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Why Shares of Interactive Brokers Group, Inc. Plunged 11% in September

By Travis Hoium – Oct 11, 2018 at 4:28AM

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Investors aren't excited about Interactive Brokers just ahead of earnings.

What happened

Shares of online stock broker Interactive Brokers Group, Inc. (IBKR -3.27%) fell 11% in September, according to data provided by S&P Global Market Intelligence, due to weakening growth metrics and an announced exchange change. While the move is notable, investors will also want to keep their attention focused on third-quarter earnings, which will be released after the market closes on Tuesday, Oct. 16, 2018. 

So what 

Each month, Interactive Brokers announces metrics for its brokerage business, and there are at least a few figures that could concern investors. New accounts have declined from 13,200 in July to 10,400 in August and 9,800 in September, which could be lowering overall growth expectations. Average client trades per account has also fallen from 476 in February to 321 in September, showing a slowing trading environment. Both could be negatives for Interactive Brokers' profitability. 

Trader with head in hands outside trading floor.

Image source: Getty Images.

Interactive Brokers also announced it will slowly transition to the new IEX exchange, which will move it away from Nasdaq. This is a new exchange that delays orders by 350 microseconds, which is intended to reduce traders being able to game the tiny delays in trades being executed around the country. 

Now what

There wasn't any alarming news for Interactive Brokers in September, but investors punished the stock nevertheless. What I would watch in next week's earnings report is whether or not falling trading volume is hurting revenue or earnings. But the fact the company is still attracting new capital to the market is a good sign for long-term investors willing to overlook the ups and downs of monthly trading volumes.

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool recommends Interactive Brokers. The Motley Fool has a disclosure policy.

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