This is a very tragic series of events for MF’s customers and for the industry as a whole. Our losses from the stock purchases amounted to $39 million for the year, of which $29 million was recognized in the 4th quarter and is represented in our financials as other income.

In addition to our losses on the stock we also suffered some customer defections in the wake of the news. This was further aggravated by a Reuters article about hyper-hypothecation, which listed Interactive Brokers along with a number of the large banks. The article quoted and misinterpreted figures from our quarterly reports. As a result in the November, December period, for the first time in our history we experienced net withdrawal of customer funds to the tune of some 300 million dollars.

We had a very hard time convincing some our customers that other than cash and forex balances we do not have positions in non exchange traded assets, and other than with central clearing houses we do not carry open positions and therefore have no counterparty credit risk. Our proprietary market making business is conducted in a separate entity from our brokerage business. We do not commingle customer assets with proprietary operations and our brokerage company does not engage in proprietary trading.

Customer equity is segregated in special bank or custody accounts. Regulations require U.S. securities brokers to perform a detailed reconciliation of customer funds and securities as of every Friday to ensure that sufficient funds are set aside for the benefit of customers. With the recent spotlight on brokers segregation practices and the increased volatility in the markets, we have taken this further and requested regulators to allow us to perform the calculation and segregate the appropriate amount of funds on a daily basis. I am pleased to report that we have received permission and today we are either the only broker or one of the first brokers who segregates customer funds on a daily basis. This should give our customers additional comfort and allows us to demonstrate to the industry that firms who are well automated do not need the extra time over the weekend to figure out their segregation requirements.

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