speaker
Conference Operator
Moderator

Good day, and thank you for standing by. Welcome to the Interactive Brokers Group first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Nancy Stubbe, Directors of Investor Relations. Please go ahead.

speaker
Nancy Stubbe
Director of Investor Relations

Thank you. Good afternoon, and thank you for joining us for our first quarter 2025 earnings call. Joining us today are Thomas Pederphy, our Founder and Chairman, Milan Galic, our President and CEO, and Paul Brody, our CFO. I will be presenting Milan's comments on the business, and all three will be available at our 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 the disclaimers in our press release. You should also... review a description of risk factors contained in our financial reports filed with the SEC. We saw in the first quarter the value of a global automated platform that can leverage its low costs and offer a broad range of products and markets. After a solid January buoyed by post-U.S. election enthusiasm, market indexes around the world reached peaks in February in the U.S. and early March everywhere else, after two years of nearly unbroken market increases. After that, cracks in the market began to show. News of DeepSeek and its less capital-intensive AI caused the market to give back half its gains in February. Talk about tariffs further accelerated the decline in March. The S&P 500 ended the quarter down 5%, but it was off 9% from its February peak. Six of the magnificent seven, the seven stocks that have dominated investor attention, fell significantly more than the market this quarter. However, Interactive Brokers does not need up markets to generate revenue. Our customers were active and remained faithful to their favorite names. Of our 25 most active names, 22 saw net buying activity. We also saw global interest from investors, both institutional and individual, in opening accounts. Internationally, it remains the case that investors want broad portfolios, with some invested in securities in their home markets and a more significant portion overseas. Product-wise, the popularity of options continued, with our contract volumes up 25% to a quarterly record. Futures volumes are up 16% also to a record, and stock share volumes are up 47%. Our volume growth rates were ahead of industry volumes. What all of the above has meant for our business starts with strong account growth as we add more investors to our platform. In the first quarter, we added 279,000 new accounts, a record that well surpassed even the meme stock days of the first quarter 2021. Total account growth was 32%, with even faster growth internationally. New accounts meant more cash in those accounts. which helped raise our client credit balances 19% to a record $125.2 billion. Our client equity rose 23% versus 2024 to $573.5 billion and was up 1% in the quarter, despite the drop in the market. This translated into strong financial results. Quarterly commission revenue was a record, reaching half a billion dollars for the first time, as were total net revenues. We do not only focus on the top line, however. Our expenses remained well-controlled, and our adjusted pre-tax profit margin was an industry-leading 74%. The eighth time, our adjusted pre-tax margin reached 70% or more. In recognition of this, and as a sign of confidence in the strength of our business model, its growth potential, and of our capital base, we revisited our allocation of capital and decided to increase the amount of dividend we pay to 32 cents a quarter. We will also split the stock four for one to achieve greater liquidity in our float and to make it more affordable for shareholders to buy round lots in the company. With respect to M&A, we have not stopped looking at potential acquisitions. Realistically, there is a dearth of opportunities at a price that makes sense for us. In most cases, because target companies charge more and pay less interest than we do, when we run their accounts using our pricing, The income we estimate and put a multiple on is lower than what they wish. We will keep looking, but in the meantime, for now, returning capital to shareholders via the dividend makes sense. In terms of how the business looked on the client front, our accounts and client equity once again grew fastest in Asia, with Europe a close second. Again, the trend of growing numbers of investors worldwide wanting access to international and particularly U.S. markets has not waned. Individuals saw the fastest account growth among our five client segments, with introducing brokers and proprietary traders not far behind. On the client equity side, individuals grew fastest with introducing brokers and proprietary trading clients just behind them. Commission-wise, individuals saw the fastest growth, followed closely by proprietary traders, while net interest growth was led by individuals, followed by financial advisors. Regarding introducing brokers, our pipeline of potential clients remains healthy. We are onboarding iBrokers to the platform and adding prospective ones to it at a steady pace. Onboarding iBrokers can take time since we offer a variety of ways for them to come onto our platform. The more complex the iBroker, the more time needed. We customize our offering for larger iBrokers needs with many needing special programming on our part to make sure their client's investment, tax, and compliance needs are met. we are up to the task. In terms of new product introductions, we had a busy quarter. We began offering our ForecastX contracts in Canada, as well as across the EEA for professional clients, and we will soon roll them out to the general EEA population. We added to our growing portfolio of country-specific savings and investment accounts, launching Canadian first home savings accounts this quarter. We added four new cryptocurrencies, Solana, Cardano, Ripple, and Dogecoin, and last week introduced three more, Chainlink, Avalanche, and SUI, bringing our total offering to 11 cryptocurrencies. We launched trading of Nifty 50 Index futures in Singapore and of equities in Slovenia. We recently made Forecast Trader available so clients using our IBK or desktop or Trader Workstation platforms can simultaneously use Forecast Trader side-by-side. We continue to see increasing activity in our overnight trading hours. We offer over 10,000 U.S. stocks and ETFs, as well as U.S. equity index futures and options, and on the fixed income side, global corporate bonds plus U.S. Treasury and European and U.K. government bonds. We added a focused overnight plus day order type so clients can submit an order in the overnight hours that will remain open until the end of the next regular trading session. Overall, our overnight volumes grew 250% from first quarter 2024 to first quarter 2025. We spent significant time this quarter on our client service and onboarding projects, our compliance and regulatory projects, and on further automating our internal operations to make them run more efficiently. We are as busy as we have ever been, with multiple projects touching all client types and geographic regions. We are excited to introduce them to you in the quarters ahead. Automating substantial parts of the brokerage business for client success is the heart of what we do. While market direction may appear significant in the short run, the long-term trend towards more global investing across multiple customer types and jurisdictions continues. This trend and our ability to serve it with a much lower cost structure and a much broader product and tool set is what sets us apart and will continue to do so in the years ahead. With that, I will turn the call over to Paul Brody. Paul?

speaker
Paul Brody
Chief Financial Officer

Thank you, Nancy. Thanks, everyone, for joining the call again. We'll start with our revenue items on page three of the release. We are pleased with the financial results this quarter as we again produce record net revenues and pre-tax income. Commissions rose 36% versus last year's first quarter, reaching over a half billion dollars for the first time. We saw higher trading volumes from our growing base of active customers with stock share volume up 47% and new quarterly volume records in both options and futures. Net interest income rose 3% year on year to $770 million, driven by higher balances and partially offset by lower benchmark interest rates. We saw strength from margin borrowing and from a decline in interest paid to customers partially offset by lower yields on our segregated cash portfolio. Other fees and services generated $78 million, up 32% from the prior year, primarily driven by higher risk exposure fees with contributions from forecast X fees and from payments for order flow from options exchange mandated programs. Other income includes gains and losses on our investments, our currency diversification strategy, and principal transactions. Note that many of these non-core items are excluded in our adjusted earnings. Without these excluded items, other income was $34 million for the quarter. Turning to expenses, execution, clearing, and distribution costs were $121 million in the quarter, up 20% over the year-ago quarter on higher volumes across all product classes. Execution and clearing costs were 19% of commission revenues in the first quarter for a gross transactional profit margin of 81%. We calculate this by excluding from execution, clearing, and distribution 19 million of non-transaction-based costs, predominantly market data fees, which do not have a direct commission revenue component. And as a note for the upcoming quarters, the SEC reduced its fee rate to zero effective this coming May 15th, which should be a tailwind for execution and clearing costs thereafter. SEC fees total $27 million for the current quarter. Compensation and benefits expense was $154 million for the quarter for a ratio of compensation expense to adjusted net revenues of 11%, down slightly from last year's quarter. We remain focused on expense discipline as reflected in our modest staff increase of 3% over the prior year. Our headcount at March 31st was 3,027. G&A expenses were $62 million up from the year-ago quarter, mainly on expansion of advertising. Our pre-tax margin was 74% for the quarter, as reported, and 73% as adjusted. Income taxes of $91 million reflects the sum of the public company's $47 million and the operating company's $44 million. This quarter, the public company's adjusted effective tax rate was 18.2% within its usual range. This is a return to expected tax levels from the fourth quarter, which benefited from the annual revaluation of our deferred tax asset and from some foreign tax credits. Moving to the balance sheet on page five of the release, The consistent strength of our business and our healthy balance sheet support our raising the dividend from $1 per year to $1.28, returning capital to shareholders while still maintaining an ample capital base for the current business and future opportunities. Our total assets ended the quarter 19% higher at $158 billion, with growth driven by margin lending and rising cash balances. We have no long-term debt. Profit growth drove our firm equity up 19% to $17.5 billion. We maintain a balance sheet geared towards supporting growth in our existing business and helping us win new business by demonstrating our strength to prospective clients and partners while also considering overall capital allocation. Turning to our operating data on pages six and seven, our trading volumes for all customers Outpaced industry growth over the prior year quarter in all three major product classes. Options and futures contract volumes rose 25% and 16% respectively, and stock share volume rose 47%. On page seven, you can see that total customer darts were 3.5 million trades per day, up 50% from the prior year, and strong in all product classes. Commission per cleared commissionable order of $2.76 is down from last year due to both smaller average order sizes and earning higher rebates, which reduce the cost of a trade and are generally passed through to the customer. Page 8 shows our net interest margin numbers. Total GAAP net interest income was $770 million for the quarter, up 3% on the year-ago quarter, and our net interest margin table net interest income was $794 million up 4%. We include for NIM purposes certain income that is more appropriately considered interest, but that for GAAP purposes is classified as other fees and services or as other income. Our net interest income reflects both the strong increases in balances and the decline in benchmark rates, resulting in a rise in margin loan interest income and lower interest expense on customer cash balances. partially offset by lower interest income on segregated cash. Regarding rates, central banks in most major markets lowered their benchmarks. Several held theirs constant and a few raised. Reflecting a decline in benchmark rates versus last year, including 100 basis points of cuts in the average U.S. Fed funds rate, which represents a 19% decline in that rate, our segregated cash interest income was down 13%, while margin loan interest rose by 14% on a 38% increase in average balances. At a high level, in the first quarter of 2024, we estimated that a 1% decrease in all benchmark rates would decrease our annual net interest income by $304 million. In the past year, the U.S. Fed funds benchmark did, in fact, fall 1%, and other countries' rates moved more or less than that. But driven by higher balances, this quarter's net interest income represented an annualized increase of $128 million. The average duration of our investment portfolio remained at less than 30 days. The US dollar yield curve remains inverted through the medium term so that we continue to maximize what we earn by focusing on short-term yields rather than accept the lower yields and significantly higher duration risk of longer maturities. particularly in an unpredictable economic environment. This strategy also allows us to maintain a relatively tight maturity match between our assets and liabilities. Securities lending net interest remain muted for a couple of reasons. There are fewer names that are hard to borrow industry-wide, as some of the typical drivers of securities lending, including IPOs and merger and acquisition activities, have remained subdued. Despite this, we've been consistently successful in raising the total notional dollar value of securities we lend. As benchmark interest rates rose from near zero in 2022, more of what we earned from securities lending became classified as interest on segregated cash. We estimate that if the additional interest earned and paid on cash collateral were included under securities borrowed and loaned, then securities lending net revenue would have been $186 million this quarter versus $167 million in the prior year quarter. Interest on customer credit balances, the interest we pay to our customers on the cash in their accounts, declined on lower benchmark rates despite higher balances from new account growth. As we have noted in the past, the high interest rates we pay on customer cash, currently 3.83% on qualified US dollar balances, is a significant attraction to new customers. Fully rate-sensitive customer balances ended the current quarter at $20.3 billion versus $18.5 billion in the year-ago quarter and $19.1 billion at year-end. Now, for estimates of the impact of changes in rates, given market expectations of further rate cuts in the future, we estimate the effect of a 25 basis point decrease in the benchmark Fed funds rate to be a $65 million reduction in annual net interest income. Our starting point for this estimate is March 31st, with the Fed Fund's effective rate at 4.33% and balances as of that date. Any growth in our balance sheet and interest earning assets would reduce this impact. About 25% of our customer cash balances is not in U.S. dollars, so estimates of a U.S. rate change exclude those currencies. we estimate the effect of decreases in all of the relevant non-USD benchmark rates would reduce annual net interest income by about $29 million for each 25 basis point decrease in those benchmarks. At a high level, a full 1% decrease in all benchmark rates would decrease our annual net interest income by $364 million. In conclusion, We started the year with another financially strong quarter, reflecting our continued ability to grow our customer base and deliver on our core value proposition to customers while scaling the business. We raised our dividend in recognition of our financial strength. Our business strategy continues to be effective, automating as much of the brokerage business as possible and expanding what we offer while minimizing what we charge. And with that, we will turn it over to the moderator and take questions.

speaker
Conference Operator
Moderator

Thank you. At this time, if you would like to ask a question, please press star 11 on your telephone. You'll hear an automated message advising your hand is raised. We also ask that you please wait for your name and company to be announced before you proceed with your question. One moment while we compile the Q&A roster. The first question that we have today is coming from Jane Jaro of Goldman Sachs.

speaker
Jane Jaro

Your line is open. Hello? Can you hear me?

speaker
James
Analyst (Goldman Sachs)

Oh, hi. It's James. Sorry. The moderator got cut off there. So just two questions here. The first one, could you just speak to the impact of retail pressure on equity market levels on your business in April? Has there been any notable deleveraging across your client base? And what has this meant for trading activity? And then separately, could you just speak to a shift in client allocations to cash versus in risk assets and then the impact on margin loans?

speaker
Mohan
Internal Q&A Facilitator

I'll take it.

speaker
Milan Galic
President & Chief Executive Officer

Thank you for your question. So we have seen very significant volumes as the market dropped and then it bounced back up. We saw record volumes. There were some shifts that we noticed. Our clients traded fewer options. They traded more futures than usual. And as you would expect, we saw more trading in the fixed income instruments and foreign exchange. I think our customers are very happy that from a single platform, they can access all these asset classes. And as they are market dislocations, like we noticed a week ago, they can seamlessly trade from the single account all these asset classes. I think it's a great benefit that our customers enjoy and appreciate. As far as As far as the deleveraging is concerned, we saw a slight decrease around 10 percent or so, 10 to 12 percent decrease in margin loans, which is something you would expect when there is such large move downward. You would expect the customers to reduce their risk posture. We also saw somewhat less aggressive positions in options and futures. I think that roughly summarizes what we've recently seen.

speaker
James
Analyst (Goldman Sachs)

Thank you, Milan. That's very helpful. Just one other one here. I know you talked a little bit about continued appetite for U.S. investments by non-U.S. customers, but any change in the appetite for U.S. stocks? since the tariff news began? And then, I guess, just your longer-term expectations for what tariffs could mean for that non-U.S. appetite for trading U.S. stocks, given that, of course, the fact that you do offer U.S. markets is a key aspect of your value proposition versus local brokers.

speaker
Milan Galic
President & Chief Executive Officer

So, as I mentioned earlier, we saw a very significant influx of new accounts and most of them were coming from overseas. So we do not yet see any decrease in the appetite of our non-U.S. clients for opening an account and trading mostly U.S. markets. As to what the tariffs can mean in the long run, I mean, it is very difficult to gauge because I think we see a lot of inconsistency as to what announced what goes into effect and then it gets reversed a few days later. So I don't think anybody can guess as to what the tariffs will ultimately mean. But I think the investors probably remember that there are other tenets of the administration posture. They did announce Tariff increases, but the plans called for lower taxes and lower regulation. So these two effects should help the markets and should continue generating a lot of appetite in our customers for investing in the United States.

speaker
Mohan
Internal Q&A Facilitator

Okay, thanks a lot.

speaker
Conference Operator
Moderator

Thank you. One moment for the next question. And our next question will be coming from the line of Craig, second dollar of Bank of America. Your line is open.

speaker
Craig
Analyst (Bank of America)

Good evening, Thomas, Juan. Hope everyone's doing well. I wanted to ask that last question a different way, but we view IBCARE's model as the ability to provide global assets to mostly individual investors around the world at a low cost. But, you know, given this new emerging trade conflict, we could see a period where investors, you know, especially individuals, focus more domestically and less on the U.S. market, even though you haven't seen this yet, as you pointed out. How do you think this could impact IBKR's global model with most of your accounts coming from outside the U.S.? ?

speaker
Milan Galic
President & Chief Executive Officer

We do not think that it will impact our model because as you recall, our aim is always offer not just US markets, but the local markets side by side on the same platform to our clients so that they can have their assets in a single account and be able to deploy their capital to investments outside their home country or region, as well as in the United States. So we do not think that this will negatively affect us in any way. But more importantly, something that I explained a little earlier, something that we noticed last week was we are very well positioned, exceptionally well positioned for volatility and the type of market movement like we saw last week. As our customers notice changes, in yields, they were able to act on them. They were able to trade sovereign bonds as they saw changes in the currencies. If their theory is that the US dollar is weakening, they can buy other currencies on the same platform or do the investments via Forex futures. If they think the oil or copper is undervalued, they can buy them. If they want to increase their allocation in gold, they can buy bullion on our platform. So we think that we are very well positioned for markets that are as uncertain as we have seen last week.

speaker
Craig
Analyst (Bank of America)

Thanks, Mohan. And I actually had a follow-up on James's first question too, but wanted to go outside of trading. We wanted to see if you could provide any insight on how client activity was tracking month to date. Specifically, we're curious if you saw any deviations to your 1Q trajectory for account growth, customer credit balances, and margin loans.

speaker
Milan Galic
President & Chief Executive Officer

We saw very significant client inflows. So our department that approves new accounts, So significant increase in the number of approved accounts. These were obviously not all of them were funded. The defunding event happens days later. So there was an influx of new accounts. And I'm sorry, what was the other part of your question?

speaker
Craig
Analyst (Bank of America)

So what I wanted to get at is account growth, customer credit balances, and margin loans. Did you see any deviation and the trajectory of those three in the first two weeks of April?

speaker
Milan Galic
President & Chief Executive Officer

There was the drop in the margin loans by around 12%. There was greater than I would expect inflow of cash, which could be somewhat related to the leveraging, but could also be related to new funds coming in. We do not separate these two numbers, so it's hard for me to tell. But as far as the trading activity is concerned, the values that we see roughly correspond to average volume levels in the previous quarter. So we're back to the normal trading.

speaker
Craig
Analyst (Bank of America)

Great. Thanks for taking my question, Juan.

speaker
Conference Operator
Moderator

Thank you. One moment for the next question. And our next question will come from the line of Patrick Moley of Piper Sandler. Your line is open.

speaker
Patrick Moley
Analyst (Piper Sandler)

Yeah, good afternoon. Thanks for taking the question. Maybe shifting to the product side of things, you're on pace to nearly triple the size of your crypto offering this year. So can you talk about what drove the decision and your comfortability with expanding that offering? And then going forward, how are you thinking about the growth opportunity here? Is this something you think could be a significant growth driver, or is this more of just you know, you're plugging a previous or what you view as a previous product gap. Thanks.

speaker
Milan Galic
President & Chief Executive Officer

So we have added seven currencies. We mentioned in one of the previous earnings calls that we would do that as soon as we see changes in the regulatory environment by the FTC. And we indeed see that there were several changes that took place the accounting guidance that requires that we record the obligation associated with safeguarding crypto assets on the balance sheet has been rescinded by the SEC. That's one change that we saw. Another change that we saw was there was an announcement that the SEC tends to decrease the regulation by enforcement going forward in crypto. We also saw that the Coinbase lawsuits had been dismissed. So all these changes gave us, they increased our appetite for the crypto space and we added the seven currencies as well as we increased the limit that governs how much assets a client account can hold in cryptocurrencies. We went from 10% to 30% of NLD. So these are the changes that we have made. As far as what the crypto space means to us, we would obviously like it to grow. It's not growing as fast as we would like, which to me personally is somewhat of a surprise because if you look at the cost of trading of crypto assets on our platform is significantly lower than the cost that our competitors charge, yet we do not see a huge influx of cryptocurrency traders to our platform. So I would expect more. For now, we just have to be satisfied with rounding up our offering, giving our clients and financial advisors access to the crypto cash so that they can access these asset costs for themselves and for their clients as well.

speaker
Patrick Moley
Analyst (Piper Sandler)

All right, great. And then just to follow up on the ForecastX platform and maybe event contracts more broadly, we've seen one of your competitors has really leaned into event contracts, specifically sports events contracts. I know that... you know, IBKR in the past has been a little bit more hesitant to, you know, pursue launching sports-related event contracts, but just curious on your thoughts about expanding that offering and maybe whether you could in the future look to maybe rethink about sports contracts. Thanks.

speaker
Milan Galic
President & Chief Executive Officer

So I would answer this question in two parts. So Interactive Brokers is the owner of the ForecastX Exchange, which ForecastX Exchange can have other FCM members. Forecast Tax Exchange will be listing sports contracts so that other FCMs can offer them to their clients. We at Interactive Brokers, we have not yet made a decision as to whether we will or will not offer them. That is where we currently are.

speaker
Mohan
Internal Q&A Facilitator

All right. Great. Thanks. That's it for me.

speaker
Conference Operator
Moderator

Thank you. One moment for the next question. And our next question will come from the line of Chris Allen of Citi. Your line is open.

speaker
Chris Allen
Analyst (Citi)

Yeah, afternoon, guys. I wanted to ask actually about Europe. Over the course of the first quarter saw a really strong overall European equity volumes. Anecdotally, it sounds like European retail investors are starting to increase their activity and becoming a little bit more like U.S.-based customers. I'm just wondering, are you seeing similar things from that region? Where do things stand from adoption of options as well? Any call on that front would be helpful.

speaker
Milan Galic
President & Chief Executive Officer

Well, our international clients are busy trading options, mostly U.S. options because that's where the volumes are. But we are offering European options as well as Asian options, and we see significant volumes in Asian options being traded by Asian clients. I am sort of curious whether Europe is going to have their own magnificent seven or six. I don't know how many it is. There is some talk of the defense stocks in Europe taking up that role, so it's going to be interesting to see whether that happens.

speaker
Chris Allen
Analyst (Citi)

Thanks. And just maybe on net interest income related to SEG cash, just the sequential movement, Just given the color of last quarter, it seems, I mean, it basically implies that you saw an overall decline of about 100 basis points across central banks. Is that correct? Is this just driven by movements in benchmark rates? Was there anything else underneath the service, maybe shortening duration, anything like that, that impact the said cash?

speaker
Paul Brody
Chief Financial Officer

Yeah, I'll take that. So, yes, primarily the drop in rates. You know, there were several drops by the Fed in late fourth quarter. So the fourth quarter itself carried some higher rates from earlier, really right through the middle of the quarter. So the full impact of those decreases were felt in the first quarter. And some of the foreign rates dropped at least that much on a percentage basis. So for example, I think the euro went from a 3% benchmark to two and a half. So that does impact all this egg cash. But as well, it impacts what we're paying our customers on the other side. So we do have offsets there.

speaker
Mohan
Internal Q&A Facilitator

Thanks, guys.

speaker
Conference Operator
Moderator

Thank you. And one moment while we prepare for the next question. And the next question will be coming from the line of Benjamin Budish of Bar Pays. Your line is open.

speaker
Benjamin Budish
Analyst (Bar Pays)

Hi, good evening, and thanks for taking the question. I wanted to follow back up on the earlier comment on margin balances. Just want to make sure we're kind of clear. When you commented that margins declined 12% from the end of the quarter, is that as of sort of the lowest point, perhaps a week ago, or is that as of yesterday? Just hoping to get a better sense of kind of where we are currently.

speaker
Milan Galic
President & Chief Executive Officer

The drop happened very quickly, and then it remained the same for several days. So no further decreases. So there was a significant reaction, but I wouldn't even call it significant. 12% is not that big. There was a reaction by our clients initially, and then they remained the same.

speaker
Benjamin Budish
Analyst (Bar Pays)

Understood. Very helpful. One other kind of modeling nuance, maybe for Paul, in terms of making sure we kind of calibrate our models correctly, given the SEC reduction, I think you said $27 million for the current quarter. Should it be fair to assume those kind of equally come out of commissions and transaction-based expenses? Is that the way to think about the impact going forward?

speaker
Paul Brody
Chief Financial Officer

Yeah, the regulatory fees are passed through, right? And it was about $27 million out of that total number for execution clearing and distribution line.

speaker
Benjamin Budish
Analyst (Bar Pays)

Very helpful. And then maybe one other like super kind of small one, but... Just curious, for the market data fees, I think you said $19 million of expense in the quarter. If I recall, that was $21 million last quarter. I know that line goes up very, very gradually over time, and I think it's kind of assumed there's constant inflation. Curious if there's any reason that number went down, anything you can kind of comment on there.

speaker
Paul Brody
Chief Financial Officer

Sorry, you're saying just the market data fees?

speaker
Benjamin Budish
Analyst (Bar Pays)

Yeah, the $19 million.

speaker
Paul Brody
Chief Financial Officer

That's interesting. That's fairly even with prior quarter and up a little bit from the prior quarter and maybe $2 million from the year-ago quarter.

speaker
Benjamin Budish
Analyst (Bar Pays)

Okay. All right. Thank you for that clarification.

speaker
Conference Operator
Moderator

Thank you. One moment for the next question. And our next question will be coming from the line of Dan Fannin. of Jeffrey, your line is open.

speaker
Jim
Analyst (speaking on behalf of Dan Fannin of Jeffrey)

Hi, this is Jim on behalf of Dan. Could you maybe just remind us what your excess capital was as of March 31st? That's the capital available for M&A and any changes in terms of your inorganic priorities or maybe like progress on social media deal?

speaker
Paul Brody
Chief Financial Officer

Yeah, it kind of remains in the six to seven billion range. You know, As this business grows, we earn more and we have more capital and more of it is devoted into the business to support things like customer trading and clearing fund deposits where we are self-clearing in most places and various buffers that have to be maintained both for regulatory purposes and for standard operating liquidity buffers. It does take a lot of capital, which is why we maintain it. But, you know, we're profitable enough that we determined we could raise a dividend and still grow that capital.

speaker
Jim
Analyst (speaking on behalf of Dan Fannin of Jeffrey)

And just in terms of M&A, has there been any progress on sourcing a new deal, any new prospective talks here? Not really.

speaker
Milan Galic
President & Chief Executive Officer

We still look at all the opportunities that that arrive on our desks. We haven't yet found anything that would work. The last significant one, we did not succeed in purchasing the competitor. We tried. We actually, we were able to offer a very significant and attractive price. The deal did not happen because we were interested in buying the entire ownership 100%. And one of the sellers was not interested. So we would be able to only acquire 70%, which was a deal breaker. That's why we didn't do it. It's difficult for us to find an acquisition that we would like. Obviously, it cannot be too small because it would be just a distraction. But so far, we haven't succeeded.

speaker
Jim
Analyst (speaking on behalf of Dan Fannin of Jeffrey)

Okay, that was helpful. Thank you.

speaker
Conference Operator
Moderator

Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. And our next question will be coming from the line of Kyle Vogt of KBW. Your line is open.

speaker
Kyle Vogt
Analyst (KBW)

Hi, good evening. Maybe I could ask a question about your dividend policy. You increased the dividend again this year after an increase at the same time last year. Can you just speak a bit more about your policy? Should investors expect an annual increase in the dividend going forward, whether you would be open to targeting a specific dividend payout ratio over time or whether you're instead targeting a certain implied dividend yield on the shares?

speaker
Thomas Pederphy
Founder & Chairman

Yes, we target our dividends to be between half a percent and one percent of the stock price.

speaker
Kyle Vogt
Analyst (KBW)

Okay. Understood, Thomas. Thank you. And then, Milan, you spoke about the 12% pullback in margin balances in April just given the equity market volatility and a move towards less risky positioning by your clients more broadly. Within your other fees and services line, it looks like your risk exposure fees fell sequentially in one queue for the first time in over two years. Is it also fair to assume that those fees move lower throughout the first quarter? and also likely move lower into April as well, or is there anything else to note that's driving that line and the decline in the first quarter?

speaker
Milan Galic
President & Chief Executive Officer

The exposure fees, they fluctuate more than the margin balances. The margin balances tend to be very steady, and they obviously reflect the income from shares that the customers buy in margin. The exposure fees are generated based on the exposure that we, as a firm, can have from clients' options and futures positions, not only the leveraged stock position. So they tend to fluctuate more. The clients of ours are very nimble. They reduce their options exposures quickly as the markets fall. So we expect these exposure fees to fluctuate more than the margin balances.

speaker
Kyle Vogt
Analyst (KBW)

Understood. Thank you very much.

speaker
Conference Operator
Moderator

Thank you. And that does conclude today's Q&A session. I would like to turn the call back to Nancy for closing remarks. Please go ahead.

speaker
Nancy Stubbe
Director of Investor Relations

Thank you, everyone, for participating today. As a reminder, this call will be available for replay on our website, and we will also be posting a clean version of our transcript on the site tomorrow. Thank you again, and we will talk to you next quarter end.

speaker
Conference Operator
Moderator

Thank you for joining today's conference call. You may all disconnect.

Disclaimer

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