Interactive Brokers Group Announces 4Q2020 Results
Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.81 for the quarter ended December 31, 2020 compared to $0.57 for the same period in 2019, and adjusted diluted earnings per share of $0.69 for this quarter compared to $0.58 for the year-ago quarter.
Net revenues were $599 million and income before income taxes was $392 million for this quarter, compared to net revenues of $500 million and income before income taxes of $312 million for the same period in 2019. Adjusted net revenues were $582 million and adjusted income before income taxes was $375 million for this quarter, compared to adjusted net revenues of $503 million and adjusted income before income taxes of $315 million for the same period in 2019.
Financial Highlights
Commission revenue showed strong growth, increasing $120 million, or 71%, from the year-ago quarter on higher customer trading volumes within an active trading environment worldwide. Net interest income decreased $62 million, or 22%, from the year-ago quarter as the average Federal Funds effective rate decreased to 0.09% from 1.65% in the year-ago quarter. Other income increased $25 million from the year-ago quarter. This increase was mainly comprised of $39 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which swung to a $32 million mark-to-market gain this quarter from a $7 million mark-to-market loss in the same period in 2019; partially offset by $25 million related to our currency diversification strategy, which lost $13 million this quarter compared to a gain of $12 million in the same period in 2019. 65% pretax profit margin for this quarter, up from 62% in the year-ago quarter. 64% adjusted pretax profit margin for this quarter, up from 63% in the year-ago quarter. Total equity of $9.0 billion.The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 12, 2021 to shareholders of record as of March 1, 2021.
Business Highlights
Customer accounts increased 56% from the year-ago quarter to 1.07 million. Customer equity grew 66% from the year-ago quarter to $288.6 billion. Total DARTs2 increased 165% from the year-ago quarter to 2.11 million. Cleared DARTs increased 160% from the year-ago quarter to 1.87 million. Customer credits increased 34% from the year-ago quarter to $77.7 billion. Customer margin loans increased 26% from the year-ago quarter to $39.0 billion.COVID-19 Pandemic
In March 2020, the World Health Organization recognized the outbreak of Coronavirus Disease 2019 (COVID-19) caused by a novel strain of the coronavirus as a pandemic. The pandemic affects all countries in which we operate. The response of governments and societies to the COVID-19 pandemic, which includes temporary closures of certain businesses; social distancing; travel restrictions, “shelter in place” and other governmental regulations; and reduced consumer spending due to job losses, has significantly impacted market volatility and general economic conditions.
The COVID-19 pandemic has precipitated unprecedented market conditions with equally unprecedented social and community challenges. Amid these challenges:
The Company is committed to ensuring the highest levels of service to its customers so they can effectively manage their assets, portfolios and risks. The Company’s technical infrastructure has withstood the challenges presented by the extraordinary volatility and increased market volume. The Company can run its business from alternate office locations and/or remotely if a Company office must temporarily close due to the spread of the COVID-19 pandemic. As announced on April 9, 2020, during the second quarter of 2020 the Company donated $5 million to assist efforts to provide food and support for people affected by the COVID-19 pandemic in the United States as well as to advance medical solutions.The initial effects of the COVID-19 pandemic on the Company’s financial results, which may have continued through the fourth quarter of 2020, can be summarized as follows: (1) higher commission revenue due to increased trading activity and a higher rate of customer accounts opened throughout 2020; and (2) lower net interest income resulting from lower benchmark interest rates.
The impact of the COVID-19 pandemic on the Company’s future financial results could be significant but currently cannot be quantified, as it depends on numerous evolving factors that currently cannot be accurately predicted, including, but not limited to the duration and spread of the pandemic; its impact on our customers, employees and vendors; governmental actions in response to the pandemic; and the overall impact of the pandemic in the economy and society; among other factors. Any of these events could have a materially adverse effect on the Company’s financial results.
Effects of Foreign Currency Diversification
In connection with our currency diversification strategy, we base our net worth in GLOBALs, a basket of 10 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $82 million, as the U.S. dollar value of the GLOBAL increased by approximately 1.01%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $13 million) and (2) Other Comprehensive Income (gain of $95 million).
Conference Call Information:
Interactive Brokers Group, Inc. will hold a conference call with investors today, January 19, 2021, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the “Interactive Brokers Conference Call.”
The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.
About Interactive Brokers Group, Inc.:
Interactive Brokers Group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 135 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to clients worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments. Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its February 24, 2020, Best Online Broker Review.
Cautionary Note Regarding Forward-Looking Statements:
The foregoing information contains certain forward-looking statements that reflect the Company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company’s operations and business environment which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company’s financial results may be found in the Company’s filings with the Securities and Exchange Commission.
1 See the reconciliation of non-GAAP financial measures starting on page 10.
2 Daily average revenue trades (DARTs) are based on customer orders.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA
Cleared Non-Cleared Avg. Trades
Customer % Customer % Principal % Total % per U.S.
Period
Trades Change Trades Change Trades Change Trades Change Trading Day2018
328,099
21,880
18,663
368,642
1,478
2019
302,289
(8%)
26,346
20%
17,136
(8%)
345,771
(6%)
1,380
2020
620,405
105%
56,834
116%
27,039
58%
704,278
104%
2,795
4Q2019
73,291
6,284
4,204
83,779
1,330
4Q2020
178,614
144%
17,008
171%
7,455
77%
203,077
142%
3,223
3Q2020
160,015
14,701
7,453
182,169
2,846
4Q2020
178,614
12%
17,008
16%
7,455
0%
203,077
11%
3,223
CONTRACT AND SHARE VOLUMES: (in 000's, except %)
TOTAL
Options % Futures1 % Stocks %Period
(contracts) Change (contracts) Change (shares) Change2018
408,406
151,762
210,257,186
2019
390,739
(4%)
128,770
(15%)
176,752,967
(16%)
2020
624,035
60%
167,078
30%
338,513,068
92%
4Q2019
100,520
29,078
39,391,536
4Q2020
170,191
69%
35,295
21%
121,062,599
207%
3Q2020
163,972
39,186
87,514,614
4Q2020
170,191
4%
35,295
(10%)
121,062,599
38%
ALL CUSTOMERS
Options % Futures1 % Stocks %Period
(contracts) Change (contracts) Change (shares) Change2018
358,852
148,485
198,909,375
2019
349,287
(3%)
126,363
(15%)
167,826,490
(16%)
2020
584,195
67%
164,555
30%
331,263,604
97%
4Q2019
91,562
28,630
37,988,125
4Q2020
160,953
76%
34,851
22%
119,654,910
215%
3Q2020
153,612
38,685
85,893,357
4Q2020
160,953
5%
34,851
(10%)
119,654,910
39%
CLEARED CUSTOMERS
Options % Futures1 % Stocks %Period
(contracts) Change (contracts) Change (shares) Change2018
313,795
146,806
194,012,882
2019
302,068
(4%)
125,225
(15%)
163,030,500
(16%)
2020
518,965
72%
163,101
30%
320,376,365
97%
4Q2019
81,468
28,307
36,969,492
4Q2020
144,378
77%
34,459
22%
116,538,527
215%
3Q2020
137,660
38,405
83,246,086
4Q2020
144,378
5%
34,459
(10%)
116,538,527
40%
1 Includes options on futures
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED
PRINCIPAL TRANSACTIONS
Options % Futures1 % Stocks %Period
(contracts) Change (contracts) Change (shares) Change2018
49,554
3,277
11,347,811
2019
41,452
(16%)
2,407
(27%)
8,926,477
(21%)
2020
39,840
(4%)
2,523
5%
7,249,464
(19%)
4Q2019
8,958
448
1,403,411
4Q2020
9,238
3%
444
(1%)
1,407,689
0%
3Q2020
10,360
501
1,621,257
4Q2020
9,238
(11%)
444
(11%)
1,407,689
(13%)
1 Includes options on futures CUSTOMER STATISTICS (in 000's, except % and where noted) Year over Year
4Q2020
4Q2019
% Change
Total Accounts (in thousands)
1,073
690
56%
Customer Equity (in billions)1$
288.6
$
174.1
66%
Cleared DARTs (in thousands)
1,871
719
160%
Total Customer DARTs (in thousands)
2,109
797
165%
Cleared Customers
Commission per Cleared Commissionable Order2
$
2.46
$
3.63
(32%)
Cleared Avg. DART per Account (Annualized)
459
266
73%
Net Revenue per Avg. Account (Annualized)$
2,151
$
2,801
(23%)
Consecutive Quarters4Q2020
3Q2020
% Change
Total Accounts (in thousands)
1,073
981
9%
Customer Equity (in billions)1$
288.6
$
232.7
24%
Cleared DARTs (in thousands)
1,871
1,629
15%
Total Customer DARTs (in thousands)
2,109
1,832
15%
Cleared Customers
Commission per Cleared Commissionable Order2
$
2.46
$
2.69
(9%)
Cleared Avg. DART per Account (Annualized)
459
442
4%
Net Revenue per Avg. Account (Annualized)$
2,151
$
2,154
(0%)
1 Excludes non-Customers. 2 Commissionable Order - a customer order that generates commissions.INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
(UNAUDITED)
Three Months
Twelve Months
Ended December 31,
Ended December 31,
2020
2019
2020
2019
(in millions) Average interest-earning assets Segregated cash and securities$
43,128
$
29,437
$
41,898
$
27,812
Customer margin loans
32,775
27,529
28,960
26,483
Securities borrowed
3,808
4,026
4,235
3,930
Other interest-earning assets
5,799
5,887
5,593
5,407
FDIC sweeps1
2,919
2,298
2,882
2,075
$
88,429
$
69,177
$
83,568
$
65,707
Average interest-bearing liabilities
Customer credit balances
$
71,190
$
55,185
$
67,540
$
52,625
Securities loaned
6,499
4,292
5,702
4,088
Other interest-bearing liabilities
17
495
215
211
$
77,706
$
59,972
$
73,457
$
56,924
Net interest income
Segregated cash and securities, net
$
7
$
126
$
166
$
560
Customer margin loans2
93
157
380
694
Securities borrowed and loaned, net
115
80
343
257
Customer credit balances, net2
9
(94
)
(46
)
(515
)
Other net interest income1/3
8
27
55
121
Net interest income3
$
232
$
296
$
898
$
1,117
Net interest margin ("NIM")
1.04
%
1.70
%
1.07
%
1.70
%
Annualized yields
Segregated cash and securities
0.06
%
1.70
%
0.40
%
2.01
%
Customer margin loans
1.13
%
2.26
%
1.31
%
2.62
%
Customer credit balances
-0.05
%
0.68
%
0.07
%
0.98
%
____________________1
Represents the average amount of customer cash swept into FDIC-insured banks as part of our Insured Bank Deposit Sweep Program. This item is not recorded in the Company's consolidated statements of financial condition. Income derived from program deposits is reported in other net interest income in the table above.
2
Interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within each customer’s account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments).
3
Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company’s consolidated statements of comprehensive income. For the three and twelve months ended December 31, 2020 and 2019, $7 million, $5 million, $21 million, and $15 million were reported in other fees and services, respectively. For the three and twelve months ended December 31, 2020 and 2019, $0 million, $4 million, $5 million, and $19 million were reported in other income, respectively.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Twelve Months
Ended December 31,
Ended December 31,
2020
2019
2020
2019
(in millions, except share and per share data)
Revenues: Commissions$
288
$
168
$
1,112
$
706
Other fees and services1/2
52
36
175
141
Other income 1/3
34
9
59
7
Total non-interest income
374
213
1,346
854
Interest income
280
418
1,133
1,726
Interest expense
(55
)
(131
)
(261
)
(643
)
Total net interest income
225
287
872
1,083
Total net revenues
599
500
2,218
1,937
Non-interest expenses:
Execution, clearing and distribution fees
66
59
293
251
Employee compensation and benefits
86
75
325
288
Occupancy, depreciation and amortization
18
17
69
60
Communications
7
6
26
25
General and administrative
30
32
236
112
Customer bad debt
-
(1
)
13
44
Total non-interest expenses
207
188
962
780
Income before income taxes
392
312
1,256
1,157
Income tax expense
12
18
77
68
Net income
380
294
1,179
1,089
Net income attributable to noncontrolling interests
309
250
984
928
Net income available for common stockholders
$
71
$
44
$
195
$
161
Earnings per share:
Basic
$
0.82
$
0.58
$
2.44
$
2.11
Diluted
$
0.81
$
0.57
$
2.42
$
2.10
Weighted average common shares outstanding:
Basic
87,076,038
76,749,142
79,939,289
76,121,570
Diluted
87,772,443
77,357,093
80,638,908
76,825,863
____________________
1
In the first quarter of 2020, we changed the presentation of our consolidated statements of income to better align with our business strategy. Previously reported amounts have been adjusted to conform with the new presentation.
2
Includes market data fees, account activity fees, risk exposure fees, order flow income from options exchange mandated programs, and revenues from other fees and services.
3
Includes gains (losses) from principal transactions; the impact of our currency diversification strategy; gains (losses) from our equity method investments, other revenue not directly attributable to our core business offerings.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
Three Months
Twelve Months
Ended December 31,
Ended December 31,
2020
2019
2020
2019
(in millions, except share and per share data)
Comprehensive income: Net income available for common stockholders$
71
$
44
$
195
$
161
Other comprehensive income:
Cumulative translation adjustment, before income taxes
21
7
26
4
Income taxes related to items of other comprehensive income
-
-
-
-
Other comprehensive income, net of tax
21
7
26
4
Comprehensive income available for common stockholders$
92
$
51
$
221
$
165
Comprehensive earnings per share:
Basic
$
1.05
$
0.67
$
2.77
$
2.18
Diluted$
1.05
$
0.66
$
2.74
$
2.16
Weighted average common shares outstanding:
Basic
87,076,038
76,749,142
79,939,289
76,121,570
Diluted
87,772,443
77,357,093
80,638,908
76,825,863
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests
$
309
$
250
$
984
$
928
Other comprehensive income - cumulative translation adjustment
74
31
98
20
Comprehensive income attributable to noncontrolling interests$
383
$
281
$
1,082
$
948
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
December 31,2020 December 31,
2019 (in millions) Assets Cash and cash equivalents
$
4,292
$
2,882
Cash - segregated for regulatory purposes
15,903
9,400
Securities - segregated for regulatory purposes
27,821
17,824
Securities borrowed
4,956
3,916
Securities purchased under agreements to resell
792
3,111
Financial instruments owned, at fair value
630
1,916
Receivables from customers, net of allowance for doubtful accounts
39,333
31,304
Receivables from brokers, dealers and clearing organizations
1,254
685
Other assets
698
638
Total assets
$
95,679
$
71,676
Liabilities and equity
Liabilities
Short-term borrowings
$
118
$
16
Securities loaned
9,838
4,410
Securities sold under agreements to repurchase
-
1,909
Financial instruments sold but not yet purchased, at fair value
153
457
Other payables:
Customers
75,882
56,248
Brokers, dealers and clearing organizations
182
220
Other payables
503
476
76,567
56,944
Total liabilities
86,676
63,736
Equity
Stockholders' equity
1,951
1,452
Noncontrolling interests
7,052
6,488
Total equity
9,003
7,940
Total liabilities and equity
$
95,679
$
71,676
December 31, 2020
December 31, 2019
Ownership of IBG LLC Membership InterestsInterests
%
Interests
%
IBG, Inc.90,780,444
21.8%
76,759,595
18.5%
Noncontrolling interests (IBG Holdings LLC)325,960,034
78.2%
338,670,642
81.5%
Total IBG LLC membership interests
416,740,478
100.0%
415,430,237
100.0%
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three Months
Twelve Months
Ended December 31,
Ended December 31,
2020
2019
2020
2019
(in millions) Adjusted net revenues1 Net revenues - GAAP$
599
$
500
$
2,218
$
1,937
Non-GAAP adjustments
Currency diversification strategy, net
13
(12
)
19
60
Mark-to-market on investments2
(33
)
15
(36
)
(13
)
Remeasurement of TRA liability3
3
-
3
-
Total non-GAAP adjustments
(17
)
3
(14
)
47
Adjusted net revenues
$
582
$
503
$
2,204
$
1,984
Adjusted income before income taxes1
Income before income taxes - GAAP
$
392
$
312
$
1,256
$
1,157
Non-GAAP adjustments
Currency diversification strategy, net
13
(12
)
19
60
Mark-to-market on investments2
(33
)
15
(36
)
(13
)
Remeasurement of TRA liability3
3
-
3
-
Customer compensation expense4
-
-
103
-
Bad debt expense5
-
-
1
42
Total non-GAAP adjustments
(17
)
3
90
89
Adjusted income before income taxes
$
375
$
315
$
1,346
$
1,246
Adjusted pre-tax profit margin
64
%
63
%
61
%
63
%
Three Months
Twelve Months
Ended December 31,
Ended December 31,
2020
2019
2020
2019
(in millions) Adjusted net income available for common stockholders1 Net income available for common stockholders - GAAP$
71
$
44
$
195
$
161
Non-GAAP adjustments
Currency diversification strategy, net
3
(2
)
4
11
Mark-to-market on investments2
(7
)
3
(7
)
(2
)
Remeasurement of TRA liability3
3
-
3
-
Customer compensation expense4
-
-
20
-
Bad debt expense5
-
-
0
8
Income tax effect of above adjustments6
1
-
(3
)
(3
)
Remeasurement of deferred income taxes7
(11
)
-
(11
)
-
Total non-GAAP adjustments
(11
)
1
6
13
Adjusted net income available for common stockholders
$
60
$
45
$
201
$
174
Note: Amounts may not add due to rounding.
Three Months
Twelve Months
Ended December 31,
Ended December 31,
2020
2019
2020
2019
(in dollars) Adjusted diluted EPS1 Diluted EPS - GAAP$
0.81
$
0.57
$
2.42
$
2.10
Non-GAAP adjustments
Currency diversification strategy, net
0.03
(0.03
)
0.05
0.14
Mark-to-market on investments2
(0.08
)
0.03
(0.08
)
(0.03
)
Remeasurement of TRA liability3
0.04
0.00
0.04
0.00
Customer compensation expense4
0.00
0.00
0.24
0.00
Bad debt expense5
0.00
0.00
0.00
0.10
Income tax effect of above adjustments6
0.01
0.00
(0.04
)
(0.04
)
Remeasurement of deferred income taxes7
(0.12
)
0.00
(0.14
)
0.00
Total non-GAAP adjustments
(0.12
)
0.01
0.08
0.17
Adjusted diluted EPS
$
0.69
$
0.58
$
2.49
$
2.27
Diluted weighted average common shares outstanding
87,772,443
77,357,093
80,638,908
76,825,863
Note: Amounts may not add due to rounding.
Note: The term “GAAP” in the following explanation refers to generally accepted accounting principles in the United States.
1 Adjusted net revenues, adjusted income before income taxes, adjusted net income available for common stockholders and adjusted diluted earnings per share (“EPS”) are non-GAAP financial measures as defined by SEC Regulation G.
We define adjusted net revenues as net revenues adjusted to remove the effect of our GLOBAL currency diversification strategy, our net mark-to-market gains (losses) on investments2, and the remeasurement of our Tax Receivable Agreement (“TRA”) liability3. We define adjusted income before income taxes as income before income taxes adjusted to remove the effect of our GLOBAL currency diversification strategy, our net mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, customer compensation expenses4, and unusual bad debt expense5. We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects attributable to IBG, Inc. of our GLOBAL currency diversification strategy, the mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, customer compensation expenses, unusual bad debt expense, and the remeasurement of certain deferred tax assets7.Management believes these non-GAAP items are important measures of our financial performance because they exclude certain items that may not be indicative of our core operating results and business outlook and may be useful to investors and analysts in evaluating the operating performance of the business and facilitating a meaningful comparison of our results in the current period to those in prior and future periods. Our GLOBAL currency diversification strategy, our mark-to-market on investments, the remeasurement of our TRA liability, customer compensation expense, unusual bad debt expense, and the remeasurement of certain deferred tax assets are excluded because management does not believe they are indicative of our underlying core business performance. Adjusted net revenues, adjusted income before income taxes, adjusted net income available to common stockholders and adjusted diluted EPS should be considered in addition to, rather than as a substitute for, GAAP net revenues, income before income taxes, net income attributable to common stockholders and diluted EPS.
2 Mark-to-market on investments represents the net mark-to-market gains (losses) on our U.S. government securities portfolio, which are typically held to maturity, investments in equity securities that do not qualify for equity method accounting which are measured at fair value, and equity securities taken over by the Company from customers related to losses on margin loans described below.
3 Remeasurement of our TRA liability represents the change in the amount payable to IBG Holdings LLC under the TRA as a result of changes in the Company’s effective corporate tax rates. For further information refer to Note 4 – Equity and Earnings per Share under Part II, Item 8 – Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10 K filed with the Securities Exchange Commission (“SEC”) on February 28, 2020.
4 Customer compensation expenses were incurred to compensate certain affected customers in connection with their losses resulting from the West Texas Intermediate Crude Oil event. On April 20, 2020, the energy markets exhibited extraordinary price activity in the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate Crude Oil contract. The price of the May 2020 physically-settled contract dropped to an unprecedented negative price of $37.63.
5 Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the twelve months ending December 31, 2019, unusual bad debt expense reflects losses recognized on margin lending to a small number of our brokerage customers that had taken relatively large positions in a security listed on a major U.S. exchange, which lost a substantial amount of its value in a very short timeframe. For the twelve months ended December 31, 2020, unusual bad debt expense reflects losses incurred by futures customers in excess of the equity in their accounts related to the West Texas Intermediate Crude Oil event described above.
6 The income tax effect is estimated using the corporate income tax rates applicable to the Company.
7 Remeasurement of certain deferred tax assets represents the change in the unamortized balance of deferred tax assets related to the step-up in basis arising from the acquisition of interests in IBG LLC as a result of changes in the Company’s effective corporate tax rates. For further information refer to Note 4 – Equity and Earnings per Share under Part II, Item 8 – Financial Statements and Supplementary Data of the Company’s Annual Report on Form 10 K filed with the Securities Exchange Commission (“SEC”) on February 28, 2020.
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