I'm Craig Siegenthaler from Bank of America, and it's my pleasure to introduce Thomas Peterffy. Thomas is the founder and chairman of Interactive Brokers. He founded the firm 43 years ago and is one of the pioneers of electronic trading. Excuse me, 47. 47 years ago? Yeah. Okay. Sorry about that, Thomas. Interactive Brokers is a digital investing platform that services its clients across multiple segments. Its offerings target individuals, RIAs, hedge funds, prop traders, introducing brokers, and extends into most major international markets. In our view, IBKR's competitive advantage is its technology, R&D effort, which allows them to offer multiple products in multiple currencies, launching new capabilities quicker, and also underpricing its competition. Thomas, thank you for joining us. Thank you very much for having me. So everyone here is interested in your perspective on these topics. We're eager to hear your thoughts, so please feel free to expand on any of them if you wish. So let's just start with the economy. It's been trending stronger than we thought. Rates are still high, but the Federal Reserve has indicated that the next move will be rate cuts. Given the uncertain world stage and perspective from your international client base, what do you see evolving on the economic front? The situation worldwide is getting more and more difficult. As you know about all the geopolitical uncertainties, China's economy is going down, deficits are rising everywhere, but still the U.S. market keeps climbing to new highs. When you ask why is that, I think exactly for that reason. Namely, it's a perverse situation that the increasing U.S. absence on the world stage leaves a vacuum, and it creates a very uncertain feeling in people all over the world. So the U.S., in spite of it being in some sense deteriorating situation politically, financially, and even culturally, is still relatively the strongest place in the world to bring your money. So that's what people are doing, and that's what we see in our rising account numbers. People from all over the world want to have their money in the United States, so they invest in the U.S. So let's talk about organic growth, arguably one of the most important metrics that you guys produce. So just a few years ago, IBKR was enjoying growth of 40%, 50%, actually 60% at some point in terms of account growth. This is when retail engagement was much higher under that COVID-perfect storm. But unlike Peloton, IBKR is still growing quickly, but not still at 50%. So how should we think about the sensitivity of your organic growth to the economic backdrop, really in relation to your 20%-25% target for account growth? Well, simply put, just as I said, the worse the economic bank bankrupt, the faster our accounts grow. That's why I'm saying it's an upside-down situation. So sticking with the 20%-25% long-term account growth, what are the components of you reaching that target? I know you've broken them up before. Well, so these are not exact numbers, but combining account numbers and customer equity and revenues, combining all those three things and distributing that into three regions, we see the Americas at 43%, Asia at 34%, and Europe and the Middle East together at 23%. Now, yeah, please. I wanted to talk about macro sensitivity. It looks like rates may be going down here. Maybe you disagree with that, but if rates do go down here, how do you see that impacting your account growth? Currently, we always pay qualifying cash deposits 0.5% on their Fed Funds, and that is currently 4.83%. Given that our peers pay practically nothing, that is a strong inducement for people to come and open accounts with us. So that happens. Of course, the higher rates go, the more that the more that difference is and the more accounts we get. Conversely, if rates go down, the lesser that difference becomes, and maybe we will get fewer accounts. Maybe. Thomas, if you do hit your target of 20%-25% account growth, how do you see that translating into EPS, given kind of flat-ish macro assumptions, given also that your operating margin's quite high today? So we don't have such a target. You keep referring to the 20%-25% target. We don't have a target. Our target is always more. Any number you posit, our target is more. Any number we hit, our target is more. We always want more. But there's no point in saying that, well, I want 22%. So if I get 23, I stop working or what? So I always want more. And that's how we get more. So but I'm sorry, what was your question? I was looking for, if you have account growth of 20%-25%, how do you think that translates into EPS growth under normal market conditions, just because your margin's already quite high and you don't buy back stock? Well, aside from the 20%-25%, whatever the account growth rate is, I think currently it's almost 30%, right? But as we grow, our original client base, as many of you may know, that we started in this business many decades ago as market makers. We started 47 years ago, and I was the first employee of the company. We started first with fair value sheets in options, and from there we moved to homemade handheld computers. And from there we moved, and they were still not connected. Then from that, we moved to connected screens on the exchange floors and all driven by a central computer system. Then from that, we moved to radio waves that people, our employees, were carrying handheld machines that were driven, connected by radio waves. And that was by around the mid-1990s. At that point, in the great capitals of Europe and Asia, there were already electronic exchanges, and we connected to all those so that by the time 2000, by the year 2000, when the first electronic exchange opened in the U.S., I mean, the ISE, we had this entire worldwide network. As our fellow market makers from the floor had to move upstairs, we opened our system up to them as brokers so that they could electronically continue their market-making activities from upstairs. So they were our basic customers. From there, we went in both directions. We tried to reach up to proprietary trading firms and hedge funds and institutional customers on the one hand, and retail and registered investment advisors and introducing brokers on the other. That's how we end up today as being the electronic broker all over the world for both institutional and retail type of accounts. Let's move the conversation on to the individual investor segment. So if you look around the world, because your business is very global, who do you think are your major competitors? Major competitors. So we correctly, I think we very correctly position ourselves being in between the large investment banks or small investment banks and investment banks in general. And so we don't really directly, in a way, compete with both and neither because we're not exactly like either of them, right? So that's where we are. So one of the, actually, the largest U.S. online broker is going through an integration of an acquisition with its active trader business in a couple of months. Is this an opportunity for you to pick up share in your active trader business? Well, of course, every change in the industry is an opportunity, but this specific one may not be because we understand that Schwab aims to retain the TD Ameritrade frequent trader platform that they have. So I don't know if anybody will have to move from there, but if they do, they certainly will move to us. So big picture question. As you look at the U.S., Europe, Asia, you think about your economic growth kind of forecast in those regions. You think about your penetration. Which of those big markets I know there's many little countries in there, but which of those big markets are you most excited about in terms of long-term growth? So just as we do not have global growth targets, we don't have regional targets either. But we are in a lucky situation now where we have customers in every corner in the world because, as I said to our employees many years ago, where you want to put the world on fire. So you have two ways to go about it. You create a fire somewhere and start growing it, right? The other way to do it is to create little points of fire in 200 different places and then slowly start growing them. So the first alternative certainly is much easier and faster at the beginning. But the second is eventually going to start picking up speed, and then it's eventually going to take over the first one. And I think we are now at the point where that is happening. Our growth is now at the point where it is going to get really fast. Thomas, sometimes I hear from users of your platform that the technology can be a little more difficult. Sometimes I hear that client service may be a little more challenging. Also, you don't have brick-and-mortar branches. And what I'm getting at is, how do you improve your penetration with U.S. mainstream investors? So maybe you folks know that we have for over four years now, we have a new CEO, and he is very focused on this issue. So as a result, we are about this week or next week, we are releasing our new Trader Workstation, which has been the mainstay of our platform for the past three decades. And we are really extremely enthusiastic about this new release. And so I would encourage you all to try and take a look at it. But what was the question? So oh, yeah. And of course, I think when you heard that our customer service may not be as good as others, that must have been some years ago, no? Well, I see one challenge, though, is your client base is so global. You need to help clients in. Yeah. So we have 24-hour-a-day customer service, and we have customer service in something like 15 languages. Yeah. So So it certainly is a much greater task to maintain this entire system and the customer service and the compliance with all the different rules around the world and the tax rules around the world. I mean, it's a very big challenge, and we are continuously automating any and all parts of this so that once we bring something in, it always we either do it or we don't do it, but if we do it, it's automated. So I think this is going very well. And as I said, we are at the point now where we really feel very comfortable about taking up on very large entities. Thomas, we've seen a very fast ramp over the last 18 months from zero GTA SPX contracts. And I'm wondering, do you see this more as a fad and potentially volume shift back to equities, or do you think this is sort of what we'll see over the long term? No, it's not a fad because the fact is that options volumes have been increasing for 53 years, and the CBOE started 53 years ago. It is still just not well understood around the world. In the United States, it has now really taken off, but it took 50 years. Now it's beginning in Europe and Asia, and that's going to be a really very, very big deal. So the Magnificent Seven large-cap stocks have really dominated the index performance. Do you have any thoughts on this trend? Sure. So you know I've been around for many decades. So what I have observed is that when technology develops and grows in spurts, so when there is a sudden growth spurt, then the leadership narrows. And when growth slows, then it broadens out, and more and more companies come to adopt the new technology. And some companies and there are many new companies that are formed directly built onto this new technology. And the companies that do not adapt fade away, and then the entire cycle restarts. And we have had this about, I don't know, one, two, three four times in my career. If I were an investor, I would look at which are those companies that are most likely to be able to adopt these new technologies, which are the companies that are in fields where the new technology is most relevant to, which are those industries where the technology is most relevant to. Among those companies, which are the ones that have the greatest runway ahead of them? If I think about it, one company in particular comes to mind. Do you want to share which one that is? Interactive Brokers, of course. Thomas, let's shift on to the income statement. Given the very short duration of your assets, I know this has benefited you over the last couple of years with the Fed rate hikes, but we may be getting a reverse on that. So how should we think about the impact EPS from future rate cuts? And please feel free to share if you think there's any natural hedges in the business. As I've said before, it's well known that 1% reduction in interest rates results in a $300 million diminution in our income. I think that. So we expect three-quarter cuts this year and maybe one or two next year. I think that our organic growth will outpace that. So we're not worried about it. Have you noticed a negative correlation between net interest income and commissions over the years? So could we get an improving activity rate with higher commissions to also offset any declines in net interest income? I never noticed a correlation between interest rates and commission income. What I do know is that when there is a precipitous decline in the markets, commission income picks up. But then once the market settles down at a much lower level, there is a long period of very slow commissions, and commissions contract. And that's the time when people like us have the opportunity to really turn away from the day-to-day and just really work on development for the next cycle of the good markets. Thomas, your balance sheet's pretty simple today. You have $14 billion of equity. You have zero debt and $4 billion of cash. So what. Wait a minute. So we have $14 yeah, $14+. Yeah. But why do you say zero cash? Zero debt. Zero debt and $4 billion of cash? We have $14 billion of cash. $4 billion of free cash, I thought. Free. You mean cash that we do not use for, well, you know, we have some regulatory cash requirement. It's not really $10 billion, maybe $6 billion. So we have a lot of cash. Okay. We have a lot of cash. What are your plans for future free cash flow generation and the $14 billion? What would you like to do with that? Well, you know we're still not as big as, say, Goldman Sachs or Morgan Stanley or UBS, right? So we still have to contend with the idea of not being accepted by hedge funds and institutional investors as even though I think that we are more we are less risky to have large assets deposited with mostly because we do not have over-the-counter positions on. I remember in 2008, the day before the Fed came out and gave everybody $20 billion-$25 billion the day before that so we went public in 2007. We had $4 billion of cash. In 2008, we still had the $4 billion plus what we have earned in that period. And on the day when everybody got that cash the day before, we were the largest financial institution on Wall Street because we had all of our cash, and we had no obligations whatsoever. Everybody else, of course, they couldn't figure out who owed them how much and who was able to pay and who wasn't. And that is always the problem with these over-the-counter positions. You never know. You never know. They are so interwoven, these positions, that you never know if there is just one person, like in this case was Lehman Brothers, who may not be able to pay, and it wasn't able to pay. You don't know how that sorts itself out through the system. So it's a problem when your counterparty has over-the-counter positions, and there is a crash, you have a problem. The $14 billion helps you sleep at night. Yeah. Yeah. It also gives us, of course, the opportunity to look at potential acquisitions. These acquisitions generally emerge at the time when there is a crash. So you spoke more openly about evaluating acquisitions on the last earnings call. I don't know if anything changed, but you shared with us that you were looking at transactions. I think two of them in particular, price was too high, but maybe you were close. Was the last deal you did the Folio assets involvement? Well, that was a very tiny deal. A very tiny. Okay. Yeah. Yeah. That That was not anything significant. Okay. So what are the qualities around targets that you're looking for? What are you looking to achieve through M&A? Well, first of all, we would look at companies with a lot of accounts that are similarly in profile to the kind of accounts we have. And so companies that have whether it's a takeover or a merger, I more would look at mergers because these little companies don't make much sense to fool around with. Large companies are often larger than ourselves, so I don't quite know how that would work out. But we don't really need any of these corporate mergers because we could just any large so we have our profit margin is 70 to in the low 70s, right? Competitors' peers' profit margins are in the 30s and 40s. So if we would get together with somebody and that other institution, we could raise their profit margin with our technology to anywhere near where we are. That, of course, would make a hell of a difference for the combined company. But I don't think we need to necessarily merge or do anything like that for that because respectfully, even your firm would greatly benefit by becoming an introducing broker to us, right? So there's no reason to really merge here, right? So I want to talk about market making. You used to be in this business. You have your SX Smart Router kind of already there. You have option trading venue. Why isn't this a business that you eventually got back in? I think you talked about this in an earnings call about a year ago, but could you get back into the market making business in the future? We have a lot of very attractive things in front of us that we can work on, and this would not be one of them. So I noticed there was a pickup in insider sales at IBKR over the last six months. And I know all of your partners and you have a considerable amount of net worth in the IBKR stock. And actually, liquidity isn't that bad. I mean, the stock could actually use more liquidity so more of my clients could buy the stock. But how does the company handle insider selling? So we have this, what is it called? The 10b5-1. 10B5. 10b5-1s, yes. And you know whenever somebody we still own 74.5% of the firm. And whenever anybody makes a sale, we see the next day after the sale is published, the stock immediately gets hammered. So it's very clear to me that there are some folks who must have some algos that constantly read the news. And when there is an insider trade, the algorithm quickly sells the stock. But these algos never work forever, you know? And I think it's about the time last time I saw this happening, that's when our stock really bounced up, and somebody sold, and then suddenly our stock started running up. So it's not a foolproof algorithm. But you want to know about what is your next question? Well, so the next question is so you were selling a little bit. I think you stopped in January. Now, you're obviously the largest owner. So if you sold, you could really benefit liquidity. Why did you stop? I just thought the stock was way too cheap, and I didn't want to sell it at that price. I wanted to come back to the hedge fund prime business. But if I may say, so as the stock is getting more coming closer to fair value, maybe, and given these crazy algorithms, if I were to sell something, I'm sure they would trash the stock. So if any one of you has an interest in, say, in a block of 5 million shares or so, and the price keeps going a little further, give me a call, maybe. Maybe you have receptive ears on the other end of the phone. So let's move back to the hedge fund prime business. You were talking about gaining share, moving upstream. Is $14 billion of capital enough to compete with the big banks and move upstream and win larger hedge funds? Because a lot of your hedge funds, I believe, are quite small. Well, $14 billion is certainly enough to win the hedge funds we are winning. But again, larger hedge funds, so it's not as much the capital anymore. So we have several advantages because we have relative to others. And it's not only the short availability and the better interest rates, but it's also we do not trade with a large order or ahead of a large order. So we really provide a better execution. And we now have the ability to receive a large order and cross it against all of our other orders inside our ATS. So we really can provide a better execution, not only to the 5 million share block, whether it would come from me, but any other block. And so. Yeah. So at this moment, Thomas, let's see if there's any questions from the audience. Yeah, please. Please raise your hand. We have a mic here so everyone can hear you. Hey, Thomas. Thanks for taking my question. So the breadth of the countries and markets that you offer trading in is extraordinarily wide versus competitors. And I believe you've mentioned before a lot of this has to do with your ability to automate back-office functions like tax and compliance. Why do you think a lot of competitors, especially ones that have scale, don't compete or aren't able to compete in those markets? Well, they are not able to compete because they haven't built out that capacity. Some firms that have built it out are not centralized. It's like they basically have the same name and the same parent organization, but they are not at all coordinated. We have experience with some competitors that are really everywhere where we are, but they are not integrated in any sense. As a result, our technology enables us to give that provided service at much lower rates and much more efficiently. That nobody seems to want to undertake so far. I don't know why. Nobody is doing what we're doing. If anything, people are moving away from that. We have seen a number of companies that the day we opened in Singapore was about a week after Schwab closed down in Singapore. I don't know why they don't do it, but they don't do it, and I don't mind that they don't do it. Hello. Could you tell me a little bit about how you embed Know Your Customer? Sorry? Could you tell me a little bit about how you have clients globally? How do you manage to ensure that you're not transacting for what might be sanctioned individuals? How do you generate the right Know Your Customer procedures in a world in which there are a lot of sanctioned individuals? So you do understand? He said, "How do you know your customers around the world, especially maybe if some were sanctioned? Oh, well, that's a very elaborate process. We have over 400 people. We only have 2,900 employees, but we have over 400 of them in the new account department. And so we have, of course, a number of automated systems that look at any new applicants. And then whenever there is not sufficient information about a potential customer, then they get contacted by one of our people. And so they do a very, very thorough search on these. And I mean, this is one of the biggest issues now in the business, basically. But just to ask some further questions, are there countries which you rule out doing business in, A? And B, how would you if I was a sanctioned individual and I provided you with a false passport or a different passport, if I was a sanctioned Russian living in Israel, for example, how would you ensure that you were not trading for me? Well, if we can't identify you, we won't open the account. So you would have to take on the persona of an actual person that exists, right, who is not you, right? And then we would have to look in the records. We read thousands of newspapers, not personally, but electronically, right? So we have a very large database of everybody. So if you are a sanctioned person and you walk in as somebody else who there is nothing known about, and you are coming from a country successfully, a country like the United States, maybe you can get through. I mean, there is nothing that if you can steal the identity of somebody who lives in the United States, you can probably get through. Great. We will end it there. So Thomas, thank you very much for your time. On behalf of all of us from Bank of America, we appreciate this. Thank you. Thank you very much. Thank you very much.