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Behind Interactive Brokers Group’s Non-Interest Expenses

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Non-interest expenses rise

Interactive Brokers Group’s (IBKR) non-interest expenses rose to $502 million in the first three quarters of 2017 from $470 million in the same period of the prior year. This rise was due to higher general and administrative expenses arising from the closure of the company’s options-market-making business and higher advertising expenses.

Interactive Brokers incurred legal charges in 2016, but not in 2017. The company paid occupancy, depreciation, and amortization expenses of $34 million in the first three quarters of 2017 and $38 million in the same period of the prior year.

Compensation expenses

Interactive Brokers’ employee compensation and benefit expenses rose to $192 million in the first three quarters of 2017 from $174 million in the same period of the prior year due to higher salary and incentive expenses and non-recurring expenses related to the closure of the company’s options-market-making business. The company reduced its customer bad debt from $6 million to $2 million, and due to automation, reduced its staff. While Interactive Brokers’ beta value is 1.0, peers (XLF) Raymond James Financial (RJF), LPL Financial Holdings (LPLA), and Financial Engines (FNGN) have betas of 1.9, 2.5, and 2.6, respectively.

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