Interactive Brokers (IBKR) reported non-comprehensive earnings of five cents per share in the third quarter, compared to earnings of 32 cents per share in the same quarter in 2013. The consensus analyst estimate for this year was 23 cents per share. Interactive Brokers net revenue plunged 47.6 percent year over year to $171 million. Analysts estimates for net revenue were $287 million for the third quarter.

It’s important to note that Interactive Brokers problems this quarter were largely in the market making business. The pre-tax loss of $111.8 million in this area was a big change from last year’s pre-tax profit of $87.5 million. The pre-tax margin for the market making business was a negative return of 159 percent compared to a positive return of 67 percent in the year ago quarter. Lower average volatility was largely to blame for the big change in this business, but a $16 million trading error added some extra damage as well.

In the electronic brokerage segment of the company, things went well in the third quarter. Net revenue jumped 24.8 percent to $243 million. Pre-tax income went up 40.6 percent to $152.4 million. Pre-tax profit margin for the electronic brokerage unit came in at 63 percent, versus a level of 56 percent in the prior year quarter. Customer accounts grew 18 percent to 272,000. Cutomer margin borrowings were 36 percent higher than at the same time last year.

The all-important Daily Average Revenue Trade (DARTs) number came in at 534,000 during this quarter, which was up an impressive 13 percent from the same quarter last year.

Interactive Brokers missed expectations this time around, but that was not because of any issues in the electronic brokerage segment. StockBrokers.com will be keeping a close eye on the Interactive Brokers market making segment numbers in the quarter ahead as October’s higher volatility should be a boost to this business.

For more information on Interactive Brokers earnings this quarter click here.

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