Interactive Brokers (U.K.) Limited - Remuneration Policy

Interactive Brokers (U.K.) Limited Remuneration Code Disclosure – as of 31 December 2015

Introduction

Interactive Brokers (U.K.) Ltd ("IBUK") is authorized and regulated by the Financial Conduct Authority (the "FCA") as an IFPRU limited activity firm and so it is subject to the FCA's rules on remuneration. These are contained in the FCA's Remuneration Code located in the Systems and Controls (SYSC 19) of the FCA Handbook. The Remuneration Code (the "Code") covers an employee's total remuneration, fixed and variable. IBUK incentivizes staff through a combination of the two.

A subsidiary of Interactive Brokers Group, Inc. ("IBG"), IBUK is an automated global electronic market maker and broker providing its customers with a trading platform allowing them to trade on more than 100 exchanges worldwide. IBG's headquarters are in Greenwich Connecticut, and it has approximately 1087 group employees in its offices in the USA, Switzerland, Canada, Hong Kong, UK, Australia, Hungary, Russia, Japan, India, China and Estonia. IBG is regulated by the SEC, FINRA, NYSE, FCA and other regulatory bodies around the world.

Our policy is designed to ensure that we comply with the Code and IBU's compensation arrangements:

  1. Are consistent with and promotes sound and effective risk management;
  2. Do not encourage excessive risk taking;
  3. Include measures to avoid conflicts of interest; and
  4. Are in line with IBUK's business strategy, objectives, values and long-term interests.

Proportionality

Enshrined in the European remuneration provisions is the principle of proportionality. The FCA has sought to apply proportionality in the first instance by categorizing firms into three (3) levels. IBUK falls within the FCA's proportionality level three (3) and, as such, this disclosure is made in line with the requirements for a level three (3) firms.

Application of the Requirements

Under the Code, IBUK is required to disclose certain information on an at least annual basis regarding the remuneration policy and practices for those employees whose professional activities have a material impact on the risk profile of IBUK and who have been identified as ‘Code Staff.' IBUK's disclosure is made in accordance with our size, internal organization and the nature, scope and complexity of our activities.

  1. Summary of information on the decision-making process used for determining IBUK's remuneration policy.
    • IBUK's policy has been agreed by the IBG LLC's Remuneration/ Compensation Committee (the "Remuneration Committee") in line with the Code's principals laid down by the FCA.
    • With regards to IBUK's size and internal organization as well as nature, scope and complexity of activities, IBUK is not required to appoint an independent Remuneration Committee. Consequently, IBUK applies an enterprise-wide approach to its remuneration policies and practices.
    • IBUK's policy will be reviewed as part of the annual process and procedures, or following a significant change to the business requiring an update to its internal capital adequacy assessment.
    • IBUK's ability to pay bonuses is based on the performance of IBUK and IBG overall.

  2. Summary of how IBUK links between pay and performance.
    • Employees are rewarded based on their contribution to the overall strategy of the business. Other factors such as performance, reliability, effectiveness of controls, as well as business development and departmental requirements in line with IBUK's long-term interests and objectives are taken into account when assessing the performance of the senior staff.
    • Employees are remunerated by the means of fixed pay, including pension and benefits, and variable remuneration which consists of an annual performance-related bonus.
    • IBUK's key employees (including Code Staff) participate in the IB stock compensation plan which is a scheme introduced to align employee interests with shareholder interests over the long term. Employees are awarded stock units in IBUK's parent company, IBG Inc. (symbol IBKR). The stock units have various vesting provisions and generally convert to common stock over seven (7) years. Such units are restricted from sale, transfer or assignment until the end of the restriction period.

  3. Aggregate quantitative information on remuneration, for staff whose actions have a material impact on the risk profile of IBUK.

    Pursuant to the disclosure requirements applicable to proportionality level 3 firms, IBUK is required to disclose aggregate information on remuneration in respect of its Code Staff, broken down both by business area and by senior management and other Code Staff.

    IBUK may omit required disclosures where we believe that the information could be regarded as prejudicial to the UK or other national transposition of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data.

    IBUK has identified three (3) employees as being in a senior management positions within the definition of Code Staff. IBUK has made no omissions on the grounds of data protection but due to confidentiality have omitted to provide a breakdown of remuneration given the limited number of Code Staff. The relatively small size of IBUK and lack of complexity is such that IBUK has only one business area so the disclosure is not broken further.

    The aggregate quantitative information on code staff remuneration is published in the "Report and Financial Statements 2014" of IBUK and will be updated with the "Report and Financial Statements 2015."

A note on Materiality

A firm must regard information as material in disclosures if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purposes of making economic decisions.

A firm must regard information as proprietary information if the sharing of that information with the public would undermine its competitive position.

Proprietary information may include information on products or systems which, if shared with competitors would render the firm's investment in them less valuable.

A firm must regard information as confidential if there are obligations to customers or other counterparty relationships binding the firm to confidentiality.

CEBS has stated that it is unlikely that the disclosure of information relating to remuneration would be confidential or proprietary for firms that have been allowed to aggregate the information due to proportionality.

Where there is a limited number of Code Staff then a firm may consider such omissions.