Interactive Brokers Group (IBKR) 10-K risk factor changes: FY2018 vs FY2017

Risks Related to Our Company [removed: Structure][added: Structure]

[removed: _Control] [added: _Control] by Mr. Thomas Peterffy of a majority of the combined voting power of our common stock may [removed: give rise] [added: give_ _rise] to conflicts of interests and could discourage a change of control that other stockholders may [removed: favor, which] [added: favor,_ _which] could negatively affect our stock price, and adversely affect stockholders in other [removed: ways._][added: ways._]

Mr. Thomas Peterffy, our founder, Chairman and Chief Executive Officer, and his affiliates beneficially own approximately [removed: 89.2%] [added: 89.6%] of the economic interests and all of the voting interests in Holdings, which owns all of our Class B common stock, representing approximately [removed: 82.6%] [added: 81.9%] of the combined voting power of all classes of our voting stock.

Moreover, because of Mr. Thomas [removed: Peterffy's] [added: Peterffy’s] substantial ownership, we are eligible to be and are, treated as a [removed: "controlled company"] [added: “controlled company”] for purposes of the [removed: NASDAQ Marketplace] [added: IEX] Rules.

As a result, we are not required by [removed: NASDAQ] [added: IEX] to have a majority of independent directors or to maintain Compensation and Nominating and Corporate Governance Committees composed entirely of independent directors to continue to list the shares of our common stock on [removed: The NASDAQ Global Select Market ("NASDAQ GS").][added: IEX.]

[removed: _We] [added: _We] are dependent on IBG LLC to distribute cash to us in amounts sufficient to pay our tax liabilities [removed: and other expenses._][added: and_ _other expenses._]

We are a holding company and our primary assets are our approximately [removed: 17.4%] [added: 18.1%] equity interest in IBG LLC and our controlling interest and related rights as the sole managing member of IBG LLC and, as such, we operate and control all of the business and affairs of IBG LLC and are able to consolidate IBG [removed: LLC's] [added: LLC’s] financial results [removed: into our financial statements.]

[removed: _We] [added: _We] are required to pay Holdings for the benefit relating to additional tax depreciation or [removed: amortization deductions] [added: amortization_ _deductions] we claim as a result of the tax basis step-up our subsidiaries received in connection with our [removed: IPO and] [added: IPO_ _and] certain subsequent redemptions of Holdings membership [removed: interests._][added: interests._]

As a result of the IPO and the Redemptions by Holdings, the increase in the tax basis attributable to our interest in IBG LLC is [removed: $1.2] [added: $1.3] billion.

Based on facts and assumptions as of December 31, [removed: 2017,] [added: 2018,] including that subsequent purchases of IBG LLC interests will occur in fully taxable transactions, the potential tax basis increase resulting from the historical and future purchases of the IBG LLC interests held by Holdings could be as much as [removed: $14.5] [added: $12.8] billion.

The tax basis of [removed: $14.5] [added: $12.8] billion assumes that (a) all remaining IBG LLC membership interests held by Holdings are purchased by us [added: in a taxable transaction] and (b) such purchases in the future are made at prices that reflect the closing share price as of December 31, [removed: 2017.][added: 2018.]

In order to have a [removed: $14.5] [added: $12.8] billion tax basis, the offering price per share of Class A common stock in such future public offering will need to exceed the then current cost basis per share of Class A common stock by approximately [removed: $44.89.][added: $39.36.]

Although the Holdings members are prohibited under the Exchange Agreement from purchasing shares of Class A common [removed: stock,] [added: stock in a public offering,] grants of our common stock to employees and directors who are also members or related to members of Holdings and the application of certain tax attribution rules, such as among family members and partners in a partnership, could result in Holdings members being deemed for tax purposes to own shares of Class A common stock.

[removed: _Future] [added: _Future] sales of our common stock in the public market could lower our stock price, and any additional [removed: capital raised] [added: capital_ _raised] by us through the sale of equity or convertible securities may dilute your ownership in [removed: us._][added: us._]

We currently have approximately [removed: 71] [added: 75] million outstanding shares of common stock.

Assuming no anti-dilution adjustments based on combinations or divisions of our common stock, the offerings referred to above could result in the issuance by us of up to an additional approximately [removed: 340] [added: 339] million shares of common stock.

[removed: _Certain] [added: _Certain] provisions in our amended and restated certificate of incorporation may prevent efforts by [removed: our stockholders] [added: our_ _stockholders] to change our direction or [removed: management._][added: management._]

Risks Related to Our [removed: Business][added: Business]

[removed: _Our] [added: _Our] business may be harmed by global events beyond our control, including overall slowdowns in [removed: securities trading._][added: securities_ _trading._]

[removed: _Our] [added: _Our] business could be harmed by a systemic market [removed: event._][added: event._]

[removed: _Our] [added: _Our] future success will depend on our response to the demand for new services, products and [removed: technologies._][added: technologies._]

[added: | | • |] rapid technological change; [added: |]

[added: | | • |] changing customer demands; [added: |]

[added: | | • |] the need to enhance existing services and products or introduce new services and products; and [added: |]

[added: | | • |] evolving industry standards. [added: |]

[removed: _Our] [added: _Our] reliance on our computer software could cause us great financial harm in the event of any disruption [removed: or corruption] [added: or_ _corruption] of our computer software.

We may experience technology failures while developing our [removed: software._][added: software._]

[removed: _We] [added: _We] depend on our proprietary technology, and our future results may be impacted if we cannot [removed: maintain technological] [added: maintain_ _technological] superiority in our [removed: industry._][added: industry._]

[removed: _The] [added: _The] loss of our key employees would materially adversely affect our [removed: business._][added: business._]

[removed: _We] [added: _We] may not pay dividends on our common stock at any time in the foreseeable [removed: future._][added: future._]

[removed: _Our] [added: _Our] future efforts to sell shares or raise additional capital may be delayed or prohibited by [removed: regulations._][added: regulations._]

[removed: _Regulatory] [added: _Regulatory] and legal uncertainties could harm our [removed: business._][added: business._]

Regulatory bodies include, in the U.S., the SEC, FINRA, the Board of Governors of the Federal Reserve System, the Chicago Board Options Exchange, the Chicago Mercantile Exchange, the CFTC, and the NFA; in Canada, the [removed: Investment Industry Regulatory Organization of Canada] [added: IIROC] and various Canadian securities commissions; in the United Kingdom, the [removed: Financial Conduct Authority;] [added: FCA;] in Switzerland, [removed: the Swiss Financial Market Supervisory Authority;] [added: FINMA;] in India, the Securities and Exchange Board of India; in Hong Kong, the [removed: Securities and Futures Commission;] [added: SFC;] in Australia, the Australian Securities and Investment Commission; and in Japan, the [removed: Financial Supervisory Agency] [added: FSA] and the Japan Securities Dealers Association.

[removed: _Our] [added: _Our] direct market access clearing and non-clearing brokerage operations face intense [removed: competition._][added: competition._]

With respect to our direct market access brokerage business, the market for electronic and interactive bidding, offering and trading services in connection with equities, options and futures is [removed: relatively new,] rapidly evolving and intensely competitive.

[added: | | • |] prime brokers who, in an effort to satisfy the demands of their customers for hands-on electronic trading facilities, universal access to markets, smart routing, better trading tools, lower commissions and financing rates, have embarked upon building such facilities and product enhancements; [added: |]

[added: | | • |] direct market access and online options and futures firms; [added: |]

[added: | | • |] direct market access and online equity brokers; [added: |]

[added: | | • |] software development firms and vendors who create global trading networks and analytical tools and make them available to brokers; and [added: |]

[added: | | • |] traditional brokers. [added: |]

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Our estimated annual losses from reimbursements to customers whose accounts

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Our

To the

The following discussion should be read in conjunction with the audited consolidated financial statements and the related notes in [added: Part II,] Item 8, [removed: included elsewhere in] [added: of] this [removed: report.][added: Annual Report on Form 10-K.]

We are an automated global electronic broker and market maker (although, we have substantially exited [removed: the] [added: our] options market making [removed: business—see] [added: business - see] Note [removed: 2—Discontinued] [added: 2 - Discontinued] Operations and Costs Associated with Exit or Disposal Activities to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K).

The proliferation of electronic exchanges [removed: in] [added: over nearly] the last [removed: 27 years] [added: three decades] has provided us with the opportunity to integrate our software with an increasing number of exchanges and market centers into one automatically functioning, computerized platform that requires minimal human intervention.

Our primary assets are our ownership of approximately [removed: 17.4%] [added: 18.1%] of the membership interests of IBG LLC, the current holding company for our businesses, and our controlling interest and related contractual rights as the sole managing member of IBG LLC.

The remaining approximately [removed: 82.6%] [added: 81.9%] of IBG LLC membership interests are held by Holdings, a holding company that is owned by our founder, Chairman and Chief Executive Officer, Mr. Thomas Peterffy and his affiliates, management and other employees of IBG LLC, and certain other members.

Capitalizing on our proprietary [removed: technology originally developed for our market making business, IB's] [added: technology, IB’s] systems provide our customers with the capability to monitor multiple markets around the world simultaneously and to execute trades electronically in these markets at a low cost, in multiple products and currencies from a single trading account.

We offer our customers access to all classes of tradable, primarily exchange-listed products, including stocks, bonds, options, futures, forex and mutual funds traded on more than 120 exchanges and market centers in [removed: 26] [added: 29] countries and in [removed: 23] [added: 24] currencies seamlessly around the world.

Currently, [removed: more than half] [added: approximately 68%] of our customers reside outside the U.S. in over 200 countries and territories, [removed: with] [added: and] over 50% of new customers [removed: coming] [added: come] from outside the U.S. Approximately [removed: 64%] [added: 65%] of our [removed: customers'] [added: customers’] equity is in institutional accounts such as hedge funds, financial advisors, proprietary trading desks and introducing brokers.

For example, we offer prime brokerage services, including capital introduction and securities lending to hedge funds; [removed: and] our model portfolio technology and automated share allocation and rebalancing tools are particularly attractive to financial [removed: advisors.][added: advisors; and our trading platform and low pricing attract introducing brokers.]

We provide a host of analytical [added: and business] tools such as [removed: IB Investors'] [added: Investors’] MarketplaceSM, which allows wealth advisors to search for money managers and assign them to customer accounts based on their investment strategy.

[removed: IB] EmployeeTrackSM is widely used by compliance officers of financial institutions to streamline the process of tracking their [removed: employees'] [added: employees’] brokerage activities.

The Probability [removed: LabSM] [added: Lab®] allows our customers to analyze option strategies under various market assumptions.

[removed: IB] Portfolio [removed: Builder] [added: BuilderSM] allows our customers to set up an investment strategy based on research and rankings from top research providers and fundamental data.

[removed: IB] [added: IBKR] Asset Management recruits registered financial advisors, vets them, analyzes their investment track records, groups them by their risk profile, and allows retail investors to assign their accounts to be traded by one or more advisors.

In addition, [added: our] Greenwich Compliance [added: affiliate] offers direct expert registration and start-up compliance services, as well as answers to basic day-to-day compliance questions for experienced investors and traders looking to start their own investment advisor firms.

[removed: In 2017, we launched the IB] [added: Our Interactive Brokers] Debit Mastercard® [removed: which] allows customers to spend and borrow directly against their account and to make purchases and ATM withdrawals anywhere Debit Mastercard® is accepted around the world.

[removed: In 2017, we also launched our] [added: Our] Insured Bank Deposit Sweep [removed: Program, which] [added: Program] provides customers with up to $2,500,000 of [removed: FDIC] [added: Federal Deposit Insurance Corporation (“FDIC”)] insurance on their eligible cash balances in addition to the existing $250,000 [removed: SIPC coverage] [added: Securities Investor Protection Corporation (“SIPC”) coverage,] for a maximum coverage of $2,750,000.

We intend to continue conducting certain proprietary trading activities in stocks and related instruments to facilitate our electronic brokerage [removed: customers'] [added: customers’] trading in products such as ETFs, ADRs, CFDs and other financial [removed: instruments.][added: instruments, as well as exchange-traded market making activities in a few select markets outside of the U.S. However, we do not expect the facilitation activities to be of sufficient size as to require reporting as a separate segment after we discontinue our options market making activities.]

As a market [removed: maker] [added: maker, in the few select markets in which] we [added: operate, we] provide liquidity by offering competitively tight bid/offer spreads over a broad base of tradable, exchange-listed products.

Institutional customers, such as hedge funds, mutual funds, introducing brokers, proprietary trading groups and financial advisors, comprised approximately [removed: 48%] [added: 51%] of total accounts and approximately [removed: 64%] [added: 65%] of total customer equity at the end of [removed: 2017.][added: 2018.]

Electronic brokerage net interest income grew [removed: 30%,] [added: 38%,] compared to [removed: 2016.][added: 2017.]

[removed: Average] [added: During this time, average] customer credit balances rose [removed: 14% due] [added: 6% due, in part,] to an inflow of new accounts, and average customer margin loan balances increased [removed: by 41% from 2016] [added: 26%,] due to [removed: customers'] [added: our customers’] appetite for increased leverage, along with expanded prime broker financing.

The following is a summary of the key profit drivers that affect our business and how they compared to [removed: 2016:][added: 2017:]

_Global trading volumes._ According to data received from exchanges worldwide, volumes in exchange-listed equity-based options increased by approximately [removed: 7%] [added: 27%] globally and [removed: 3%] [added: 23%] in the U.S. for the year ended December 31, [removed: 2017,] [added: 2018,] compared to [removed: 2016.][added: 2017.]

During [removed: 2017] [added: 2018] we accounted for approximately [removed: 5.1% (7.9%] [added: 4.2% (5.1%] in [removed: 2016)] [added: 2017)] of the exchange-listed equity-based options volume traded worldwide (including options on ETFs and stock index products), and approximately [removed: 7.7% (10.9%] [added: 6.5% (7.7%] in [removed: 2016)] [added: 2017)] of exchange-listed equity-based options volume traded in the U.S. [removed: The decreases in both measures were driven by] [added: This decrease was primarily due to exiting] our [removed: pull-back in] options market [removed: making.][added: making activities in the U.S. It is important to note that although options volume is a readily comparable measure, it reflects only a portion of the volume that generates our commission revenues.]

See tables on pages [removed: 62-63] [added: [55-](#tTRADEV)[56](#tTRADEV2)] of this Annual Report on Form 10-K for additional details regarding our trade volumes, contract and share volumes and brokerage statistics.

[added: _Volatility._] Based on the Chicago Board Options Exchange Volatility Index [removed: ("VIX®"),] [added: (“VIX®”),] the average [added: U.S. market] volatility [removed: decreased] [added: increased] to [removed: 11.1] [added: 16.6] in [removed: 2017, down 30%] [added: 2018, up 49%] from the average of [removed: 15.9] [added: 11.1] in [removed: 2016.][added: 2017.]

We actively manage this exposure by keeping our net worth in proportion to a defined basket of 14 currencies we call the [removed: "GLOBAL" in order] [added: “GLOBAL”] to diversify our risk and to align our hedging strategy with the currencies that we use in our business.

During [removed: 2017] [added: 2018] the value of the GLOBAL, as measured in U.S. dollars, [removed: increased 3.06%] [added: decreased 1.14%] compared to its value as of December 31, [removed: 2016,] [added: 2017,] which had a [removed: positive] [added: negative] impact on our comprehensive earnings for [removed: 2017.][added: 2018.]

Diluted earnings per share were [removed: $1.07] [added: $2.28] for the year ended December 31, [removed: 2017 ("current year"),] [added: 2018 (“current year”),] compared to diluted earnings per share of [removed: $1.25] [added: $1.07] for the year ended December 31, [removed: 2016 ("prior year").][added: 2017 (“prior year”).]

[removed: On a comprehensive basis, which includes other comprehensive income ("OCI"), diluted] [added: Diluted] earnings per share [added: on comprehensive income] were [removed: $1.22] [added: $2.09] for the current year, compared to [removed: diluted earnings per share of $1.19] [added: $1.22] for the prior year.

In connection with our currency diversification strategy (i.e., GLOBALs) [removed: at] [added: as of] December 31, [removed: 2017] [added: 2018,] approximately 30% of our equity was denominated in currencies other than the U.S. dollar.

In the current year, our currency diversification strategy [removed: increased] [added: decreased] our comprehensive earnings by [removed: $175] [added: $99] million [removed: (versus a decrease] [added: (compared to an increase] of [removed: $65] [added: $175] million in the prior year), as the U.S. dollar value of the GLOBAL [removed: increased] [added: decreased] by approximately [removed: 3.06%,] [added: 1.14%,] compared to its value as of December 31, [removed: 2016.][added: 2017.]

[removed: _Consolidated:_] [added: _Consolidated:_] For the current year, our net revenues were [removed: $1,702] [added: $1,903] million and income before income taxes was [removed: $1,049] [added: $1,196] million, compared to net revenues of [removed: $1,396] [added: $1,702] million and income before income taxes of [removed: $761] [added: $1,049] million in the prior year.

The increase in income before income taxes in the current year was mainly driven by a [removed: 30%] [added: 36%] increase in net interest income and a [removed: 253%] [added: 20%] increase in [removed: other income,] [added: commissions,] partially offset by a [removed: 75%] [added: 52%] decrease in [removed: trading gains.][added: other income.]

Our pre-tax profit margin was [removed: 62%,] [added: 63%,] compared to [removed: 55%] [added: 62%] for the prior year.

The results for the [added: prior] year were negatively impacted by the effects of the Tax Cuts and Jobs Act (the [removed: "Tax Act"),] [added: “Tax Act”),] enacted on December 22, 2017.

As a result of the Tax Act, the [removed: current] [added: prior] year includes a net reduction in consolidated earnings of approximately $84 million, of which $62 million [removed: is] [added: was] due to the one-time repatriation tax and a net $22 million [removed: is] [added: was] related to the remeasurement of our U.S. deferred tax assets at lower enacted corporate tax rates.

The effects of the Tax Act are further detailed in Note [removed: 10] [added: 11] to the audited consolidated financial statements, in Part II, Item 8 of this Annual Report on Form 10-K.

[removed: _Electronic Brokerage:_] [added: _Electronic Brokerage:_] For the current year, income before income taxes in our electronic brokerage segment increased [removed: $104] [added: $317] million, or [removed: 14%,] [added: 37%,] compared to the prior year, driven by higher net interest [removed: income] [added: income, commissions revenue] and [removed: commissions,] [added: other income,] partially offset by [removed: lower other income and] higher [removed: execution and clearing,] [added: expenses in the areas of] general and [removed: administrative,] [added: administrative; execution, clearing] and [added: distribution fees; and] employee compensation and [removed: benefits expenses.][added: benefits.]

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Risk NavigatorSM is a real-time market risk management platform that allows our customers to measure risk exposure across multiple asset classes around the globe.

We have recently expanded the range of financial services we offer our customers through our Integrated Investment Management program, where customers can perform many different types of transactions from a single account.

Bill Pay allows customers to make electronic or check payments in the U.S. It can be configured for one-time or recurring payments and permits customers to schedule future payments.

In addition, our customers can now have their paychecks or other recurring payments directly deposited into their brokerage account.

_Market Making._ As previously announced, we transferred our U.S. options market making operations to Two Sigma Securities, LLC effective September 29, 2017 and also exited the majority of our options market making activities outside the U.S. by December 31, 2017.

We intend to continue conducting certain proprietary trading activities in stocks and related instruments to facilitate our electronic brokerage customers’ trading in products such as ETFs, ADRs, CFDs and other financial instruments, as well as exchange-traded market making activities in a few select markets outside of the U.S. However, we do not expect the facilitation activity to be of sufficient size as to require reporting as a separate segment after we discontinue our options market making activities.

During 2018, U.S. market volatility was significantly higher than in the prior year, reflecting greater geopolitical and economic uncertainty.

Equity market indices around the globe were predominantly down, with the S&P 500 index declining 6%, less than the more substantial declines in most European and Asian markets.

U.S. interest rates continued on an upward path, while trends in benchmark rates of other currencies were mixed.

Among our customer base, volatility is strongly correlated with customer trading activity across product types.

With positive customer account and asset growth, we would expect our customers’ trading activity to outpace general market volume measures, especially in periods with higher volatility.

In addition, higher benchmark interest rates give us an opportunity to earn more net interest income on fully interest-sensitive assets.

Amid this uncertain market environment, customer account growth remained robust, with total customer accounts increasing 24% from 2017 to 598 thousand.

Customer equity increased 3% to $128.4 billion as healthy inflows from customers more than offset securities market declines impacting customers’ existing positions.

We continue to attract large customers that seek our superior technology and execution capabilities, high interest rates on cash balances, and low costs, as well as our securities finance services, including margin lending and short sale support.

Higher volatility improves our electronic brokerage performance because it generally corresponds to higher trading volumes.

In 2018, as the VIX increased, we saw a positive impact on customer trading activity, which rose 25%, and our commissions revenue, which rose 20%.

_Interest Rates._ The U.S. Federal Reserve continued its series of increases in the target federal funds rate with hikes in March, June, September and December 2018, while rates in other currencies were mixed.

Increases in benchmark rates have generally led to higher net interest income and wider net interest margin.

Because we pay among the highest rates in the brokerage industry on qualified customer cash balances and charge among the lowest rates on margin borrowings, we attract customers who seek to maximize their yields and minimize their costs.

As our margin balances are tied to benchmark rates, rising U.S. interest rates have enhanced the interest we receive on our U.S. dollar customer margin balances.

Rising rates also increase the interest we earn on our segregated cash, the majority of which is invested in U.S. government securities and related instruments.

Higher rates also raise our interest expense, as we pass along more interest to our customers.

We believe our low rates on margin borrowings and high yields on qualified cash balances are important factors that attract customers to our platform.

While the interest we pay on customer cash balances and the interest we earn on customer margin loans is based on fixed spreads around benchmark rates, additional net interest income is earned on non-interest bearing customer balances, e.g., on securities accounts with less than $100,000 in equity, and on rising balances.

Over an extended period in 2018, a small number of the Company’s brokerage customers had taken relatively large positions in a security listed on a major U.S. exchange.

The Company extended margin loans against the security at a conservatively high collateral requirement.

In December 2018, within a very short timeframe, this security lost a substantial amount of its value.

The customer accounts were well margined and at December 31, 2018 they had incurred losses but had not fallen into any deficits.

Margin shortfalls were met in a timely manner by delivery of additional shares by the customers.

Subsequent price declines in the stock have caused these accounts to fall into deficits, despite the Company’s efforts to liquidate the customers’ positions.

Through February 27, 2019, the Company has recognized an aggregate loss of approximately $47 million.

The maximum aggregate loss, which would occur if the securities’ prices all fell to zero and none of the debts were collected, would be approximately $59 million.

The Company is currently evaluating pursuing the collection of the debts.

Our Risk Management Committee continuously monitors and evaluates our risk management policies, including the implementation of policies and procedures to enhance the detection and prevention of these types of events.

_Market Making:_ For the current year, income before income taxes in our market making segment increased $61 million, to a gain of $34 million compared to the prior year, primarily due to lower operating costs on the remaining operations and the non-recurrence of two items recognized in the prior year: $25 million in one-time exit costs related to the wind-down of our options market making business, partially offset by an $11 million gain on the transfer of our U.S. market making business.

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_Market Making._ On March 8, 2017 we announced our intention to discontinue our options market making activities globally and we are currently in the process of winding down these operations.

Additionally, as we previously announced, we entered into a definitive transaction to transfer our U.S. options market making operations to Two Sigma Securities, LLC.

This transaction closed on September 29, 2017.

However, we do not expect this activity to be of sufficient size as to require reporting these activities as a separate segment after we discontinue our options market making activities.

We conduct our market making business primarily through our Timber Hill subsidiaries.

This real-time rebalancing of our portfolio, together with our real-time proprietary risk management system, enables us to curtail risk.

Against a backdrop of a still sluggish trading environment amid historically low market volatility, we maintained our position as the largest U.S. electronic broker as measured by the number of customer revenue trades and increased our Daily Average Revenue Trades ("DARTs") by 4% from 2016.

New customer account growth remained robust as total customer accounts increased 25% from 2016 to 483 thousand.

Our customer base continues to be geographically diverse, with customers residing in over 200 countries and territories and over 50% of new customers come from outside the U.S. Average equity per account increased 16% from 2016 to $258 thousand, as we continued to attract larger customers that seek our superior technology and low costs as well as our securities finance services, including margin lending and short sale support.

The Federal Reserve's increases in the Federal Funds target rate in December 2016, March 2017, June 2017 and December 2017, together with higher average customer credit and margin loan balances, generated significantly more net interest income than in 2016.

Our low margin lending rates are tied to benchmark rates, such as the Federal Funds rate in the U.S. In 2017, our customers paid 0.8% to 2.9% for their U.S. dollar margin loans with us.

Market making segment results decreased in 2017 on lower trading gains, as expected, reflecting the winding down of our options market making operations.

It is important to note that this metric is not directly correlated with our profits.

_Volatility._ Since we typically maintain an overall long volatility position, our market making profits are generally correlated with market volatility, protecting us against a severe market dislocation in either direction.

As we had begun to wind down our market making activities, volatility had less of an impact in 2017 than in 2016.

Lower volatility also impacts our electronic brokerage segment because it results in fewer trading opportunities for our customers.

Despite an 8% decline in average DARTS per account, our total DARTs increased 4% compared to 2016.

In light of our decision to wind down our options market making activities globally, we removed the Singapore dollar (SGD) and realigned the relative weight of the U.S. dollar (USD) versus the other currency components to better reflect our businesses going forward.

The new composition, which was effective as of the close of business on March 31, 2017, contains 14 currencies, one fewer than the prior composition.

The impact of the Tax Act recognized this year may differ, possibly materially, due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions we may take as a result of the Tax Act.

Trading gains decreased 75% on lower trading volumes, as we wind down our options market making activities.

In addition, the results for the current year include approximately $25 million in one-time exit costs, primarily consisting of the write-down of the value of exchange trading rights, included in general and administrative expenses, and severance costs for employee terminations, included in employee compensation and benefits expense.

These exit costs were partially offset by a $13 million net recovery of costs related to the wind-down of our U.S. options market making operations included in other income.

On March 8, 2017, the Company announced its intention to discontinue its options market making activities globally.

We will continue to access the phase-out of our market making operations outside of the U.S substantially over the coming months.

Consistent with earlier estimates, we recognized approximately $25 million in one-time restructuring costs in the current year.

A substantial portion of these exit costs is expected to be defrayed by continuing certain market making operations until the restructuring is complete.

As of the end of the current year, we had discontinued nearly all of our U.S. and the majority of our non-U.S. options market making operations.

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(1)

shareholders of record.

When implied interest rates in the equity and equity options and futures markets exceed the actual interest rates available to us, our market making systems tend to buy stock and sell it forward, which produces higher trading gains and lower net interest income.

When these rates are inverted, our market making systems tend to sell stock and buy it forward, which produces lower trading gains and higher net interest income.

In addition, 2017 includes a net gain on the sale of the U.S. options market making operations.

IBG LLC.

The cost of maintaining our conservative risk profile is based on implied volatility, while our profitability, in part, is based on actual volatility.

Hence, our profitability is increased when actual volatility runs above implied volatility and it is decreased when actual volatility falls below implied volatility.

[removed: _Pricing] [added: _Pricing] Model [removed: Exposure_][added: Exposure_]

[removed: _Foreign] [added: _Foreign] Currency [removed: Exposure_][added: Exposure_]

As a result of our international [removed: market making] activities and accumulated earnings in our foreign subsidiaries, our income and net worth is exposed to fluctuations in foreign exchange rates.

For example, our European operations and some of our Asian operations are conducted by our Swiss subsidiary, [removed: THE.][added: IBKRFS.]

[removed: THE] [added: IBKRFS] is regulated by the Swiss Financial Market Supervisory Authority as a securities dealer and its financial statements are presented in Swiss francs.

Accordingly, [removed: THE] [added: IBKRFS] is exposed to certain foreign exchange risks as described below:

[added: | | • | IBKRFS buys and sells securities denominated in various currencies and carries bank balances and borrows and lends such currencies in its regular course of business. At the end of each accounting period, IBKRFS’ assets and liabilities are revalued into Swiss francs for presentation in its financial statements.] The resulting foreign currency gains or losses are reported in [removed: THE's] [added: IBKRFS’] income statement and, as translated into U.S. dollars for U.S. GAAP purposes, in our consolidated statement of comprehensive income, as a component of other income. [added: |]

[added: | | • | IBKRFS’ financial statements are presented in Swiss francs (i.e., its functional currency) as noted above.] At the end of each accounting period, [removed: THE's] [added: IBKRFS’] net worth is translated at the then prevailing exchange rate into U.S. dollars and the resulting translation gain or loss is reported as OCI in our consolidated statement of financial condition and consolidated statement of comprehensive income. [added: OCI is also produced by our other non-U.S. subsidiaries. |]

For instance, an increase in the value of the Swiss franc would be unfavorable to the earnings of [removed: THE] [added: IBKRFS] but would be counterbalanced to some extent by the fact that the translation gain or loss into U.S. dollars is likely to move in the opposite direction.

Our [removed: market making] [added: risk management] systems incorporate cash forex to hedge our currency exposure at little or no cost throughout each day on a continuous basis.

The majority of currency spot positions held as part of our currency diversification strategy are regularly transferred [removed: from the market making segment] to the parent holding company, IBG LLC, where they are held and reported in the corporate segment.

The U.S. dollar value of the GLOBAL [removed: increased] [added: decreased] from [removed: $0.949] [added: $ 0.978] to [removed: $0.978,] [added: $ 0.967,] or [removed: 3.06%,] [added: 1.14%,] as of December 31, [removed: 2017] [added: 2018] compared to December 31, [removed: 2016.][added: 2017.]

As of December 31, [removed: 2017,] [added: 2018,] approximately 30% of our equity was denominated in currencies other than the U.S. dollar.

The table below shows a comparison of the U.S. dollar equivalent of the GLOBAL as of December 31, [removed: 2017] [added: 2018] and [removed: 2016.][added: 2017.]

| Currency | [removed: |] Composition | | | FX Rate | | | GLOBAL in [removed: USD] [added: USD] Equiv. | | | % of [removed: Comp.] [added: Comp.] | | | Net Equity [removed: (in] [added: (in] USD millions) | | | [removed: New Composition | | |] FX Rate | | | GLOBAL in [removed: USD] [added: USD] Equiv. | | | % of [removed: Comp.] [added: Comp.] | | | Net Equity [removed: (in] [added: (in] USD millions) | | | CHANGE in [removed: %] [added: %] of Comp. | | |

| USD | | [removed: | 0.45] [added: 0.68] | | | 1.0000 | | | [removed: 0.450] [added: 0.680] | | | [removed: 47.4] [added: 69.5] | % | $ | [removed: 2,759 | | | 0.68] [added: 4,471] | | | 1.0000 | | | 0.680 | | | [removed: 69.5] [added: 70.3] | % | $ | [removed: 4,471] [added: 5,031] | | | [removed: 22.1] [added: 0.8] | % |

| HKD | | [removed: | 0.26] [added: 0.14] | | | [removed: 0.1290] [added: 0.1280] | | | [removed: 0.034] [added: 0.018] | | | [removed: 3.5] [added: 1.8] | % | | [removed: 206 | | | 0.14] [added: 118] | | | [removed: 0.1280] [added: 0.1277] | | | 0.018 | | | 1.8 | % | | [removed: 118] [added: 132] | | | [removed: –1.7] [added: 0.0] | % |

| CAD | | [removed: | 0.04] [added: 0.02] | | | [removed: 0.7445] [added: 0.7950] | | | [removed: 0.030] [added: 0.016] | | | [removed: 3.1] [added: 1.6] | % | | [removed: 183 | | | 0.02] [added: 105] | | | [removed: 0.7950] [added: 0.7332] | | | [removed: 0.016] [added: 0.015] | | | [removed: 1.6] [added: 1.5] | % | | [removed: 105] [added: 108] | | | [removed: –1.5] [added: –0.1] | % |

| MXN | | [removed: | 0.30] [added: 0.17] | | | [removed: 0.0482] [added: 0.0509] | | | [removed: 0.014] [added: 0.009] | | | [removed: 1.5] [added: 0.9] | % | | [removed: 89 | | | 0.17] [added: 57] | | | 0.0509 | | | 0.009 | | | 0.9 | % | | [removed: 57] [added: 64] | | | [removed: –0.6] [added: 0.0] | % |

| SEK | | [removed: | 0.09] [added: 0.05] | | | [removed: 0.1098] [added: 0.1219] | | | [removed: 0.010] [added: 0.006] | | | [removed: 1.0] [added: 0.6] | % | | [removed: 61 | | | 0.05] [added: 40] | | | [removed: 0.1219] [added: 0.1129] | | | 0.006 | | | 0.6 | % | | [removed: 40] [added: 42] | | | [removed: –0.4] [added: 0.0] | % |

| NOK | | [removed: | 0.06] [added: 0.03] | | | [removed: 0.1158] [added: 0.1218] | | | [removed: 0.007] [added: 0.004] | | | [removed: 0.7] [added: 0.4] | % | | [removed: 43 | | | 0.03] [added: 24] | | | [removed: 0.1218] [added: 0.1157] | | | [removed: 0.004] [added: 0.003] | | | 0.4 | % | | [removed: 24] [added: 26] | | | [removed: –0.4] [added: 0.0] | % |

| DKK | | [removed: | 0.04] [added: 0.02] | | | [removed: 0.1416] [added: 0.1612] | | | [removed: 0.006] [added: 0.003] | | | [removed: 0.6] [added: 0.3] | % | | [removed: 35 | | | 0.02] [added: 21] | | | [removed: 0.1612] [added: 0.1536] | | | 0.003 | | | 0.3 | % | | [removed: 21] [added: 23] | | | [removed: –0.3] [added: 0.0] | % |

| | | | | | | | | [removed: | 0.949] [added: 0.978] | | | 100.0 | [removed: %] [added: %] | $ | [removed: 5,820 | | |] [added: 6,433] | | | | | | [removed: 0.978] [added: 0.967] | | | 100.0 | [removed: %] [added: %] | $ | [removed: 6,433] [added: 7,156] | | | 0.0 | [removed: %] [added: %] |

[removed: _Interest] [added: _Interest] Rate [removed: Risk_][added: Risk_]

We had no variable-rate debt outstanding as of December 31, [removed: 2017.][added: 2018.]

We pay our electronic brokerage customers interest based on benchmark overnight interest rates in various currencies, on [added: cash] balances above $10 [removed: thousand, or equivalent, and on] [added: thousand (or equivalent) in securities] accounts holding more than $100 thousand (or equivalent) net asset value.

Based on customer balances and investments outstanding as of December 31, [removed: 2017,] [added: 2018,] and assuming reinvestment of maturing instruments in instruments of short-term duration, an [added: unexpected] increase of 0.25% over current U.S. dollar interest rate levels would increase our net interest income by approximately [removed: $11] [added: $15] million over the first year and [removed: $15] [added: $16] million on an annualized basis, assuming the full effect of reinvestment at higher rates.

Our interest rate sensitivity estimate [removed: has been updated to] [added: contains] separate assumptions for U.S. dollar rates from other [removed: currencies'] [added: currencies’] rates and [removed: to isolate] [added: it isolates] the effects of a rate increase on reinvestments.

Based on customer balances and investments outstanding as of December 31, [removed: 2017,] [added: 2018,] and assuming reinvestment of maturing instruments in instruments of short-term duration, [removed: a] [added: an unexpected] decrease in U.S. dollar interest rates of 0.25% would decrease our net interest income by approximately $7 million over the first year and $16 million on an annualized basis, assuming the full effect of reinvestment at lower rates.

We also face [removed: substantial] interest rate risk due to positions carried in our market making business to the extent that long or short stock positions may have been established for future or forward dates on options or futures contracts and the value of such positions are impacted by interest rates.

[removed: _Dividend Risk_][added: _Dividend Risk_]

We face dividend risk in our market making business as we derive [removed: significant] revenues and incur [removed: significant] expenses in the form of dividend income and expense, respectively, from our inventory of equity securities, and must make [removed: significant] payments in lieu of dividends on short positions in equity securities within our portfolio.

[removed: _Margin Loans_][added: _Margin Loans_]

As of December 31, [removed: 2017,] [added: 2018,] we had [removed: $29.8] [added: $27.0] billion in margin loans extended to our customers.

Our account level margin requirements meet or exceed those required by Regulation T of the Board of Governors of the Federal Reserve and [removed: SEC] [added: FINRA] portfolio margin rules, as applicable.

[removed: _Value-at-Risk_][added: _Value-at-Risk_]

However, VaR has various strengths and limitations, which include, but are not limited to: use of historical changes in market risk factors, which may not be accurate predictors of future market conditions, and may not fully incorporate the risk of extreme market events that are outsized relative to observed historical market behavior or reflect the historical distribution of results beyond the confidence interval; and reporting of losses in a single day, which [added: does not reflect the risk of positions that cannot be liquidated or hedged in one day.]

[removed: _Stress Test_][added: _Stress Test_]

The scenarios are shifts of [removed: +/–100, +/–200] [added: +/−100, +/−200] and [removed: +/–300] [added: +/−300] basis points.

The scenarios are shifts of [removed: +/–25] [added: +/−25] basis points.

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| | | | | As of 12/31/2017 | | | | | | | | | | | | As of 12/31/2018 | | | | | | | | | | | | | | |

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| EUR | | 0.09 | | | 1.1998 | | | 0.108 | | | 11.0 | % | | 710 | | | 1.1467 | | | 0.103 | | | 10.7 | % | | 763 | | | –0.4 | % |

| JPY | | 4.41 | | | 0.0089 | | | 0.039 | | | 4.0 | % | | 257 | | | 0.0091 | | | 0.040 | | | 4.2 | % | | 298 | | | 0.2 | % |

| GBP | | 0.02 | | | 1.3514 | | | 0.027 | | | 2.8 | % | | 178 | | | 1.2760 | | | 0.026 | | | 2.6 | % | | 189 | | | –0.1 | % |

| INR | | 1.10 | | | 0.0157 | | | 0.017 | | | 1.8 | % | | 113 | | | 0.0144 | | | 0.016 | | | 1.6 | % | | 117 | | | –0.1 | % |

| CHF | | 0.02 | | | 1.0263 | | | 0.021 | | | 2.1 | % | | 135 | | | 1.0190 | | | 0.020 | | | 2.1 | % | | 151 | | | 0.0 | % |

| CNH | | 0.10 | | | 0.1535 | | | 0.015 | | | 1.6 | % | | 101 | | | 0.1456 | | | 0.015 | | | 1.5 | % | | 108 | | | –0.1 | % |

| AUD | | 0.02 | | | 0.7802 | | | 0.016 | | | 1.6 | % | | 103 | | | 0.7052 | | | 0.014 | | | 1.5 | % | | 104 | | | –0.1 | % |

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THE buys and sells futures contracts and securities denominated in various currencies and carries bank balances and borrows and lends such currencies in its regular course of business.

At the end of each accounting period, THE's assets and liabilities are revalued into Swiss francs for presentation in its financial statements.

THE's financial statements are presented in Swiss francs (i.e., its functional currency) as noted above.

OCI is also produced by our other non-U.S. subsidiaries.

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| | | | | | As of 12/31/2016 | | | | | | | | | | | | | | | As of 12/31/2017 | | | | | | | | | | | | | | |

| EUR | | | 0.17 | | | 1.0519 | | | 0.179 | | | 18.8 | % | | 1,096 | | | 0.09 | | | 1.1998 | | | 0.108 | | | 11.0 | % | | 710 | | | –7.8 | % |

| JPY | | | 8.00 | | | 0.0086 | | | 0.068 | | | 7.2 | % | | 420 | | | 4.41 | | | 0.0089 | | | 0.039 | | | 4.0 | % | | 257 | | | –3.2 | % |

| GBP | | | 0.03 | | | 1.2341 | | | 0.037 | | | 3.9 | % | | 227 | | | 0.02 | | | 1.3514 | | | 0.027 | | | 2.8 | % | | 178 | | | –1.1 | % |

| INR | | | 2.00 | | | 0.0147 | | | 0.029 | | | 3.1 | % | | 180 | | | 1.10 | | | 0.0157 | | | 0.017 | | | 1.8 | % | | 113 | | | –1.3 | % |

| CHF | | | 0.03 | | | 0.9819 | | | 0.029 | | | 3.1 | % | | 181 | | | 0.02 | | | 1.0263 | | | 0.021 | | | 2.1 | % | | 135 | | | –1.0 | % |

| CNH | | | 0.19 | | | 0.1434 | | | 0.027 | | | 2.9 | % | | 167 | | | 0.10 | | | 0.1535 | | | 0.015 | | | 1.6 | % | | 101 | | | –1.3 | % |

| AUD | | | 0.03 | | | 0.7216 | | | 0.022 | | | 2.3 | % | | 133 | | | 0.02 | | | 0.7802 | | | 0.016 | | | 1.6 | % | | 103 | | | –0.7 | % |

| SGD | | | 0.01 | | | 0.6905 | | | 0.007 | | | 0.7 | % | | 42 | | | 0.00 | | | | | | | | | | | | | | | –0.7 | % |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

_Changes in the Composition of the "GLOBAL"_

In light of our decision to discontinue our options market making activities globally, we removed the Singapore dollar (SGD) and realigned the relative weights of the U.S. dollar (USD) versus the other currency components to better reflect our businesses going forward.

The new composition contains 14 currencies, one fewer than the prior composition.

The new composition was effective as of the close of business on March 31, 2017.

does not reflect the risk of positions that cannot be liquidated or hedged in one day.

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(1)

(2)

(3)

The risks on these products were managed separately and measured using the stress test analysis.

(4)

Interactive Brokers Group, Inc. [removed: ("IBG, Inc."] [added: (“IBG, Inc.”] or the [removed: "Company")] [added: “Company”)] is an automated global electronic broker and market maker (although, we have substantially exited the options market making [removed: business—see] [added: business - see] Note [removed: 2—Discontinued] [added: 2 - Discontinued] Operations and Costs Associated with Exit or Disposal Activities to the audited consolidated financial statements in Part [removed: II] [added: II,] Item 8 of this Annual Report on Form 10-K).

In the United States [removed: ("U.S."),] [added: of America (“U.S.”),] we conduct our business primarily from our headquarters in Greenwich, Connecticut and from Chicago, Illinois.

Abroad, we conduct our business through offices located in Canada, the United Kingdom, Switzerland, [removed: Liechtenstein,] India, China (Hong Kong and Shanghai), [removed: Japan] [added: Japan,] and Australia.

As of December 31, [removed: 2017] [added: 2018] we had [removed: 1,228] [added: 1,413] employees worldwide.

IBG, Inc. is a holding company [removed: and our] [added: whose] primary [removed: assets are our] [added: asset is the] ownership of approximately [removed: 17.4%] [added: 18.1%] of the membership interests of IBG LLC (the [removed: "Group"),] [added: “Group”),] the current holding company for our businesses.

[removed: We are] [added: IBG, Inc. is] the sole managing member of IBG LLC.

The proliferation of electronic exchanges in the last [removed: 27] [added: 28] years has provided us with the opportunity to integrate our software with an increasing number of exchanges and market centers [removed: into] [added: to create] one automatically functioning, computerized platform that requires minimal human intervention.

[removed: they] [added: | | • | _White Branding_ - Our large financial advisor and broker-dealer customers may “white brand” our trading interface, account management and reports with their firm’s identity. Broker-dealer customers] can [added: also] select from among our modular functionalities, such as order routing, trade reporting or [removed: clearing] [added: clearing,] on specific products or exchanges where they may not have up-to-date [removed: technology] [added: technology, in order] to offer [added: to] their customers a [removed: comprehensive,] [added: complete] global range of services and products. [added: |]

[removed: In the past several years our market making business has] suffered from competitive pressures and, along with the rapid increase in our electronic brokerage business, we decided to discontinue our market making activities globally.

We intend to continue conducting certain proprietary trading activities in stocks and related instruments to facilitate our electronic brokerage [removed: customers'] [added: customers’] trading in products such as ETFs, ADRs, CFDs and other financial [removed: instruments.][added: instruments, as well as exchange-traded options market making activities in a few select markets outside of the U.S. However, we do not expect the facilitation activity to be of sufficient size as to require reporting as a separate segment after we discontinue our options market making activities.]

[removed: Also] [added: In addition,] posted on our website are our Bylaws, our Amended and Restated Certificate of Incorporation, charters for the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of our board of directors, our Accounting Matters Complaint Policy, our Whistle Blower Hotline, our Corporate Governance Guidelines and our Code of Business Conduct and Ethics governing our directors, officers and employees.

Within the time periods required by SEC and the [removed: NASDAQ Stock Market ("NASDAQ"),] [added: Investors Exchange LLC (“IEX”),] we will post on our website any amendment to the Code of Business Conduct and Ethics and any waiver applicable to any executive officer, director or senior financial officer.

In addition, our website includes information concerning purchases and sales of our equity securities by our executive officers and directors, as well as disclosure relating to certain non-GAAP financial [removed: measures] [added: measures, if any,] (as defined in Regulation G) promulgated under the Securities Act of 1933, as amended (the [removed: "Securities Act")] [added: “Securities Act”)] and the Securities Exchange Act of 1934, as amended (the [removed: "Exchange Act")] [added: “Exchange Act”)] that we may make public orally, telephonically, by webcast, by broadcast or by similar means from time to time.

[removed: ][added: ]

Our primary assets are our ownership of approximately [removed: 17.4%] [added: 18.1%] of the membership interests of IBG LLC, the current holding company for our businesses, and our controlling interest and related contractual rights as the sole managing member of IBG LLC.

The remaining approximately [removed: 82.6%] [added: 81.9%] of IBG LLC membership interests are held by IBG Holdings LLC [removed: ("Holdings"),] [added: (“Holdings”),] a holding company that is owned [added: directly and indirectly] by our founder, Chairman and Chief Executive Officer, Mr. Thomas Peterffy and his affiliates, management and other employees of IBG LLC, and certain other members.

The IBG LLC membership interests held by Holdings will be subject to purchase by us over time in connection with [added: offerings by us of shares of our common stock.]

The below table shows the amount of IBG LLC membership interests held by IBG, Inc. and Holdings as of December 31, [removed: 2017.][added: 2018.]

| | [removed: |] IBG, Inc. | | | Holdings | | | Total | | |

On August 4, [removed: 2011 and] [added: 2011,] November 12, [removed: 2013] [added: 2013, and July 28, 2017] the Company filed [removed: "shelf"] [added: “shelf”] Registration Statements on Form S-3 (File Number [removed: 333-176053] [added: 333-176053, 333-192275] and [removed: 333-192275)] [added: 333-219552)] with the SEC for the issuance of additional shares in connection with Holdings requesting redemption of a portion of its member interests in IBG LLC.

Under these shelf registration statements, the Company issued [removed: 12,643,495] [added: 15,396,082] shares of common stock (with a fair value of [removed: $362] [added: $505] million) to Holdings in exchange for an equivalent number of shares of member interests in IBG LLC.

| | | | | (in millions) | | | | | | [removed: | | |]

[removed: See "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II Item 7 and] [added: For additional information regarding our net capital requirements see] Note [removed: 4 and] [added: 15] to the audited consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

[removed: Electronic Brokerage—Interactive Brokers][added: _Electronic Brokerage - Interactive Brokers_]

Electronic brokerage represented [removed: 94%] [added: 96%] of net revenues and [removed: 103%] [added: 97%] of income before income taxes from electronic brokerage and market making combined during [removed: 2017.][added: 2018.]

We conduct our electronic brokerage business through [removed: our] [added: certain] Interactive Brokers [removed: ("IB")] [added: (“IB”)] subsidiaries.

Since launching this business in 1993, we have grown to approximately [removed: 483] [added: 598] thousand institutional and individual brokerage customers.

We provide our customers with what we believe to be one of the most [added: effective and efficient electronic brokerage platforms in the industry.]

[added: | | • | _Low Costs_ - We provide our customers with among the industry’s lowest overall transaction costs in two ways. First, we offer among the lowest execution, commission and financing costs in the industry. Second, our customers benefit from our advanced routing of orders designed to achieve the best available trade price.] In [removed: 2017, customers'] [added: order to illustrate this advantage, we publish monthly brokerage metrics including our customers’ average net trade cost for Reg.-NMS stocks. In 2018, customers’] total all-in cost of executing and clearing U.S. Reg.-NMS stocks through IB, including brokerage commissions, regulatory and exchange fees and market impact, was [removed: 1.3] [added: 0.9] basis points of trade money, as measured against a daily volume-weighted average price [removed: ("VWAP")] [added: (“VWAP”)] benchmark. [added: |]

[added: | | • |] _Automated Risk [removed: Controls—_Throughout] [added: Controls_ - Throughout] the trading day, we calculate margin requirements for each of our customers on a real-time basis across all product classes (stocks, options, futures, bonds, forex and mutual funds) and across all currencies. [added: Our customers are alerted to approaching margin violations and if a customer’s equity falls below what is required to support that customer’s margin, we attempt to automatically liquidate positions on a real-time basis to bring the customer’s account into margin compliance. This is done to protect IB, as well as the customer, from excessive losses. |]

[removed: _IB Universal AccountSM—_From] [added: | | • | _IBK__R Integrated_ _Investment Account_ - From] a single point of entry in one [removed: IB Universal AccountSM] [added: IBKR Integrated Investment Account] our customers are able to transact in [removed: 23] [added: 24] currencies, across multiple classes of tradable, primarily exchange-listed products, including stocks, options, futures, bonds, forex and mutual funds traded on more than 120 exchanges and market centers in [removed: 26] [added: 29] countries around the world seamlessly. [added: |]

[added: | | • | _IB SmartRouting__SM_ - Our customers benefit from our advanced order routing technology.] IB SmartRoutingSM retains control of the [removed: customer's] [added: customer’s] order, continuously searches for the best available price and, unlike most other routers, dynamically routes and re-routes all or parts of a [removed: customer's] [added: customer’s] order to achieve optimal execution and among the lowest execution and commission costs in the industry. [added: To highlight the quality of our price executions, we publish on our website independent measurements performed by a third party provider of transaction analysis to illustrate IB’s net price improvement versus the industry. We also offer Transaction Cost Analysis reporting to allow customers to track execution performance using multiple criteria. |]

[added: | | • |] _Interactive [removed: AnalyticsSM and] [added: Analytics__SM_ _and] IB Option [removed: AnalyticsSM—_We] [added: Analytics__SM_ - We] offer our customers state-of-the-art tools, which include a customizable trading platform, advanced analytic tools and over 60 sophisticated order types and algorithms. [added: We also provide a real-time option analytics window which displays values that reflect the rate of change of an option’s price with respect to a unit change in each of a number of risk dimensions. |]

[added: | | • |] _Probability [removed: Lab® (Patent Pending)—_The] [added: Lab__®_ _(Patent Pending)_ - The] Probability Lab provides customers with an intuitive, visual method to analyze market [removed: participants'] [added: participants’] future stock price forecasts based on current option prices. [added: This tool compares a customer’s stock price forecast versus that of the market, and scans the entire option universe for the highest Sharpe ratio multi-leg option strategies that take advantage of the customer’s forecast. |]

[added: | | • | _Investors’ Marketplace_ - The Investors’ Marketplace is an expansion of our Money Manager Marketplace and our Hedge Fund Capital Introduction program.] This program is the first electronic meeting place that brings together individual investors, financial advisors, money managers, fund managers, research analysts, technology providers, business developers and administrators, allowing them to interact to form connections and conduct business. [added: |]

[added: | | • |] _Trade [removed: Desk—_We] [added: Desk_ - We] offer broker-assisted trading through our block trade desk, which is ideal when customers are away from their [removed: computer, or if they just want another set of eyes watching their orders] [added: computer;] and [removed: updating them on market changes.][added: through our corporate bond desk, for times when large customer orders need access to more liquidity than is currently available electronically. |]

[added: | | • |] _Model [removed: Portfolios—_Model] [added: Portfolios_ - Model] Portfolios offer advisors an efficient and time-saving approach to investing customer assets. [added: They allow advisors to create groupings of financial instruments based on specific investment themes, and then invest customer funds into these models. |]

[added: | | • |] _Portfolio [removed: Builder—_Portfolio] [added: Builder_ - Portfolio] Builder allows our customers to set up an investment strategy based on research and rankings from top buy-side providers and fundamental data; use filters to define the universe of equities that will comprise their strategy and back-test their strategy using up to three years of historical performance; work in hypothetical mode to adjust the strategy until the historical performance meets their standards; and with the click of a button let the system create the orders to invest in a strategy and track its performance in their portfolio. [added: |]

[added: | | • |] _Greenwich [removed: Compliance—_Greenwich] [added: Compliance_ - Greenwich] Advisor Compliance Services [removed: ("Greenwich Compliance")] [added: (“Greenwich Compliance”)] offers direct expert registration and start-up compliance services, as well as answers to basic day-to-day compliance questions for experienced investors and traders looking to start their own investment advisor firms. [added: Greenwich Compliance professionals have regulatory and industry experience, and can help investment advisors trading on the IB platform meet their registration and compliance needs. |]

[removed: IB] [added: | | • | _IBKR] Asset [added: Management_ - IBKR Asset] Management [added: (formerly known as Covestor) recruits registered financial advisors, vets them, analyzes their investment track records, and groups them by their risk profile. Retail investors who are interested in having their individual accounts robo-traded are grouped by their risk and return preferences. Retail investors can assign their accounts to be traded by one or more advisors. IBKR Asset Management] also offers to IB customers Smart Beta Portfolios which combine the benefits of actively managed fund stock selection techniques with passive ETF low cost automation to provide broad market exposure and potentially higher returns. [added: |]

| --- | --- | --- |

| | • | As a direct market access broker, we serve the customers of both traditional brokers and prime brokers, including hedge funds, individuals, proprietary traders, financial advisors and introducing brokers. We provide our customers with an advanced order management, trade execution and portfolio management platform at a very low cost. Our customers can simultaneously access many financial markets worldwide and trade across multiple asset classes (stocks, options, futures, foreign exchange (“forex”), bonds and mutual funds) denominated in 24 different currencies, on one screen, from a single account based in any major currency. Our large financial advisor and broker-dealer customers may “white brand” our trading interface (i.e., make our trading interface available to their customers without referencing our name), or they can select from among our modular functionalities, such as order routing, trade reporting or clearing on specific products or exchanges where they may not have up-to-date technology to offer their customers a comprehensive, global range of services and products. The emerging complexity of multiple market centers provided us with the opportunity of building and continuously adapting our order routing software to secure excellent execution prices for our customers. |

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| | • | As a market maker, in the few select markets in which we operate, we provide liquidity by offering competitively tight bid/offer spreads over a broad base of tradable, exchange-listed products. Our quotes are driven by proprietary mathematical models that assimilate market data and reevaluate our outstanding quotes many times per second. In the past several years our market making business has |

| --- | --- | --- |

As previously announced, we transferred our U.S. options market making operations to Two Sigma Securities, LLC effective September 29, 2017 and also exited the majority of our options market making activities outside the U.S. by December 31, 2017.

The SEC maintains an internet site, www.sec.gov, that contains annual, quarterly and current reports, proxy and information statements and other information that issuers file electronically with the SEC.

Our electronic SEC filings are made available to the public on the SEC’s internet site.

| | (1) | In connection with redemption transactions in 2018, as of December 31, 2018, IBG Holdings LLC held for sale for the benefit of certain of its members 887,708 shares of IBG, Inc. Class A common stock, representing an additional 0.21% of the voting interests in IBG, Inc. See “Use of Proceeds” in Part II, Item 5 of this Annual Report on Form 10-K. |

| --- | --- | --- |

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| Ownership % | | 18.1 | % | | 81.9 | % | | 100.0 | % |

| Membership interests | | 75,100,955 | | | 338,691,717 | | | 413,792,672 | |

Business Segments

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| --- | --- | --- |

| --- | --- | --- |

| --- | --- | --- |

| | • | _Flexible and Customizable System_ - Our platform is designed to provide an efficient customer experience, beginning with a highly automated account opening process and ending with a fast trade execution. Our sophisticated interface provides interactive real-time views of account balances, positions, profits or losses, buying power and “what-if” scenarios to enable our customers to more easily make informed investment decisions and trade efficiently. Our system is configured to remember the user’s preferences and is specifically designed for multi-screen systems. When away from their main workstations, customers are able to access their accounts through our IB WebTraderSM or MobileTraderSM interfaces for a seamless experience. |

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| | • | _IB Risk Navigator__SM_ - We offer free to all customers our real-time market risk management platform that unifies exposure across multiple asset classes around the globe. The system is capable of identifying overexposure to risk by starting at the portfolio level and drilling down into successively greater detail within multiple report views. Report data is updated every ten seconds or upon changes to portfolio composition. Predefined reports allow the summarization of a portfolio from different risk perspectives, and allow views of Exposure, Value at Risk (“VaR”), Delta, Gamma, Vega and Theta, profit and loss and position quantity measures for the different portfolio views. The system also offers the customer the ability to modify positions through “what-if” scenarios that show hypothetical changes to the risk summary. |

| --- | --- | --- |

| --- | --- | --- |

| | • | _Securities Financing Services_ - We offer a suite of automated Stock Borrow and Lending tools, including our depth of availability, transparent rates, global reach and dedicated service representatives. Our Stock Yield Enhancement Program allows our customers to lend their fully-paid stock shares to us in exchange for cash collateral. In turn, we lend these stocks in exchange for collateral and earn stock lending fees. We pay our customers a rebate on the cash collateral generally equal to 50% of the income we earn from lending the shares. This allows customers holding fully-paid long stock positions to enhance their returns. |

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| --- | --- | --- |

| --- | --- | --- |

| --- | --- | --- |

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| --- | --- | --- |

| --- | --- | --- |

| | • | _Bill Pay_ – Our Bill Pay program allows customers to make electronic or check payments to almost any company or individual in the United States. It can be configured for one-time or recurring payments and permits customers to schedule future payments. |

| --- | --- | --- |

| | • | _Direct Deposit_ – Our Direct Deposit program allows customers to automatically deposit paychecks, pension distributions and other recurring payments to their IB (non-retirement) brokerage account. |

| --- | --- | --- |

| | • | _PortfolioAnalys__t_ – Our PortfolioAnalyst reporting tool is designed to allow customers to evaluate the performance of their portfolio by creating and saving reports based on a set of measurement criteria and optionally comparing their data to selected industry benchmarks. |

As a direct market access broker, we serve the customers of both traditional brokers and prime brokers.

We provide our customers with an advanced order management, trade execution and portfolio management platform at a very low cost.

Our customers can simultaneously access many financial markets worldwide and trade across multiple asset classes (stocks, options, futures, foreign exchange ("forex"), bonds and mutual funds) denominated in 23 different currencies, on one screen, from a single account based in any major currency.

Our large financial advisor and broker-dealer customers may "white brand" our trading interface (i.e., make our trading interface available to their customers without referencing our name), or

The emerging complexity of multiple market centers provided us with the opportunity of building and continuously adapting our order routing software to secure excellent execution prices for our customers.

As a market maker, we provide continuous bid and offer quotations on securities and futures products listed on some electronic exchanges around the world.

Our quotes are driven by proprietary mathematical models that assimilate market data and reevaluate our outstanding quotes many times per second.

On March 8, 2017 we announced our intention to discontinue our options market making activities globally and we are currently in the process of winding down these operations.

Additionally, as we previously announced, we entered into a definitive transaction to transfer our U.S. options market making operations to Two Sigma Securities, LLC.

This transaction closed on September 29, 2017.

offerings by us of shares of our common stock.

| | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Ownership % | | | 17.4 | % | | 82.6 | % | | 100.0 | % |

| Membership interests | | | 71,479,604 | | | 340,229,444 | | | 411,709,048 | |

On July 28, 2017, the Company filed a "shelf" Registration Statement on Form S-3 (File Number 333-219552) with the SEC for the issuance of additional shares in connection with Holdings requesting redemption of a portion of its member interests in IBG LLC.

Under this shelf registration statement, in 2017, the Company issued 1,214,860 shares of common stock (with a fair value of $49 million) to Holdings in exchange for an equivalent number of shares of member interests in IBG LLC.

Segment Operating Results

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | Year Ended December 31, | | | | | | | | |

| | | | | 2017 | | | 2016 | | | 2015 | | |

| Electronic Brokerage | | Net revenues | | $ | 1,405 | | $ | 1,239 | | $ | 1,097 | |

| | | Non-interest expenses(1) | | | 545 | | | 483 | | | 561 | |

| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| | | Income before income taxes | | $ | 860 | | $ | 756 | | $ | 536 | |

| | | Pre-tax profit margin | | | 61 | % | | 61 | % | | 49 | % |

| Market Making | | Net revenues | | $ | 86 | | $ | 190 | | $ | 298 | |

| | | Non-interest expenses | | | 113 | | | 146 | | | 168 | |

| | | Income (loss) before income taxes | | $ | (27 | ) | $ | 44 | | $ | 130 | |

| | | Pre-tax profit (loss) margin | | | (31 | )% | | 23 | % | | 44 | % |

| Corporate(2) | | Net revenues | | $ | 211 | | $ | (33 | ) | $ | (206 | ) |

| | | Non-interest expenses | | | (5 | ) | | 6 | | | 2 | |

| | | Income (loss) before income taxes | | $ | 216 | | $ | (39 | ) | $ | (208 | ) |

| Total | | Net revenues | | $ | 1,702 | | $ | 1,396 | | $ | 1,189 | |

| | | Non-interest expenses | | | 653 | | | 635 | | | 731 | |

| | | Income before income taxes | | $ | 1,049 | | $ | 761 | | $ | 458 | |

| | | Pre-tax profit margin | | | 62 | % | | 55 | % | | 39 | % |

(1)

Like other brokerage firms, we have been named as a defendant in lawsuits and from time to time we have been threatened with, or named as a defendant [removed: in,] [added: in] arbitrations and administrative proceedings.

The USPTO Patent Trial and Appeal Board [added: (“PTAB”)] found [added: all claims of] ten of the twelve asserted patents to be [removed: not patentable and two patents to be patentable.][added: invalid.]

[removed: It] [added: While it] is difficult to predict the outcome of the matter, [removed: however,] the Company believes it has meritorious defenses to the allegations made in the complaint and intends to defend itself vigorously against them.

On September 28, 2016, the [added: District] Court issued an order granting the [removed: Company's] [added: Company’s] motion to dismiss [removed: and dismissing] the complaint in its entirety, and without providing plaintiff leave to amend.

On September 28, 2017, plaintiff appealed [removed: the order of dismissal and subsequent judgment] to the United States Court of Appeals for the Second Circuit.

[removed: appeal,] [added: Regardless of the ultimate outcome of the motion to dismiss,] we do not believe that a purported class action is appropriate given the great differences in portfolios, markets and many other circumstances surrounding [removed: the liquidation of any particular customer's margin-deficient account.]

In the current era of dramatically heightened regulatory scrutiny of financial institutions, we have incurred [removed: sharply] increased compliance costs, along with the industry as a whole.

[removed: Increased regulation also creates increased barriers to entry, however, we] [added: We] have built [added: and continue to build] human and automated infrastructure to handle increased regulatory scrutiny, which provides us with a possible advantage over potential newcomers to the business.

We receive [removed: hundreds or] thousands of regulatory inquiries each year in addition to being subject to frequent regulatory examinations.

We are currently the subject of [added: active or dormant] regulatory inquiries regarding [removed: topics such as order] [added: subjects including, but not limited to:] audit trail reporting, trade reporting, best [removed: execution,] [added: execution and order execution procedures,] short sales, margin lending, anti-money laundering, [added: procedures for trading and handling low-priced securities, procedures for accounts introduced by financial advisors and other referrers,] technology development practices, business continuity planning and other topics of recent regulatory interest.

[removed: Nonetheless, in] [added: In] the current climate, we expect to pay significant and increasing regulatory fines on various topics on an ongoing basis, as other regulated financial services businesses do.

The amount of any fines, and when and if they will be incurred, [added: typically] is impossible to predict given the nature of the regulatory process.

| --- | --- | --- |

Of the remaining two patents, 53 of the 56 claims of one patent were held invalid and the other patent survived CBM Review proceedings.

Appeals were filed by either Defendants or Trading Technologies on all PTAB determinations.

On February 13, 2019, the United States Court of Appeals for the Federal Circuit issued opinions in the appeals on four patents from the CBM Review determinations.

The Federal Circuit vacated the CBM Review determinations of invalidity for these four patents, concluding that these patents were not eligible for CBM Review.

At the Federal Circuit’s request, the parties filed letter briefs on February 22, 2019, stating how the Federal Circuit should proceed with the other pending appeals.

On February 26, 2019, the District Court ordered that the stay be lifted with respect to the four patents that are the subject of the Federal Circuit decision and scheduled trial for February 2020.

On September 26, 2018 the Court of Appeals affirmed the dismissal of plaintiff’s claims of breach of contract and commercially unreasonable liquidation but vacated and remanded back to the District Court plaintiff’s claims for negligence.

On November 30, 2018, the plaintiff filed a Second Amended Complaint.

The Company filed a motion to dismiss the new complaint on January 15, 2019 requesting that the District Court dismiss the remaining negligence claims.

the liquidation of any particular customer’s margin-deficient account.

Increased regulation also creates increased barriers to entry.

The Company has procedures for evaluating whether potential regulatory fines are probable, estimable and material and for updating its contingency reserves and disclosures accordingly.

The Defendants have filed appeals on the claims that were held to be patentable.

On February 19, 2016, the Company filed a motion to dismiss the class action complaint.

On October 5, 2016, the Court entered judgment in the Company's favor.

On October 12, 2016, plaintiff filed motions for leave to file an amended complaint and to vacate or amend judgment.

On November 14, 2016, plaintiff also filed a motion to disqualify the district judge.

The Company opposed all three motions.

In memoranda of decision dated August 29, 2017 and September 5, 2017, the Court denied the motions.

On January 9, 2018, the plaintiff filed his appellate brief.

The opposition brief is currently due on April 10, 2018.

We believe that the appeal, like the original complaint, lacks merit.

Further, even if the Court's dismissal were to be overturned on

We are unaware of any specific regulatory matter that, itself, or together with regulatory matters on the same specific topic, would have a material impact on our business, financial condition and results of operations.

[removed: [INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE](#gi12901_index_to_financial_statements___ind02493)][added: | [ITEMS 15 (a)(1) and 15 (a)(2)](#tFTOC2) | [Index to Financial Statements and Financial Statement Schedule](#tFTOC2) | | | | [124](#tFTOC2) | |]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE COMMISSION

For the year ended December 31, [removed: 2017][added: 2018]

| [removed: Delaware] (State or other jurisdiction of incorporation or organization) | [removed: | 30-0390693] (I.R.S. Employer Identification No.) |

[removed: Greenwich,] [added: Greenwich,] Connecticut [removed: 06830][added: 06830]

[removed: (Address] [added: (Address] of principal executive office)

(203) [removed: 618-5800][added: 618-5800]

[removed: (Registrant's] [added: (Registrant’s] telephone number, including area code)

| Title of each class | [removed: |] Name of the each exchange on which registered |

| Common Stock, par value $.01 per share | [removed: |] The [removed: NASDAQ Stock Market] [added: Investors Exchange] LLC [removed: (NASDAQ Global Select Market)] |

Yes [removed: ý] [added: ☒] No o

Yes o No [removed: ý][added: ☒]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [added: or] a smaller reporting [removed: company, or an emerging growth] company.

See the definitions of [removed: "large] [added: “large] accelerated [removed: filer," "accelerated filer," "smaller reporting company,"] [added: filer,” “accelerated filer”] and [removed: "emerging growth company"] [added: “smaller reporting company”] in Rule 12b-2 of the Exchange Act.

| Large accelerated filer [removed: ý |] [added: ☒] | Accelerated filer o | [removed: |] Non-accelerated filer o [removed: (Do not check if a smaller reporting company)] | [removed: |] Smaller reporting company o [added: |] Emerging growth company o |

The aggregate market value of the voting and non-voting common equity stock held by non-affiliates of the registrant was approximately [removed: $2,544,471,315] [added: $4,653,486,080] computed by reference to the [removed: $37.42] [added: $64.41] closing sale price of the common stock on the NASDAQ Global Select Market, on June 30, [removed: 2017,] [added: 2018,] the last business day of the [removed: registrant's] [added: registrant’s] most recently completed second fiscal quarter.

As of February [removed: 23, 2018,] [added: 25, 2019,] there were [removed: 71,475,755] [added: 75,100,952] shares of the [removed: issuer's] [added: issuer’s] Class A common stock, par value $0.01 per share, outstanding and 100 shares of the [removed: issuer's] [added: issuer’s] Class B common stock, par value $0.01 per share, outstanding.

Documents Incorporated by Reference: Portions of [removed: Registrant's] [added: Registrant’s] definitive proxy statement for its [removed: 2018] [added: 2019] annual meeting of shareholders are incorporated by reference in Part III of this Form 10-K.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, [removed: 2017][added: 2018]

Table of [removed: Contents][added: Contents]

| [removed: [](#bi_cau)] [Cautionary Note Regarding Forward Looking [removed: Statements](#bi_cau)] [added: Statements](#tCNR)] | | | | | [removed: [1](#bi_cau)] [added: [1](#tCNR)] | [added: |]

| [removed: [](#da12901_part_i) [PART I](#da12901_part_i)] [added: PART I] | | | | | | [added: |]

| [removed: [](#da12901_item_1._business)] [ITEM [removed: 1.](#da12901_item_1._business)] [added: 1.](#tI1)] | [added: [Business](#tI1)] | [removed: [](#da12901_item_1._business) [Business](#da12901_item_1._business)] | | | [removed: [2](#da12901_item_1._business)] [added: [2](#tI1)] | [added: |]

| [removed: [](#dg12901_item_1a._risk_factors)] [ITEM [removed: 1A.](#dg12901_item_1a._risk_factors) |] [added: 1A.](#tI1A)] | [removed: [](#dg12901_item_1a._risk_factors)] [Risk [removed: Factors](#dg12901_item_1a._risk_factors)] [added: Factors](#tI1A)] | | | [removed: [22](#dg12901_item_1a._risk_factors)] | [added: [19](#tI1A) | |]

| [removed: [](#di12901_item_1b._unresolved_staff_comments)] [ITEM [removed: 1B.](#di12901_item_1b._unresolved_staff_comments) |] [added: 1B.](#tI1B)] | [removed: [](#di12901_item_1b._unresolved_staff_comments)] [Unresolved Staff [removed: Comments](#di12901_item_1b._unresolved_staff_comments)] [added: Comments](#tI1B)] | | | [removed: [33](#di12901_item_1b._unresolved_staff_comments)] | [added: [28](#tI1B) | |]

| [removed: [](#di12901_item_2._properties)] [ITEM [removed: 2.](#di12901_item_2._properties)] [added: 2.](#tI2)] | [added: [Properties](#tI2)] | [removed: [](#di12901_item_2._properties) [Properties](#di12901_item_2._properties)] | | | [removed: [34](#di12901_item_2._properties)] [added: [29](#tI2)] | [added: |]

| [removed: [](#di12901_item_3._legal_proceedings_and_regulatory_matters)] [ITEM [removed: 3.](#di12901_item_3._legal_proceedings_and_regulatory_matters) |] [added: 3.](#tI3)] | [removed: [](#di12901_item_3._legal_proceedings_and_regulatory_matters)] [Legal Proceedings and Regulatory [removed: Matters](#di12901_item_3._legal_proceedings_and_regulatory_matters)] [added: Matters](#tI3)] | | | [removed: [34](#di12901_item_3._legal_proceedings_and_regulatory_matters)] | [added: [29](#tI3) | |]

| [removed: [](#di12901_item_4._mine_safety_disclosures)] [ITEM [removed: 4.](#di12901_item_4._mine_safety_disclosures) |] [added: 4.](#tI4)] | [removed: [](#di12901_item_4._mine_safety_disclosures)] [Mine Safety [removed: Disclosures](#di12901_item_4._mine_safety_disclosures)] [added: Disclosures](#tI4)] | | | [removed: [36](#di12901_item_4._mine_safety_disclosures)] | [added: [31](#tI4) | |]

| [removed: [](#dk12901_part_ii) [PART II](#dk12901_part_ii)] [added: PART II] | | | | | | [added: |]

| [removed: [](#dk12901_item_5._market_for_registrant___ite04681)] [ITEM [removed: 5.](#dk12901_item_5._market_for_registrant___ite04681) |] [added: 5.](#tI5)] | [removed: [](#dk12901_item_5._market_for_registrant___ite04681)] [Market for [removed: Registrant's] [added: Registrant’s] Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#dk12901_item_5._market_for_registrant___ite04681)] [added: Securities](#tI5)] | | | [removed: [37](#dk12901_item_5._market_for_registrant___ite04681)] | [added: [32](#tI5) | |]

| [removed: [](#dk12901_item_6._selected_financial_data)] [ITEM [removed: 6.](#dk12901_item_6._selected_financial_data) |] [added: 6.](#tI6)] | [removed: [](#dk12901_item_6._selected_financial_data)] [Selected Financial [removed: Data](#dk12901_item_6._selected_financial_data)] [added: Data](#tI6)] | | | [removed: [41](#dk12901_item_6._selected_financial_data)] | [added: [35](#tI6) | |]

| [removed: [](#dm12901_item_7._management_s_discussio__ite03668)] [ITEM [removed: 7.](#dm12901_item_7._management_s_discussio__ite03668) |] [added: 7.](#tI7)] | [removed: [](#dm12901_item_7._management_s_discussio__ite03668) [Management's] [added: [Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#dm12901_item_7._management_s_discussio__ite03668)] [added: Operations](#tI7)] | | | [removed: [43](#dm12901_item_7._management_s_discussio__ite03668)] | [added: [37](#tI7) | |]

| [removed: [](#du12901_item_7a._quantitative_and_qual__ite02669)] [ITEM [removed: 7A.](#du12901_item_7a._quantitative_and_qual__ite02669) |] [added: 7A.](#tI7A)] | [removed: [](#du12901_item_7a._quantitative_and_qual__ite02669)] [Quantitative and Qualitative Disclosures about Market [removed: Risk](#du12901_item_7a._quantitative_and_qual__ite02669)] [added: Risk](#tI7A)] | | | [removed: [77](#du12901_item_7a._quantitative_and_qual__ite02669)] | [added: [68](#tI7A) | |]

| [removed: [](#fa12901_item_8._financial_statements_and_supplementary_data)] [ITEM [removed: 8.](#fa12901_item_8._financial_statements_and_supplementary_data) |] [added: 8.](#tI8)] | [removed: [](#fa12901_item_8._financial_statements_and_supplementary_data)] [Financial Statements and Supplementary [removed: Data](#fa12901_item_8._financial_statements_and_supplementary_data)] [added: Data](#tI8)] | | | [removed: [84](#fa12901_item_8._financial_statements_and_supplementary_data)] | [added: [73](#tI8) | |]

| [removed: [](#ga12901_item_9._changes_in_and_disagre__ite03576)] [ITEM [removed: 9.](#ga12901_item_9._changes_in_and_disagre__ite03576) |] [added: 9.](#tI9)] | [removed: [](#ga12901_item_9._changes_in_and_disagre__ite03576)] [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#ga12901_item_9._changes_in_and_disagre__ite03576)] [added: Disclosure](#tI9)] | | | [removed: [133](#ga12901_item_9._changes_in_and_disagre__ite03576)] | [added: [118](#tI9) | |]

| [removed: [](#ga12901_item_9a._controls_and_procedures)] [ITEM [removed: 9A.](#ga12901_item_9a._controls_and_procedures) |] [added: 9A.](#tI9A)] | [removed: [](#ga12901_item_9a._controls_and_procedures)] [Controls and [removed: Procedures](#ga12901_item_9a._controls_and_procedures)] [added: Procedures](#tI9A)] | | | [removed: [133](#ga12901_item_9a._controls_and_procedures)] | [added: [118](#tI9A) | |]

| [removed: [](#ge12901_item_9b._other_information)] [ITEM [removed: 9B.](#ge12901_item_9b._other_information) |] [added: 9B.](#tI9B)] | [removed: [](#ge12901_item_9b._other_information)] [Other [removed: Information](#ge12901_item_9b._other_information)] [added: Information](#tI9B)] | | | [removed: [137](#ge12901_item_9b._other_information)] | [added: [121](#tI9B) | |]

| [removed: [](#ge12901_part_iii) [PART III](#ge12901_part_iii)] [added: PART III] | | | | | | [added: |]

| [removed: [](#ge12901_item_10._directors,_executive___ite02336)] [ITEM [removed: 10.](#ge12901_item_10._directors,_executive___ite02336) |] [added: 10.](#tI10)] | [removed: [](#ge12901_item_10._directors,_executive___ite02336)] [Directors, Executive Officers and Corporate [removed: Governance](#ge12901_item_10._directors,_executive___ite02336)] [added: Governance](#tI10)] | | | [removed: [137](#ge12901_item_10._directors,_executive___ite02336)] | [added: [121](#tI10) | |]

10-K 1 bp15115x1_10k.htm FORM 10-K

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10-K 1 a2234631z10-k.htm 10-K

Use these links to rapidly review the document

[INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](#fa12901_index_to_consolidated_financial_statements)

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| [](#it15a) [ITEMS 15 (a)(1) and 15 (a)(2)](#it15a) | | [](#it15a) [Index to Financial Statements and Financial Statement Schedule](#it15a) | | | [141](#it15a) |

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We also lease facilities in [removed: 19] [added: 21] other locations throughout parts of the world where we conduct our operations as set forth below.

Unless otherwise indicated, all properties are used by both our [removed: market making and] electronic brokerage [added: and market making] segments.

| Location | [removed: |] Space (sq. feet) | | | Expiration | [removed: | |] Principal Usage |

| North [removed: America | | |] [added: America] | | | | | |

| Greenwich, CT | | [removed: | 162,273 |] [added: 163,510] | | 2030 | [removed: |] Headquarters and data center |

| Greenwich, CT | | [removed: |] 42,196 | | [removed: |] 2019 | [removed: |] Office space |

| Chicago, IL | | [removed: | 48,275 |] [added: 60,276] | | 2026 | [removed: |] Office space |

| Washington, D.C. | | [removed: |] 8,884 | | [removed: |] 2024 | [removed: |] Office space |

| West Palm Beach, FL | | [removed: |] 8,509 | | [removed: | 2027 |] [added: 2026] | Office space |

| Montreal, Canada | | [removed: |] 4,566 | | [removed: |] 2019 | [removed: |] Office space |

| Vancouver, Canada | | [removed: |] 2,737 | | [removed: |] 2021 | [removed: |] Office space |

| Boston, MA | | [removed: |] 2,348 | | [removed: |] 2021 | [removed: |] Office space |

| San Francisco, CA | | [removed: |] 833 | | [removed: |] 2019 | [removed: |] Office space |

| Secaucus, NJ | | [removed: | 785 |] [added: 5,785] | | 2022 | [removed: | Office] [added: Data center and office] space |

| [removed: Europe | | |] [added: Europe] | | | | | |

| Zug, Switzerland | | [removed: |] 19,246 | | [removed: | 2018 |] [added: 2019] | Office space [removed: and data center] |

| Zug, Switzerland | | [removed: |] 4,435 | | [removed: |] 2021 | [removed: |] Office space |

| London, United Kingdom | | [removed: |] 12,969 | | [removed: |] 2023 | [removed: |] Office space |

| Tallinn, Estonia | | [removed: | 7,875 |] [added: 11,010] | | 2023 | [removed: |] Office space |

| Budapest, Hungary | | [removed: |] 6,412 | | [removed: | 2018 |] [added: 2019] | Office space |

| St. Petersburg, Russia | | [removed: |] 2,742 | | [removed: | 2018 |] [added: 2019] | Office space |

| [removed: Asia—Pacific | | |] [added: Asia - Pacific] | | | | | |

| Mumbai, India | | [removed: |] 12,061 | | [removed: |] 2020 | [removed: |] Office space |

| Mumbai, India | | [removed: |] 11,229 | | [removed: |] 2022 | [removed: |] Office space |

| Hong Kong | | [removed: | 8,872 | |] [added: 10,826] | [removed: 2018] | [added: 2021] | Office space |

| Hong Kong | | [removed: |] 6,739 | | [removed: | 2019 |] [added: 2022] | Office space |

| Shanghai, China | | [removed: | 3,635 |] [added: 7,648] | | 2021 | [removed: |] Office space |

| Sydney, Australia | | [removed: | 3,400 |] [added: 3,358] | | 2023 | [removed: |] Office space |

| Tokyo, Japan | | [removed: |] 2,161 | | [removed: |] 2019 | [removed: |] Office space |

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| Chicago, IL | | 4,000 | | 2021 | Data center |

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| Zurich, Switzerland | | 4,000 | | 2019 | Data center |

| Luxembourg City, Luxembourg | | 8,533 | | 2023 | Office space |

| Vaduz, Liechtenstein | | 2,368 | | 2021 | Office space |

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| Mumbai, India | | 30,985 | | 2023 | Office space |

| Hong Kong | | 4,000 | | 2020 | Data center |

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| Vaduz, Liechtenstein | | | 2,370 | | | 2018 | | Data center |

PART [removed: II][added: II]

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[removed: On] [added: As of] February [removed: 20, 2018,] [added: 22, 2019,] there were six holders of record, which does not reflect those shares held beneficially or those shares held in [removed: "street"] [added: “street”] name.

Accordingly, the number of beneficial owners of our common stock exceeds this [removed: number.][added: number]

The following graph compares cumulative total stockholder return on our common stock, the S&P 500 Index and the NASDAQ Financial-100 Index from December 31, [removed: 2012] [added: 2013] to December [removed: 29, 2017.][added: 31, 2018.]

The comparison assumes $100 was invested on December 31, [removed: 2012] [added: 2013] in our common stock and each of the foregoing indices and assumes reinvestment of dividends before consideration of income taxes.

[removed: ][added: ]

[added: | | (1) |] The NASDAQ Financial-100 Index includes 100 of the largest domestic and international financial securities listed on The NASDAQ Stock Market based on market capitalization. [added: They include companies classified according to the Industry Classification Benchmark as Financials, which are included within the NASDAQ Bank, NASDAQ Insurance, and NASDAQ Other Finance Indexes. |]

[added: | | (2) |] The S&P 500 Index includes 500 large cap common stocks actively traded in the U.S. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock markets, the New York Stock Exchange and NASDAQ. [added: |]

Use of [removed: Proceeds from Member Redemption][added: Proceeds]

From 2008 through [removed: 2016,] [added: 2017,] Holdings redeemed [removed: 17,656,754] [added: 18,871,614] IBG LLC shares with an approximate total value of [removed: $476] [added: $525] million, which redemptions were funded using cash on hand at IBG LLC and through issuances of common stock.

On July [removed: 28, 2017,] [added: 27, 2018,] the Company issued [removed: 1,214,860] [added: 1,537,727] shares of Class A common stock (with a fair value of [removed: $49] [added: $94] million) to Holdings, for sale for the benefit of, certain of its members in exchange for membership interests in IBG LLC equal in number to such number of shares of common stock issued by the Company.

The acquired shares [removed: were] [added: are to be] sold for the benefit of certain of the members of Holdings who elected to redeem a portion of their Holdings membership interests in open market transactions pursuant to one or more Rule 10b5-1 trading plans (collectively, the [removed: "Plans").][added: “Plans”).]

As a consequence of this transaction, IBG, [removed: Inc.'s] [added: Inc.’s] interest in IBG LLC increased to approximately [removed: 17.4%,] [added: 18.1%,] with Holdings owning the remaining [removed: 82.6%.][added: 81.9%.]

The redemptions also resulted in an increase in the Holdings interest held by Mr. Thomas Peterffy and his affiliates from approximately [removed: 89.1%] [added: 89.2%] to approximately [removed: 89.2%.][added: 89.6%.]

On October 13, 2015, the Company filed a Post-Effective Amendment to multiple Registration Statements filed under the Securities Act of 1933, as amended (the [removed: "Securities Act")] [added: “Securities Act”)] on Form [removed: S-8 that registered shares of the Company's Class A common stock, $0.01 par value, for issuance under the Company's 2007 Stock Incentive Plan (the "Plan"): Registration No. 333-142686, filed on May 7, 2007; Registration No. 333-174913, filed on June 15, 2011; and Registration No. 333-203358, filed on April 10, 2015.][added: S-8.]

The [added: SIP] Plan provides employees with two options to pay for their withholding tax obligations, which become due when restricted stock units vest into shares: either (1) reimburse the Company via cash payment, or (2) elect to have the Selling Stockholder withhold a portion of the vesting shares.

In the case of employees who elect to have [removed: the] IBG LLC withhold shares to cover their tax obligations, those shares are transferred to IBG LLC, which in turn, sells those shares in open market transactions to recover the amount paid to the tax authorities on the [removed: employees'] [added: employees’] behalf.

For the year ended December 31, [removed: 2017] [added: 2018] the Company sold [removed: 596,135] [added: 564,141] shares of its Class A common stock withheld from employees (with a fair value of [removed: $21] [added: $45] million) in open market transactions.

The Post-Effective Amendment [removed: contains] [added: contained] a reoffer prospectus that [removed: registers] [added: registered] 6,400,000 shares of the [removed: Company's] [added: Company’s] Class A common stock [removed: which represents] [added: representing] the [removed: Company's] [added: Company’s] estimate of shares that will be withheld from employees related to the vesting of [added: restricted stock units, under the amended 2007 Stock Incentive] Plan [removed: shares] [added: (the “SIP Plan”),] over the next nine years [added: from the time of the filing,] based on [removed: current] [added: the] tax rates [added: at that time] and historical employee elections.

The Company has re-issued [removed: 1,517,011] [added: 2,081,152] shares under this reoffer [removed: prospectus supplement.][added: prospectus.]

The following table provides information about shares of common stock available for future awards under all of the [removed: Company's] [added: Company’s] equity compensation plans as of December 31, [removed: 2017.][added: 2018.]

| | [removed: |] Number of securities to be [removed: issued] [added: issued] upon exercise of [removed: outstanding] [added: outstanding] options, [removed: warrants] [added: warrants] and rights | | | Weighted-average exercise [removed: price] [added: price] of outstanding options [removed: warrants] [added: warrants] and rights | | | Number of securities [removed: remaining] [added: remaining] available for [removed: future] [added: future] awards under [removed: equity] [added: equity] compensation [removed: plans(1)] [added: plans(1)] | | |

| Equity compensation plans [added: not] approved by security holders | | [removed: |] N/A | | | N/A | | | — | |

| Equity compensation plans [removed: not] approved by security holders | | [removed: |] N/A | | | N/A | | | [removed: 7,048,669] [added: 5,943,616] | |

[added: | | (1) |] Amount represents restricted stock units available for future issuance of grants under the [removed: Company's] [added: Company’s 2007] Stock Incentive [removed: Plan, as amended.][added: Plan. |]

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Interactive Brokers Group Inc.’s Class A common stock trades under the symbol “IBKR” on the Investors Exchange LLC.

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A portion of the acquired shares was sold during 2018 pursuant to the Plans, in open market transactions.

The remaining shares are held for sale under certain conditions, pursuant to the Plans.

The above shares are being issued by the SIP Plan under the following registration statements: Registration No. 333-142686, filed on May 7, 2007; Registration No. 333-174913, filed on June 15, 2011; and Registration No. 333-203358, filed on April 10, 2015.

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| Total | | — | | | — | | | 5,943,616 | |

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The following table shows the high and low sale prices for the periods indicated for our common stock, as reported by NASDAQ :

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | Sales Price | | | | | |

| | | High | | | Low | | |

| | | (in dollars) | | | | | |

| 2016 | | | | | | | |

| First Quarter | | $ | 43.14 | | $ | 29.50 | |

| Second Quarter | | $ | 41.40 | | $ | 33.75 | |

| Third Quarter | | $ | 37.39 | | $ | 33.66 | |

| Fourth Quarter | | $ | 39.68 | | $ | 31.97 | |

| 2017 | | | | | | | |

| First Quarter | | $ | 39.51 | | $ | 34.11 | |

| Second Quarter | | $ | 38.23 | | $ | 33.01 | |

| Third Quarter | | $ | 45.08 | | $ | 36.23 | |

| Fourth Quarter | | $ | 62.33 | | $ | 44.80 | |

The closing price of our common stock on February 22, 2018, as reported by NASDAQ, was $67.52 per share.

Holders

During the second quarter of 2011, we declared and paid a cash dividend of $0.10 per share and have continued this quarterly dividend policy through the current fiscal year end and into the first quarter of 2018.

(1)

They include companies classified according to the Industry Classification Benchmark as Financials, which are included within the NASDAQ Bank, NASDAQ Insurance, and NASDAQ Other Finance Indexes.

(2)

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| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |

| Total | | | — | | | — | | | — | |

In 2017, the Company amended the 2007 Stock Incentive Plan (the "Stock Incentive Plan") to extend its term for a ten-year period through April, 24, 2027, pending stockholders' approval at the Company's 2018 Annual Meeting.

They are presented for the years ended, and as of, December 31, [removed: 2013,] 2014, 2015, 2016, [added: 2017,] and [removed: 2017.][added: 2018.]

| | [removed: |] Year Ended December 31, | | | | | | | | | | | | | | |

| | [added: 2018] | [added: | |] 2017 | | | 2016 | | | 2015 | | | 2014 | | | [removed: 2013 | | |]

| | [removed: |] (in millions, except share and per share amounts) | | | | | | | | | | | | | | |

| Consolidated Statement of Comprehensive Income Data | | | | | | | | | | | | | | | | [removed: |]

| Revenues | | | | | | | | | | | | | | | | [removed: |]

| Trading gains | | [removed: $] [added: 39] | [added: | |] 40 | | [removed: $] | 163 | | [removed: $] | 269 | | [removed: $] | 261 | | [removed: $ | 331 | |]