comparison to the VWAP for the day for each stock would be much more informative. We have been disclosing that for every at the end of each month for several years now. Secondly, is the tick sizes. I think the tick sizes they are proposing are too small. It will fragment the volume. The NBBO will become somewhat less significant because you will see very, very small amount of stock on the NBBO relative to what you see today. Thirdly, the best execution rules, I mean, to tell you frankly, they are difficult to grasp, the proposed rules on best execution, I'm still awaiting our lawyers to explain to me what they are. Fourthly, the idea of options, that is going to be a very big change to accept by the industry, because most brokers are, as you know, they are geared to executing via their liquidity providers. I understand that they are preparing for a big legal fight if the SEC is really pushing forward with that. From the point of view of Interactive Brokers, what we do is we get liquidity providers and institutional order flow that we try to match our retail flow with. We already have our kind of an option, and it wouldn't be a big change for us what the SEC is proposing. We like the fact that currently we are the only ones who are doing that. Our ability to provide best execution is very unique, which, if this would become the law, then it would no longer be so unique. From the point of view of Interactive Brokers, we are not in favor of the new rule, although we believe that that rule would be generally positive for the public. Thank you for the comments here, rule by rule. I think they, not all, but echo a lot of the comment letters and feedback that, especially the tick size. Right. I know. Right. Most aren't in favor. Right. Yeah. The real tick size. Well, one last question on that, and then we'll sort of go to the wrap-up. Four separate rule proposals, and I know the chair, Chair Gensler, believes that they are separate, but any views, Thomas, on, when you have four changes, would you prefer to see it more in a phased-in approach? Or, do you think that they stand alone enough that, you know, the way they've been proposed, it might be the best? I think that the disclosure rules are relatively simple to follow, and the tick sizes, I think the exchanges will also be opposed to the tick sizes. I think the tick sizes, if they go forward, I think they'll get modified, and they'll become larger than currently proposed. If they do, I don't think there would be too much opposition to that. I see the first two rules are easily implemented, and the second two is, as I said, the third one, I don't really understand yet, and the fourth one, I would bet against them. I don't think that they will be implemented. Understood. The exchanges actually do not. As you say, they wanna see smaller tick sizes, but not. Not that, Not so tiny, right. I guess we've been talking here for 15 years. You know, we've seen HFT come into the marketplace. We've seen you make changes to Interactive Brokers, and if you do come at lunch, you'll hear where the name Interactive Brokers came from. Anyway, the changes over these 15 years closed the market maker, zero commissions, 0 DTE options. I guess, Thomas, you are the visionary, or you have been the visionary. What do you see going forward for Interactive Brokers or for, I guess, option, retail option trading in general? Any big views or changes or a thought? Big views? You know, around 2000, we had over 200 seats, exchange seats that we were leasing, and we had market-making members on the floors of the five options exchanges, and they were holding handheld devices with which we were communicating by radio waves. That was the height of our market-making operation. After the 2008- 2009 crash, high-frequency trading came along, and they going after Madoff. He used to buy order flow from retail brokers and cross it against himself on the Cincinnati Stock Exchange. I thought that was his real business in retrospect. It was just a facade. The HFTs basically got the idea from Madoff of buying order flow, and we were trading as market makers, we were trading on all the exchanges, basically, our bread and butter came from the retail order flow. After the 2008- 2009 crash, we saw that order flow drying up. We had to eventually decide if we would take the other side of Interactive Brokers orders or get out of the market-making business. I regret the decision that we made at the time, which was to get out of market making, we sold the market maker to Two Sigma on an earn-out basis, we basically got nothing for it. Here we are today, right? It's basically you see the HFTs, they are providing an extremely efficient market, as far as I can see, from relative to the bid and offer. I am not so sure that if you look at, I mean, you know, they say that Citadel made $7 billion last year on the market-making side, so, you know, that they are doing something that's very well done from their point of view. Where do we go from here? Well, if you look at Apple's goggles, I think that there'll be some technology that maybe will work with that. I mean, I've been trying to figure out how to think about that. There is certainly potential for that, to visualize three-dimensional surfaces, like from options traders' points of view, the probability surface going out in time is. You currently, if you come to Interactive Brokers, we have something called Probability Lab, where you can see the probability distribution function derived from the exchange quotes, then you are able to adjust that distribution and get option values from your adjusted distribution. You can from there create orders that would take advantage of the difference between the actual implied distribution by current prices and what the prices would be if they went after if you derive them from your distribution function. You could change that for a three-dimensional situation, which would be really quite earth-shaking. This just proves to me why you're the founder of the company and why you keep- the vision, like we talked about, the vision doesn't stop. Right. I think I have a glimpse of it, but that would be fascinating stuff. It's been a great time following Interactive Brokers. We definitely want you to, the audience, that is, to come and hear Thomas's full story at lunch and more about the story of bringing automation to trading, which you are one of the pioneers. Thank you. Thank you very much.