Interactive Brokers Lifts Dividend 71% to $0.60 as Pretax Margin Hits 78%, but Per-Account Trading Falls to a Multi-Year Low
Third-quarter 2026 earnings call, October 15, 2026
Interactive Brokers reported record pretax income and a 78% pretax margin for the third quarter, the eighth consecutive quarter above 70%. It paired the result with a sharp increase in its annual dividend, from $0.35 to $0.60 per share. Founder and Chairman Thomas Peterffy said the board has been guided by a payout of between 0.5% and 1% of market value, and that "we have fallen somewhat behind. So we are trying to catch up here." Asked whether a market drawdown that pushed the yield above that range could force a cut, Peterffy was categorical: "I don't think that we will ever cut the dividend, at least not in any situation that I can imagine sitting here right now." With $23.3 billion of equity, no long-term debt and a business growing accounts by more than 30%, the capital return looks easily funded, though the move reads more as a catch-up to a self-imposed guideline than a new payout framework.
Autonomous AI Trading Moves From Concept to Pilot
The most notable product development was the launch of autonomous AI trading. Eligible clients can connect the AI agent of their choice to an IBKR account through the Model Context Protocol and let it trade without human approval, using a dedicated partition within the existing account that can be created and funded in a single session. The rollout is deliberately small. CEO Milan Galik said about 3,000 clients, all previous users of the firm's human-in-the-loop AI connector, were invited over the past several days, with eligibility to widen over the coming weeks. The connector itself, which added Perplexity as an official partner this quarter along with account-level P&L, alerts, watch lists and two-leg option strategies, is described as one of the fastest-adopted features in the company's history.
Management's thesis is that AI will raise activity rather than cannibalize it. "The good investors will become much more productive because they will be able to consume and process significantly higher amount of information," Galik said, adding that they will follow more companies and implement strategies more easily. The company gave no volume or revenue targets, and the claim that AI-driven trading will lift activity per account remains unproven. It is worth watching given that per-account activity is currently moving in the opposite direction.
Trading Activity Softened Across the Board
The weaker side of the quarter was client activity. Total DARTs of 4.3 million rose 18% year over year, but KBW's Chris Allen noted that trading per account fell to its lowest level in some time. Asked whether the pullback was concentrated in any segment, Galik replied with a single word: "Broad-based." Stock share volume fell 24%, which CFO Paul Brody attributed largely to low-priced stocks, where share counts are high relative to notional value. Options volumes were down slightly, and futures contracts rose 13%. Commission per cleared order fell 4% to $2.59 on smaller order sizes across product types.
Management attributed part of the slowdown to a strong second quarter that benefited from IPO-related activity, with IPOs expected this quarter having been delayed. Galik expects volatility to rise into the midterm elections and said he has "no concerns whatsoever." That is a reasonable explanation, but it is a forecast rather than evidence, and the breadth of the decline limits how much comfort it provides. Commissions still grew 12% to $602 million, the third straight quarter above $600 million, as account growth offset weaker engagement.
Net Interest Income Carried the Quarter, With Rate Tailwinds Ahead
Net interest income rose 19% to just over $1.1 billion on a GAAP basis, and $1.2 billion on the company's NIM-table basis, despite an average Fed funds rate that was 63 basis points lower than a year ago. Balances did the work. Margin loan interest rose 36%, with margin balances up 47% year over year and 8% sequentially, while segregated cash interest rose 4%. Brody said the risk-on tone built as the quarter progressed. Segregated cash interest was roughly flat sequentially as clients deployed funds into the market.
Rates are now a modest tailwind. Several central banks raised rates in September, and Brody said the Fed hikes in mid-September will mostly show up in the fourth quarter. The company has lengthened portfolio duration slightly from under 30 days, while keeping a tight asset-liability match. The sensitivity disclosures are 25 basis points of Fed funds equal to $83 million of annual net interest income, measured from a 3.88% effective rate on September 30 balances, and 25 basis points across non-USD benchmark rates equal to $35 million. About 30% of interest-sensitive customer balances are outside the dollar. Fully rate-sensitive customer balances were $27.8 billion, compared with $25 billion a year earlier.
Reported securities lending net interest trailed last year's unusually strong result. Brody offered a broader view that includes lending-related income booked in segregated cash interest, which he estimated at $426 million of total net revenue this quarter, up 36%. Other fees and services rose 33% to $88 million on risk exposure fees, market data and options exchange order-flow payments.
Costs Stay Lean, With Marketing Spend Rising
Compensation was $167 million, or 9% of adjusted net revenues, on headcount of 3,286. G&A was $78 million, with advertising the main driver of the increase. Execution, clearing and distribution costs rose 46% to $134 million, mostly from the reinstatement of SEC regulatory fees, which were $30 million this quarter versus zero a year earlier. Those fees are passed through and do not affect profit. Excluding $28 million of non-transaction costs, gross transactional margin was 83%.
Management confirmed a deliberate shift toward digital customer acquisition, including the X Cashtags partnership that offers a $100 funding credit. Early results are mixed. Peterffy said the customers arriving are higher-value, but there are fewer of them, and that "it will take some time to get it correctly lined up." With account growth above 30%, the company is not short of demand, but the quantity-versus-quality trade-off in this channel is something to monitor as ad spend grows.
RIA Opportunity Gets a Competitive Opening, But Execution Is Slow
The tax-aware long/short offering for registered investment advisers is still small, at roughly $300 million of assets at quarter-end, with three or four strategy providers including AQR and more due by year-end and early next year. Galik acknowledged that adoption is "moving more slowly than we would like." The company argues its low financing costs, deep lendable-securities pool and automation suit strategies that need margin, shorting and securities lending, and that other brokers are restricting such strategies. Economics should resemble the rates IBKR offers on large balances today, according to Galik, so this is a balance-driven rather than a high-margin business.
A potential catalyst comes from a competitor. Galik said Fidelity plans to require a $100 million minimum from RIAs on its platform beginning around the middle of next year, and that IBKR is "one of the obvious choices, if not the obvious choice" for displaced advisers. Management is using the roughly nine-month window to simplify RIA onboarding and deepen integrations with multi-custodian platforms, aiming to win business from advisers who currently custody with competitors.
Prediction Markets Expand; Cboe Binary Options Add Complexity
IBKR now routes to Kalshi, CME and its own ForecastEx, and is working on Polymarket. Management said the integrations are raising volume and improving liquidity and pricing for clients. The firm also launched hourly and 15-minute event contracts in crypto, metals and energy, which it says have lifted engagement.
Galik gave a useful technical explanation of the coming Cboe single-stock KPI contracts. Existing prediction market products are CFTC-regulated swaps, whereas the Cboe contracts are classified as binary options, structured as separate calls and puts that can be bought and sold. Because they are not linked, the call and put prices can sum to more than $1, which cannot occur in CFTC-regulated markets. IBKR plans to tie them together on its prediction market interface and also list them on standard option screens. Launch timing is uncertain, with Cboe possibly aiming for the end of October.
International Expansion: Japan Is Hard, and Other Targets Stay Undisclosed
Japan received candid treatment. The firm has added margin lending, fully paid securities lending and its Gaika+ program for interest on non-yen cash. The immediate priority is migrating Japanese residents' accounts from the U.S. affiliate to the Japanese entity, which is under regulatory discussion, and further work remains on digital KYC and faster onboarding. Galik conceded the difficulty: "It's difficult to do business in Japan. That is what we have learned over the last couple of years." He called the market culturally homogeneous and hoped younger investors would be more open to foreign brokers. Asked about similar opportunities elsewhere, he said there are some but declined to identify them so as not to show competitors "the blueprint."
Elsewhere, IBKR added the Bucharest Stock Exchange, the Texas Stock Exchange (already trading about 2.5 million shares a day on the platform), and a new institutional-oriented options exchange. It launched B3 futures in Brazil and began a limited rollout of crypto staking. DAOL Investment & Securities in South Korea went live on IBKR's infrastructure, and the introducing broker pipeline was described as steady with recent quarters. Overnight trades rose to more than 10 million this quarter from 3.5 million a year earlier.