Brokerage firms offer execution and clearing in equity securities, options, fixed income, mutual funds and other securities to individuals, institutions and active or professional traders. Traditional online brokerage firms cater to self-directed retail investors by providing access to websites through which orders can be placed. Prime brokers act as settlement agent, provide custody for assets, provide financing for leverage, and prepare daily account statements for their clients, who generally are money managers, hedge funds, market makers, arbitrageurs, specialists and other professional investors.

Direct-access trading systems allow an investor to see bid and offer quotes disseminated by market centers and to direct orders to a specific destination to interact with a specific bid or offer using software and high-speed computer linkages to such places as NASDAQ, various ECNs and options and futures exchanges.

The retail electronic brokerage industry has experienced moderate growth in the past several years, as evidenced by both the increase in the number of customer accounts and the trades executed by those customers. In the United States, the number of retail online brokerage accounts has increased from 11.9 million in 2000 to 14.7 million in 2005, according to the publicly available filings of major U.S. online brokers, representing a CAGR of 4.3%.

The speed, efficiency and visibility provided by the Internet are expected to continue to drive an overall expansion of the electronic brokerage industry. In addition, the proliferation of such tools as analytical software packages and third-party securities research is expected to support the continued growth of the electronic brokerage industry as investors become increasingly comfortable with making their own investment decisions and executing upon those ideas via the Internet.

The Company conducts its market making business through its Timber Hill subsidiaries. The Company provides liquidity by offering competitively tight bid/offer spreads over a broad base of approximately 324,000 tradable, exchange-listed products. In particular, the Company is a market leader in exchange-traded equity options, equity-index options and futures.

The Company commits its own capital and derives revenues or incurs losses from the difference between the price paid when securities are bought and the price received when those securities are sold.

The Company’s entire portfolio is evaluated each second and continuously rebalanced throughout the trading day.

The Company conducts its electronic brokerage business through its Interactive Brokers (IB) subsidiaries. As an electronic broker, the Company executes, clears and settles trades globally for both institutional and individual customers.

Capitalizing on the technology originally developed for the Company’s market making business, IB\\\\\\\'s systems provide the customers with the capability to monitor multiple markets around the world simultaneously and to execute trades electronically in these markets at a low cost in multiple products and currencies from a single trading account.

The Company offers its customers access to all classes of tradable, exchange-listed products and market centers, including stocks, bonds, options, futures and forex, traded on more than 50 exchanges and market centers and in 16 countries around the world seamlessly.

The Company offers its customers state-of-the-art tools, which include a customizable trading platform, advanced analytical tools and sophisticated order types such as guaranteed combination trades.

Trading gains increased $159.2 million, or 34%, to $631.1 million for the nine months ended September 30, 2006 from $471.9 million for the nine months ended September 30, 2005.

Net interest income increased $74.2 million, or 106%, to $144.0 million for the nine months ended September 30, 2006 from $69.8 million for the nine months ended September 30, 2005.

Non-interest expenses increased by $100.5 million, or 37%, to $369.1 million for the nine months ended September 30, 2006 from $268.6 million for the nine months ended September 30, 2005.

Net income increased $198.8 million, or 52%, to $578.3 million for the nine months ended September 30, 2006 from $379.5 million for the nine months ended September 30, 2005.