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

Interactive Brokers (U.K.) Limited Remuneration Code Disclosure – as of 31 December 2014

In June 2013 the European Parliament and Council approved the Capital Requirements Regulation ("CRR") and Capital Requirements Directive ("CRD"), which together comprise CRD IV. The CRD establishes a revised regulatory capital framework across Europe governing the amount and nature of capital credit institutions and investment firms must maintain. In the United Kingdom, the CRD has been implemented by the Financial Conduct Authority ("FCA") in its regulations through the General Prudential Sourcebook ("GENPRU") and the Prudential Sourcebook for Investment Firms ("IFPRU").

The FCA framework consists of three pillars. Pillar 3 complements the minimum capital requirements (Pillar 1) and the supervisory review process (Pillar 2) by requiring disclosure of specified information about the firm's underlying risk management controls, capital position and remuneration. Pillar 3 also incorporates the provisions of Systems and Controls (SYSC 19) of the FCA Handbook known as the FCA Remuneration Code (the "Code"). The Code regulates the remuneration structures and practices of banks, building societies and MiFID investment firms. The FCA takes a proportionate approach, which allows firms to tailor their remuneration policies to reflect the size, nature, scope and complexity of their activities.

Business Summary

Interactive Brokers (U.K.) Ltd ("IBUK") is a subsidiary of Interactive Brokers Group, Inc. (" IBG"), which 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 960 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 agencies around the world.

IBUK is a standalone IFPRU limited license firm authorized and regulated by the FCA. Furthermore, IBUK falls under the proportionality level 3, and, as such, the disclosure is made in line with the requirements for proportionality level 3 firms. Under the Code, the firms such as IBUK are required to disclose information, on an at least annual basis, regarding their remuneration policy and remuneration practices for those employees identified as ‘Code Staff.'

Materiality and Proprietary or Confidential Information

The CRR's Article 432(1) states that a firm may omit one or more of the required disclosures if the information provided by such disclosures is not regarded as material. The criterion for materiality is that 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 purpose of making economic decisions.

Where IBUK has considered a disclosure to be immaterial, IBUK has stated this in a relevant section.

The CRR's Article 432(2) states that a firm may omit one or more items of information included in the required disclosures if those items include information which is regarded as proprietary or confidential. The criterion for proprietary information is that a firm must regard information as proprietary information if sharing that information with the public would undermine its competitive position, where such proprietary information may include information on products or systems which, if shared with competitors, would render a firm's investments therein less valuable. The criterion for confidential information is that a firm must regard information as confidential if there are obligations to customers or other counterparty relationships binding the firm to confidentiality.

Where IBUK has considered a disclosure to be proprietary or confidential, IBUK has stated this in a relevant section.

IBUK's Remuneration Committee

Under the proportionality provisions available in the Code and with regard to the legal structure, size, internal organization and nature and scope and complexity of IBUK's activities, IBUK is not required to have a formal remuneration committee. Instead IBUK applies an enterprise-wide approach to its remuneration policies and practices. IBG LLC being the IBUK's holding company, IBG LLC's Remuneration/ Compensation Committee (the ‘‘Remuneration Committee'') is responsible for the oversight of the IBUK's remuneration strategy. Specifically, the Remuneration Committee establishes, implements and maintains remuneration policies, procedures and practices in line with the applicable regulatory standards, including the Code and promotes sound and effective risk management. At the same time, IBUK's remuneration policies and practices are aimed to discourage excessive or undue risk-taking in addition to avoiding conflicts of interest.

The Remuneration Committee met once during the 2014 accounting year.

The IBUK's remuneration policy is considered to be appropriate to its legal structure, size, internal organization and the nature, scope and complexity of its activities.

Code Staff Criteria

In accordance with the Code, IBUK is required to identify those of its staff which it considers to be ‘Code Staff.' In general terms, Code Staff are those senior individuals whose managerial responsibilities or professional activities could influence, and have a material impact on, the firm's overall risk profile.

Decision-Making Process

The remuneration structure is made up of fixed pay, variable remuneration and long term share incentive scheme. The key attributes of this compensation framework, in addition to the Remuneration Committee's discretion, include: Group performance, individual performance, risk and control, individual skill, and departmental requirements in line with the firm's long-term interests and objectives. Employees are rewarded based on their contribution on the overall strategy and performance of the business.

IBUK remunerates its employees through a combination of fixed pay (base salary and benefits) and variable remuneration, including an annual performance-related bonus, where compensation is made in the form of a mixture of cash and long-term share-based payments. For all employees, including Code Staff, variable remuneration in form of bonuses is discretionary and paid annually. The purpose of the bonuses is to take into account individual performance, performance of the individual's business unit and the overall results of IBUK. Additionally, this variable component aims to incentivize all IBUK employees in the longer term.

IBUK's key employees (including staff subject to the Code) participate in the IB stock compensation plan which is a scheme introduced to increase the emphasis on stock-based incentive compensation and align employee interests with shareholder interests over the long term. Under the terms of the IB stock compensation plan, employees are awarded stock units in the 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.

Link between Pay and Performance

The Compensation Committee bases its executive compensation decisions on core compensation principles, including the following:

The Remuneration Committee retains the discretion to vary the profit sharing arrangements as appropriate and in doing so will factor in any risk adjustments it may deem appropriate.

Aggregate Quantitative Remuneration Data

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. 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.

IBUK has identified two (2) employees as being in a senior management position, performing a Significant Influence Function (as categorized by FCA under Controlled Functions) and as such defined as Code Staff. In view of IBUK's low headcount and number of code staff, IBUK has taken the position that disclosing detailed remuneration data could (1) potentially jeopardize the privacy of individual personal data and (ii) jeopardize IBUK's competitive position and as such will not be disclosed.

The aggregate quantitative information on code staff remuneration is published in the "Report and Financial Statements 2014" of IBUK filed at the Companies House.