Revenue From Contracts With Customers

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

8. Revenues from Contracts with Customers

On January 1, 2018, the Company adopted ASU No. 2014-09, ‘‘Revenue from Contracts with Customers’’ (‘‘ASC Topic 606’’) using the modified retrospective method (i.e., applied prospectively effective January 1, 2018 without revising prior periods), which had no impact on the Company’s opening retained earnings.

Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised services to the customers. A service is transferred to a customer when, or as, the customer obtains control of that service. A performance obligation may be satisfied at a point in time or over time. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised service. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’s progress in satisfying the performance obligation in a manner that depicts the transfer of the services to the customer. The amount of revenue recognized reflects the consideration the Company expects to receive in exchange for those promised services (i.e., the “transaction price”). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration, if any.

The Company’s revenues from contracts with customers are recognized when the performance obligations are satisfied at an amount that reflects the consideration expected to be received in exchange for such services. The majority of the Company’s performance obligations are satisfied at a point in time and are typically collected from customers by debiting their brokerage account with the Company.

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Nature of Services

The Company’s services under contracts with customers are mainly related to its electronic brokerage business. The Company’s main sources of revenues from contracts with customers are as follows:

-Commissions are charged to customers for order execution services and trade clearing and settlement services. These services represent a single performance obligation as the services are not separately identifiable in the context of the contract. The Company recognizes revenue at a point in time at the execution of the order (i.e., trade date). Commissions are generally collected from cleared customers on trade date and from non-cleared customers monthly.

-Market data fees are charged to customers for market data services to which they subscribe that the Company delivers. The Company recognizes revenue monthly as the performance obligation is satisfied over time by continually providing market data for the period. Market data fees are collected monthly, generally in advance.

-Risk exposure fees are charged to customers who carry positions with market risk that exceeds defined thresholds. The Company recognizes revenue daily as the performance obligation is satisfied at a point in time by the Company taking on additional risk of account liquidation and potential losses due to insufficient margin. Risk exposure fees are collected daily.

-Payments for order flow are earned from various options exchanges based upon options trading volume originated by the Company that meets certain criteria and from IBKR Lite^SM liquidity providers. The Company recognizes revenue daily as the performance obligation is satisfied at a point in time on customer orders that qualify for payments subject to exchange-mandated programs. Payments for order flow are collected monthly, in arrears.

-Minimum activity fees are charged to customers that do not generate the required minimum monthly commission. The Company recognizes revenue monthly as the performance obligation is satisfied at a point in time by servicing customer accounts that do not generate the required minimum monthly commissions. Minimum activity fees are collected monthly, in arrears.

The Company’s electronic brokerage business also earns revenues from other services, including order cancelation or modification fees, position transfer fees, telecommunications fees, withdrawal fees, and bank sweep program fees, among others.

Disaggregation of Revenue

The tables below present revenue from contracts with customers by business segment, geographic location, and major types of services for the periods indicated.


	Year-Ended December 31, 2019
	Electronic Brokerage		Market Making		Corporate		Total

	(in millions)
Geographic location ¹
United States	$	599	$	2	$	2	$	603
International		244		—		—		244
	$	843	$	2	$	2	$	847

Major types of services
Commissions	$	706	$	—	$	—	$	706
Market data fees ²		45		—		—		45
Risk exposure fees ²		16		—		—		16
Payments for order flow ²		21		—		—		21
Minimum activity fees ²		27		—		—		27
Other ²		28		2		2		32
	$	843	$	2	$	2	$	847

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	Year-Ended December 31, 2018
	Electronic Brokerage		Market Making		Corporate		Total

	(in millions)
Geographic location ¹
United States	$	658	$	5	$	2	$	665
International		260		—		—		260
	$	918	$	5	$	2	$	925

Major types of services
Commissions	$	777	$	—	$	—	$	777
Market data fees ²		46		—		—		46
Risk exposure fees ²		26		—		—		26
Payments for order flow ²		21		—		—		21
Minimum activity fees ²		23		—		—		23
Other ²		25		5		2		32
	$	918	$	5	$	2	$	925

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(1)Based on the location of the subsidiaries in which the revenues are recorded.
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(2)Included in other income in the consolidated statements of comprehensive income.

Receivables and Contract Balances

Receivables arise when the Company has an unconditional right to receive payment under a contract with a customer and are derecognized when the cash is received. Receivables of $10 million and $9 million, as of December 31, 2019 and December 31, 2018, respectively, are reported in other assets in the consolidated statements of financial condition.

Contract assets arise when the revenue associated with the contract is recognized prior to the Company’s unconditional right to receive payment under a contract with a customer (i.e., unbilled receivable) and are derecognized when either it becomes a receivable or the cash is received. Contract assets are reported in other assets in the consolidated statements of financial condition. As of December 31, 2019 and 2018, contract asset balances were not material.

Contract liabilities arise when customers remit contractual cash payments in advance of the Company satisfying its performance obligations under the contract and are derecognized when the revenue associated with the contract is recognized either when a milestone is met triggering the contractual right to bill the customer or when the performance obligation is satisfied. Contract liabilities are reported in accounts payable, accrued expenses and other liabilities in the consolidated statements of financial condition. As of December 31, 2019 and 2018, contract liability balances were not material.

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