A quarter-point global rate move is worth $118 million a year to Interactive Brokers

Interactive Brokers estimates that a 0.25 percentage-point increase in United States interest rates would raise its annualised net interest income by $83 million. The same increase across relevant non-US benchmark rates would add another $35 million. If both occurred together, the disclosed sensitivities imply an annualised benefit of approximately $118 million. A corresponding decline would reduce annualised net interest income by the same amounts under the company’s model.[1]

The combined figure is equivalent to about 2.5 per cent of Interactive Brokers’ annualised third-quarter net interest income. The broker produced $1.19 billion of net interest income in the three months to September 30, 2026; multiplying that quarter by four gives $4.76 billion, against which the $118 million sensitivity can be compared.[1]

That calculation does not forecast the next year. Interactive Brokers assumes customer balances and investments at the quarter-end level, reinvestment of maturing instruments in short-duration assets and the full effect of higher or lower reinvestment rates. It does not approximate mark-to-market changes in fixed-rate securities. Customer behaviour, currency movements, changes in margin borrowing and management decisions could all produce a different result.[1]

What the calculation does reveal is the scale of the broker’s exposure to a seemingly small movement in benchmark rates. That exposure is built on an enormous two-sided balance sheet: average customer credit balances of $176.6 billion and average customer margin loans of $104.0 billion in the third quarter. The company earned $1.11 billion of net interest attributed to margin loans and recorded $1.03 billion of net interest expense attributed to customer credit balances during the quarter.[1]

The public-interest issue is not that a broker earns a spread. Interest income is a central and disclosed part of the business. It is that customers do not all receive the same pass-through from the cash side of the model, even while the group’s aggregate rate sensitivity reaches nine figures for a quarter-point move.[1][2]

The first $10,000 earns no interest under the published structure

Interactive Brokers’ published cash-rate methodology applies several thresholds. Interest is not paid on the first $10,000, or currency equivalent, of eligible uninvested cash. Accounts with net asset value above $100,000 are eligible for the full applicable rate on balances above the threshold. Accounts below $100,000 receive a proportionally lower rate, and the rate rises as account value approaches the threshold. Eligibility can also depend on currency, pricing plan and the account segment in which the cash is held.[2]

Those rules mean a benchmark-rate increase is not passed to every dollar of customer cash in the same way. A customer with $10,000 of uninvested US-dollar cash receives no interest on that balance under the published threshold. A customer with $25,000 of cash and an account value above $100,000 earns the applicable rate on $15,000, not the full $25,000. A customer with the same cash but a smaller account may receive a lower proportional rate on the eligible portion.[2][1]

Interactive Brokers is transparent about those tiers on its pricing page. The finding is therefore not that the thresholds are concealed. It is that the economics of the thresholds become more consequential when seen against the group’s balance-sheet sensitivity. If benchmark yields rise on cash and short-duration investments, the broker can benefit across a large pool of customer-funded assets, while the first $10,000 in each eligible currency holding remains non-interest-bearing and smaller accounts receive less than the full published rate.[2][1]

The exact revenue retained because of the thresholds cannot be calculated from the public filing. Interactive Brokers does not disclose the number of accounts in each net-asset-value band, the distribution of cash balances around the $10,000 threshold or the average rate paid by customer cohort. It would therefore be wrong to multiply the threshold by the number of accounts and label the result “free funding.” Many accounts hold less cash, some hold none, currencies are treated separately, and customer funds are subject to segregation and investment requirements.[2][1]

A cohort table would make the economics measurable: average positive cash, eligible cash, rate paid and interest expense for accounts below $25,000, $25,000 to $100,000, and above $100,000 in net asset value. Without that data, customers can calculate their own rate but cannot see how much of the broker’s aggregate interest margin comes from each tier.[2][1]

Margin lending grew faster than the quarter’s average suggests

Customer margin loans outstanding reached approximately $105.6 billion at September 30, up from $90.5 billion at the end of 2025—an increase of about 16.7 per cent in nine months. The third-quarter average was $104.0 billion, compared with $70.8 billion a year earlier.[1]

The broker’s margin balances are generally priced to a benchmark plus a spread, subject to a minimum charge of 0.75 per cent in US dollars and most foreign currencies. That structure makes the asset side rate-sensitive as well. Higher benchmarks can increase what customers pay on variable-rate margin balances, while higher rates also increase returns on segregated cash and other short-duration investments. Lower benchmarks operate in the opposite direction, although floors, tiering and the timing of repricing can make the pass-through uneven.[1]

Interactive Brokers reported a 4.25 per cent annualised yield on average customer margin loans in the third quarter and a 2.31 per cent annualised yield on customer credit balances. Those figures are accounting yields across broad portfolios, not the rate charged to or paid to a particular customer. The 1.94-point difference gives only a rough indication of the gross relationship before considering segregated cash income, securities financing, FDIC-sweep income, capital, liquidity and operating costs.[1]

The broker’s net interest margin was 1.99 per cent, down from 2.16 per cent a year earlier even as quarterly net interest income rose from $999 million to $1.19 billion. Balance growth outweighed margin compression. That combination is important: Interactive Brokers can produce more net interest income with a lower percentage margin because the amounts of customer cash, margin credit and securities financing have expanded so rapidly.[1]

Securities lending creates a second, partly reclassified rate engine

The interest-rate mechanism extends beyond idle cash and margin loans.[1]

Interactive Brokers estimated that total net interest income economically related to securities-lending activities was $427 million in the third quarter, up from $314 million a year earlier. For the first nine months, the equivalent estimate was $1.04 billion, up from $751 million. Much of that economics does not appear in the line labelled “securities borrowed and loaned, net.” Interest earned on cash collateral can instead appear in segregated-cash and customer-credit lines, so the company provides a reclassified estimate to show the activity as a whole.[1]

In the Stock Yield Enhancement Program, customers permit fully paid shares to be lent. Interactive Brokers says it generally pays the customer a rebate equal to 50 per cent of a market-based rate for lending the shares, while placing cash or US Treasury collateral in segregated arrangements or with an affiliate acting as collateral agent.[1]

The 50 per cent formulation does not mean the broker retains exactly half of every dollar earned from the transaction. Cash-collateral interest, borrowing demand, counterparty rates, operational costs and the way revenue is classified can alter the total economics. It does show another explicit sharing rule through which customer assets generate income for both customer and broker.[1]

Together, the cash tiers and securities-lending rebate demonstrate two different allocation systems. On positive cash, the amount paid depends on balance, account value, currency and segment, with no interest on the first threshold amount. On eligible stock loans, the customer generally receives half of a market-based lending rate. Both are disclosed, but neither can be fully evaluated at group level because the filing does not publish customer-cohort distributions or a complete gross-to-net revenue bridge.[1]

What the $118 million sensitivity does and does not measure

The $118 million combined figure should not be described as a guaranteed gain from a rate increase or a loss imposed on customers.[1]

The sensitivity assumes parallel quarter-point changes in US and relevant non-US benchmarks. Real central banks do not necessarily move together. Currency mix matters. Maturing assets reprice over time. Customer cash can leave, margin demand can fall, and customers can shift between products. Fixed-rate securities can lose market value when rates rise, an effect excluded from the net-interest estimate. Interactive Brokers says it intends to hold relevant government securities to maturity, but a sale before maturity could crystallise a loss.[1]

The estimate is nonetheless informative because it is management’s own model applied to current balances. It quantifies how quickly a small rate movement can alter earnings in a brokerage whose customer-credit base is larger than its margin book by more than $70 billion on a quarterly-average basis.[1]

It also provides a benchmark for future reporting. If cash balances or margin loans grow, the sensitivity may grow. If the company changes rates paid to customers, product tiers or asset duration, the relationship may change. A single earnings figure cannot show whether the benefit of higher rates came from customer balance growth, wider spreads, securities-lending collateral or delayed pass-through.[1]

The disclosure gap is distributional

Interactive Brokers supplies more detail than many competitors about rates, thresholds and net-interest components. The unresolved question is how the benefit is distributed across its customer base.[1]

A complete account would disclose the weighted-average rate paid on positive cash by account-size band; the proportion of cash receiving zero, partial and full interest; the revenue effect of the $10,000 threshold; and the amount of stock-lending income paid to participating customers versus retained by the group. None of those measures is needed to confirm that the published terms apply, but all are needed to judge their aggregate materiality.[1]

The investigation’s central finding is therefore a reconstruction rather than an allegation: a simultaneous quarter-point rate move across the broker’s principal currency exposures is worth about $118 million of annualised net interest income under the company’s model, while its published customer terms ensure that rate pass-through varies substantially by balance and account size. The mechanism is lawful on the evidence reviewed and clearly disclosed at product level. Its distributional consequences remain impossible to measure from public group reporting.[1]

Report an error or submit an update