Interactive Brokers Group, Inc.

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Thank you for standing by, and welcome to the Interactive Brokers Group's second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Nancy Sui, Director of Investor Relations. Please go ahead.

Thank you. Good afternoon, and thank you for joining us for our second quarter 2022 earnings conference call. Once again, Thomas is on the call, but has asked me to present his comments on the business. Also joining us today are Milan Gallic, our CEO, and Paul Brody, our CFO. After prepared remarks, we will have a Q&A. As a reminder, today's call may include forward-looking statements, which represent the company's belief regarding future events, which by their nature, are not certain and are outside of the company's control. Our actual results and financial condition may differ possibly materially from what is indicated in these forward-looking statements. We ask that you refer to disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC. I will start today's call with the bad news. In the first half of 2022, circumstances did not evolve in our favor. First, starting at the end of last year, activity diminished in Asia because of China's crackdown on large, privately owned companies, and many of our clients from that region suffered outsized losses. Then, late in the first quarter, the impact of the war in Ukraine began to be felt on the European economy, chilling the mood of our customers in that region. Finally, early in the second quarter, the delayed response by the Fed to inflationary pressures created fears of a recession in the US, sending prices into bear market territory. Deficit spending in the US has limited the government's ability to respond to rising inflation with increasingly higher interest rates. As for each 1% hike, interest on US debt increases by $300 billion as it gets refinanced, so inflation is likely to stay with us. The same difficulty in raising rates in the face of higher inflation and the same causes are also occurring in Europe. customer losses in their accounts in the markets were substantial. Adding to that, the impact of the withdrawal of all funded accounts by Futu to their own new clearing firm and an introducing broker using a custodial bank while still executing with us, our customers' funds diminished by about $80 billion over the past two quarters. In addition, our net new account openings plummeted by about 40% by the end of the quarter. On a brighter note, now for the good news. It seems that many large global financial institutions are looking at the other side of this market valley and are beginning to focus on their clients' trading needs. These clients more and more often want to run globally diversified portfolios, heavily weighted towards U.S. equities, no matter where they live. Satisfying that demand would necessitate that they consolidate worldwide their often separately and locally developed technology and operations. Several such institutions believe that they can get there sooner by putting their clients on IBKR's platform now and begin working on developing the tools to serve their unique, specific client financial needs better. IBKR has reached a positive conclusion in several such discussions. These institutions will onboard their clients gradually and separately by type and location, beginning later in the third quarter, while others will start later this year and next. These will be introducing broker accounts and thus they will add to our number of accounts. It is for this reason that, in spite of our number of net new account openings having declined by 40% by the end of the quarter, I expect this drop to be temporary as the new introducing brokers accounts will begin to show up. Accordingly, I still project long-term account growth of 30%. Most of our technology development capacity in the near future will be devoted to building systems that make our Introducing Broker and worldwide RIA platform even more compelling. With this backdrop, we are pleased with how our business performed. We ended the quarter with a record 1,923,000 accounts, a net increase of 36% from last June. We saw account growth in all client segments in all geographic regions with particular strengths, 49% and 38% in Europe and Asia, which together represent the majority of our accounts. As our client base grows, darts have risen as well. Second quarter total darts were strong at over 2.1 million. While trading in the U.S. seems to be holding steady, we began seeing some easing of trading activity in Europe and Asia due to declining markets. Commission per dart rose due to product mix as volumes continue to be strong in futures and options which carry a higher commission. While in equities, higher commissions per dart were from more active trading and higher priced stocks, which helped boost commissions over last year. Higher futures commissions include very high exchange and regulatory fees, which in part explain our higher execution and clearing direct expense. Higher darts and commission per trade led to our total commission revenues rising to $322 million, the third highest in company history, and behind only the unusually active trading periods in the first quarters of this year and last. Options and futures volumes continue to be strong. In the second quarter, in the U.S., listed options volume for the industry saw average daily volume of nearly 40 million contracts, one of the highest on record and up 8%. Interactive brokers options volumes were even stronger, up 11%. Our futures business was even better, with our contract volumes up 46% over last year, nearly twice the 25% increase in industry volumes. As inflation can lead to higher commodities prices, investors often use commodity futures to participate, especially when there is also volatility in the markets. Interactive Brokers has become better at offering our customers new and innovative products, while also enabling them to navigate through our many high-quality features at ever greater efficiency, helping them to establish their own personalized work environments and tools. Superior customer experience our platform offers continues to be spread by word of mouth as well as by our institutional sales team. In uncertain markets, the quality of our capital base matters. Our capital base grew even stronger during this period, with total equity reaching $10.6 billion this quarter. This base funds our business in countries around the world, helps us to attract larger customers, and reassures clients looking to participate in the markets. We saw account growth once again in all five of the client types that we service. Individual account growth was fastest at 44%, followed by proprietary traders at 32%, introducing brokers at 24%, financial advisors at 15%, and hedge funds at 10%. We are always looking to find opportunities and grow our business. We continue to place enhanced focus on our marketing efforts, and we have increased spending in this area from last year. We are letting investors know that Interactive Brokers pays its clients over 1.08% on their cash balances, and if the Federal Reserve raises rates by 75 basis points, then their rate will also rise by 75 basis points to 1.83%. We recently introduced fractional trading in European stocks, so our clients can purchase as little as $1 of almost any U.S. or European stock. And in the U.K., you can now open a Stocks and Shares ISA. We continue to add to the functionality of our Impact app. We recently added the ability to offset a selection of specific carbon-emitting activities, giving clients the ability to offset their footprint and keep track in their statements, all from their IBKR account. We still see higher inflation as a catalyst that convinces more people that holding onto their money as cash is a losing proposition. Investing in equities worldwide will be necessary to earn a return and interactive brokers will be there with our innovative platform and educational materials. We aim to be the platform of choice for the best informed, most successful investors. And we look forward to welcoming our 2 millionth customer in the next few months. With that, I will turn the call over to our CFO, Paul Brody, who will go through our numbers for the quarter. Paul?