Financial Strength - Strength and Security (2024)

Financial Strength

When placing your money with a broker, you need to make sure your broker is secure and can endure through good and bad times. The financial statements of Interactive Brokers LLC are available on our website for your review.

Note that Interactive Brokers LLC and its affiliates are owned by IBG LLC.

In a recent interview, Thomas Peterffy, Founder and Chairman of the Board of Directors, shared his views on the current state of financial markets, including rising interest rates and their impact on Interactive Brokers. He also discussed IBKR's interest rates on instantly available cash balances and how clients are positioned to navigate the current environment.

• IBKR IS NOT A BANK, and as a regulated securities broker dealer, we cannot carry securities classified as HTM (Held To Maturity), which are not required to be marked to market on a bank's books. We also cannot make unsecured, long-term loans.
• The only kind of loans we can make are margin loans fully secured by marketable securities.
• Our real-time margining system marks all client positions to market continuously. All orders are credit vetted before being executed and positions in accounts with inadequate margin deposits are liquidated automatically.
• ALL of our positions are marked to market daily and the resulting payables/receivables are reconciled to outside sources automatically.
• IBKR invests cash in very short-term investments maturing within a few months. We hold no material positions in over-the-counter securities or derivatives. We hold no CDOs, MBS or CDS.

• On a consolidated basis, IBG LLC has $15.2 billion in equity capital, over $10.9 billion in excess of regulatory requirements.
• IBG LLC's owners are our public company, Interactive Brokers Group, Inc. (27.7%) and the firm's employees and their affiliates (74.3%). Unlike at most other firms, where management owns a relatively small share, we participate substantially in the downside just as much as in the upside. Because of this vested interest, we run our business conservatively.
• IBG LLC reported $3.069 billion of pretax profit for 2023.
• IBG LLC has no long-term debt.
• Interactive Brokers LLC is rated "A-Outlook Stable" by Standard & Poor's. .
• Interactive Brokers LLC's financial statements, which reflect the mark to market profit/loss on all securities positions, are submitted monthly to its regulators in its FOCUS report. View latest report.

Important Strength and Security Facts about Interactive Brokers LLC

How We Handle Client Assets

A portion (approximately 11% as of July 1, 2024) of client money is segregated in special bank or custody accounts, which are designated for the exclusive benefit of clients of IBKR. This protection (the SEC term is "reserve" and the CFTC term is "segregation") is a core principle of securities and commodities brokerage. By properly segregating the client's assets, if no money or stock is borrowed and no futures positions are held by the client, then the client's assets are available to be returned to the client in the event of a default by or bankruptcy of the broker.

As a practice, IBKR places a portion of its own money in these reserve and segregated accounts to ensure that there is more than enough cash to protect all clients.

A majority (approximately 89% as of July 1, 2024) of client funds is typically invested in short-term U.S. Treasury securities and reverse repurchase agreements, where the collateral received is in the form of U.S. Treasury securities. IBKR’s investment policy targets short-term government securities and reverse repurchase agreements, with a typical weighted average maturity of 30 to 40 days and a maximum term of one year. In this way, we can avoid mismatching the maturities between our on-demand obligations to our clients and our investments. This practice also allows us to avoid excessive price volatility and the risks of large losses stemming from declines in investment values that may be exhibited by longer term securities. As a broker dealer, we must mark to market the value of investments of client funds daily, unlike banks that may hold securities classified as “held to maturity”, which are not required to be marked to market.

Although permitted by CFTC regulations, given the credit concerns over foreign sovereign debt IBKR does not currently invest any client money in money market funds.

Securities accounts with no borrowing of cash or securities

Securities client money is protected as follows:

• A majority is invested in U.S. Treasury securities, including direct investments in Treasury bills, Treasury Notes and reverse repurchase agreements, where the collateral received is in the form of U.S. Treasury securities. These transactions are conducted with third parties and guaranteed through a central counterparty clearing house (Fixed Income Clearing Corp., a subsidiary of the Depository Trust & Clearing Corp.), which marks the collateral to market prices daily, thereby ensuring that IBKR holds full collateral value. The collateral remains in the possession of IBKR and held at a custody bank in a segregated Reserve Safekeeping Account for the exclusive benefit of clients. U.S. Treasury securities may also be pledged to a clearing house to support client margin requirements on securities options positions.
• Client cash is maintained on a net basis in the reserve accounts, which reflects the long balances of some clients and loans to others. To the extent any one client maintains a margin loan with IBKR, that loan will be fully secured by stock valued at up to 140% of the loan. The security of the loan is enhanced by IBKR's conservative margin policies, which do not allow the borrower to correct a margin deficiency within days, as permitted by regulation. Instead, IBKR monitors and acts on a real-time basis to automatically liquidate positions and repay the loan. This brings the borrower back into margin compliance without putting IBKR and other clients at risk.

• A portion is deposited primarily with large U.S. banks in special reserve accounts for the exclusive benefit of IBKR's clients. These deposits are distributed across a number of banks with investment-grade ratings so that we can avoid a concentration risk with any single institution. No single bank holds more than 5% of total client funds held by IBKR. As of July 2024, the following banks held deposits from IBKR (this list is subject to change over time at IBKR's discretion). Certain banks, which are affiliates or branches of foreign financial institutions, are subject to regulatory oversight by the Federal Reserve and the Office of the Comptroller of the Currency.
  • BMO Bank, N.A.
  • CIBC Bank US
  • Citizens Bank
  • Standard Chartered Bank
  • Truist Bank
  • US Bank, N.A.

Current SEC regulations require broker-dealers to perform a detailed reconciliation of client money and securities (known as the "reserve computation") at least weekly to ensure that client monies are properly segregated from the broker-dealer's own funds. In order to further enhance our protection of our clients' assets, Interactive Brokers sought and received approval from FINRA (the Financial Industry Regulatory Authority), to perform and report the reserve computation on a daily basis, instead of once per week. IBKR initiated daily computations in December 2011 along with daily adjustments of the money set aside in safekeeping for our clients. Reconciling our accounts and client reserves daily instead of weekly is just another way that Interactive Brokers seeks to provide state-of-the-art protection for our clients.

Client-owned, fully-paid securities are protected in accounts at depositories and custodians that are specifically identified for the exclusive benefit of clients. IBKR reconciles positions in securities owned by clients daily to ensure that these securities have been received at the depositories and custodians.

Commodities accounts

Commodities client money is protected as follows:

• A majority is invested in U.S. Treasury securities, which are held at a custody bank in a safekeeping account segregated for the exclusive benefit of clients.
• A portion is invested in U.S. Treasury securities and pledged to futures clearing houses to support client margin requirements on futures and options on futures positions.
• A portion is held at commodities clearing banks/brokers in accounts identified as segregated for the benefit of IBKR's clients to support client margin requirements.

• A portion is deposited primarily with large U.S. banks in segregated accounts for the exclusive benefit of clients. These deposits are distributed across a number of banks with investment-grade ratings so that we can avoid a concentration risk with any single institution. No single bank holds more than 5% of total client funds held by IBKR. As of July 2024, the following banks held deposits from IBKR (this list is subject to change over time at IBKR's discretion).
  • Barclays Bank plc
  • BMO Bank, N.A.
  • Citibank, N.A.
  • JPMorgan Chase Bank, N.A.
  • Standard Chartered Bank
• As prescribed by commodities regulations, client funds are subject to real-time protection. IBKR performs a detailed reconciliation of client equity on a daily basis to ensure that client monies are properly segregated. This computation is submitted to the regulators daily.

Click below for the Interactive Brokers Firm Specific Disclosure Document required by CFTC Rule 1.55(k).
Interactive Brokers LLC Firm Specific Disclosure Document pursuant to CFTC Rule 1.55(k) and NFA Rule 2-36(n)

Securities accounts with margin loans

For clients who borrow money from IBKR to purchase securities, IBKR is permitted by securities regulations to utilize for financing purposes up to 140% of the loan value of the stock these clients hold with IBKR. In simple terms, IBKR borrows money from a third party (such as a bank or broker-dealer), using the client's margin stock as collateral, and it lends those funds to the client to finance the client's margin purchases. Typically, IBKR lends out a small portion of the total stock it is permitted to lend out. When IBKR lends clients' stock, it must put additional money into the special reserve accounts set aside for the benefit of clients.

Insured Bank Deposit Sweep Program

Under the Insured Bank Deposit Sweep Program, eligible IBKR clients can obtain up to $2,500,000 of FDIC insurance in addition to the existing $250,000 SIPC coverage for total coverage of $2,750,000. IBKR sweeps each participating client's free credit balances daily to one or more banks, up to $246,500 per bank, allowing for the accrual of interest and keeping within the FDIC protected threshold. Cash balances above $2,750,000 remain subject to safeguarding under the SEC's Customer Protection Rule 15c3-3, backed by the firm's equity capital, which is $15.2 billion.

Click for more information about the Insured Bank Deposit Sweep Program

Disclosure

1. Information as of June 30, 2024. "Interactive Brokers Group" and "IBKR" include the Group's operating subsidiaries.