| 22 October 2009

Interactive Brokers Group (IBKR) reported a significant drop in earnings this quarter, making only $0.20 per share, or 35% less than the $0.31 analysts had expected. Last year the company earned $0.65 per share in Q3.

Revenues fell to $272 million, compared with $497 million in 2008. That's a 45% drop. Net income dropped 62% year-over-year to $133 million.

We reported a smaller decrease in profit and revenue last quarter for the company. Customer accounts and trades grew last quarter, but profits were squeezed by tighter bid/ask spreads.

The company again blamed spreads on the whopping decrease in profits. “Ever increasing competition in the transparent, exchange listed derivatives markets continued to pressure spreads to never before seen levels in the third quarter,” said Thomas Peterffy, the company's CEO. The market making segment of the company saw a 74% decrease year-over-year in income before income taxes. The brokerage segment, meanwhile, saw only a 3% decrease and was "roughly flat" quarter-over-quarter.

The company did report a 20% increase in accounts and DART levels remained about even with last quarter at 318,000.

Earlier this week kaChing announced that it had partnered with Interactive Brokers to allow users to auto-execute the trades made by 'genius' investors in an Interactive Brokers account.

We were happy to see that the company did not blame overall deteriorating market conditions for the poor performance, other than to point to the tighter spreads, especially on exchange listed derivative products, which it said "will inevitably be followed by higher trading volumes and better customer performance." Most brokers have been blaming overall poor market conditions, which we believe to be a non-issue.

TradeStation Group (TRAD) reported results this morning and David Fleischman, the company’s Chief Financial Officer, said, “Our third quarter financial performance was solid despite difficult market conditions." optionsXpress (OXPS) CEO David Fisher said earlier this week, "Our customers and our business model continued to display their resilience in the third quarter despite the difficult economic environment."