What’s the Best Small Cap Electronic Brokerage Stock? IBKR, MKTX & IGEX

If you have found yourself trading more as the markets become more volatile or struggling to come to terms with low interest rates, small caps like Interactive Brokers Group, Inc (NASDAQ: IBKR), MarketAxess Holdings Inc (NASDAQ: MKTX), Indo Global Exchanges PteLtd (OTCMKTS: IGEX) which are in the electronic brokerage or trading platform business would be well worth taking a closer look at. Here is what you need to know about all three:

Interactive Brokers Group. An automated global electronic broker, Interactive Brokers Group specializes in catering to financial professionals by offering state-of-the-art trading technology and a brokerage trading platform which executes and processes trades in securities, futures and foreign exchange instruments on more than 100 electronic exchanges and trading venues around the world. Earlier this month, Interactive Brokers Group reported 471,000 Daily Average Revenue Trades (DARTs) for August - 32% higher than August of last year and 1% higher than prior month. Back in July, Interactive Brokers Group reported second-quarter financial results as net revenue increased to $283.9 million from $260.9 million last year while income before income taxes was $134 million verses $109 million. In the earnings call (the transcript is available on Seeking Alpha here), the CFO noted that:

"Low benchmark interest rates, which continue to compress the spreads earned by our Brokerage units, have been offset by steadily higher customer credit balances in each successive period, and our aggressive lending rates have boosted customer margin borrowing."

Along with:

"Customer credit balances, which increased 23% over the year-ago quarter also continue to grow progressively, though spread compression, especially in certain foreign currencies persist in restraining interest income."

Otherwise, investors should note that Interactive Brokers Group has a trailing P/E of 23.29 and a forward P/E of 16.16 along with a forward dividend of $0.40 for a 2.1%. On Wednesday, Interactive Brokers Group fell 0.53% to $18.75 (IBKR has a 52 week trading range of $13.48 to $18.95 a share) for a market cap of $936.85 million plus the stock is up 38.3% since the start of the year, up 32.2% over the past year and down 14.7% over the past five years.

MarketAxess Holdings. Over 1,000 institutional investor and broker-dealer firms are active users of the MarketAxess Holdings' trading platform to access global liquidity in US high-grade corporate bonds, European bonds, high-yield and emerging markets bonds, agency bonds, asset-backed and preferred securities and credit default swaps. Back in July, MarketAxess Holdings reported record revenues of $65.6 million (up 34.3%), record total trading volume of $187.7 billion (up 29.6%), record estimated US high grade market share of 14.1% and record pre-tax income of $31.5 million (up 48.6%). The Chairman/CEO noted that:

"The record volumes in our three core products - high grade, high yield and emerging markets – were driven by growth in market share and led to record revenues and pre-tax income. We are also pleased with the promising momentum in our Open Trading initiatives and the positive response to our early integration efforts in Europe with Xtrakter."

In the earnings call (the transcript is available on Seeking Alpha here), the Chairman/CEO noted also that:

"The progress that we've made in EM over the last four to six quarters is primarily driven by U.S. investors that are active in emerging markets and European investors. The local markets activity is starting to tick up. And actually, in Brazil specifically, the tax on foreign investment was just removed in June. And following that change, we've seen a modest up tick in cross regional flow into Brazil local markets."

MarketAxess Holdings has a trailing P/E of 32.94 and a forward P/E of 29.70 along with a forward dividend of $0.52 for a dividend yield of 0.90%. On Wednesday, MarketAxess Holdings fell 2.41% to $59.99 (MKTX has a 52 week trading range of $27.90 to $62.26 a share) for a market cap of $2.25 billion plus the stock is up 71.9% since the start of the year, up 94.4% over the past year and up 580.9% over the past five years.

Indo Global Exchanges. Based in Indonesia with its population of 240,000,000, Indo Global Exchanges is one of the more interesting trading platform providers since its focus is on the largely untapped Asian markets plus the company aims to become one of the world's foremost online global trading platforms. Indo Global Exchanges provides comprehensive online trading platforms offering the following market access to the clients:

Over 30 global equity exchanges for trading in securities. Over 30 global equity exchanges for trading in CFD's (Euro Zone, UK, Japan, Asia, Oceania, Canada and USA). Over 180 currency pairs in spot (Cash), forwards and options. Gold and Silver trading in spot (Cash), forwards and options. Global Commodity Futures exchanges including financial futures. Indices and Commodity CFD's.

In addition, the Indo Global Exchange also uses Halifax Investment Services Pty Ltd and Australian Stock Report as its clearing and settling operation in Australia. Earlier this month, Indo Global Exchange announced the appointment of Dermot Michael Monaghan to its Board of Directors. Dermot has extensive experience in the North American and Asian financial markets from working in various capacities for the Royal Bank of Canada, RBC Capital Markets, PT Masuka, ABN AMRO (SECS) Asia, Standard Chartered Securities, ING Baring Securities and Cresvale Securities. He also currently resides in Indonesia. On Wednesday, Indo Global Exchanges rose 19.57% to $0.550 for a market cap of $39.87 million plus the stock is up 266.7% since last July.

The Bottom Line. Your next smart investment or trade might just be in a small cap electronic brokerage or trading platform stock like Interactive Brokers Group, MarketAxess Holdings or Indo Global Exchanges.