Interactive Brokers has made significant strides in its brokerage in recent years and is on track to get a five-star rating by 2022. The broker has historically catered to both active and professional traders, and it has pushed to make its platforms and customer service more user-friendly and accessible. And these enhancements complement its powerful trading platform and astonishingly low margin rates. Thus, we think that this broker is another interesting one you should know. We already compiled all of its details in the article.
List of Contents
Interactive Brokers: Website
Minimum Balance: $0
Cost per stock trade: $1, for IBKR Pro, and $0 for IBKR Lite
Cost per options trade: $0.65 per contract
Commission-free: 150+ commission-free ETFs on IBKR Pro, All ETFs on IBKR Lite
No-transaction-fee mutual funds: 7,700+ NTF mutual funds
Securities: stocks, ETFs, bonds, mutual funds, options, futures, forex, metals, cryptocurrency
Customer service: By phone 24/7, chat on Monday-Friday 24 hours, and Sunday 1-7 p.m. ET, email
Account fees: $0 ACATS transfer-out fees
Mobile applications: Interactive Brokers offers the “IBKR Mobile” app on the Apple App Store and Google Play Store.
Genuinely, IBKR is another name for Interactive Brokers. It was established in the year of 1993. Importantly, it provides brokerage services using a streamlined methodology that places an emphasis on broad market access, reduced costs, and superior trade execution. In addition, customers can trade stocks, options, futures, currency, bonds, and funds across 135 markets using a single integrated account that manages all of their trading needs. The interesting point is that the company introduced its Impact Dashboard in 2022. It is a tool that guides you through the process of analyzing assets from the perspective of socially responsible investment (SRI).
All in all, Finxpd has found that Interactive Brokers is one of the best brokers for professional traders and active traders who want to take advantage of a powerful suite of tools and global access to a wide range of assets. Nevertheless, we will examine it more deeply into Interactive Brokers, so that you can determine whether or not it meets the requirements you have for an investment platform.
Genuinely, IBKR has a long history of having a poor image in terms of providing adequate customer service. However, the corporation is actively attempting to change this perception. A service called IBot, which is run by an artificial intelligence engine and responds to inquiries posed in plain English, was one of the features that the company implemented a few years ago. IBot is accessible throughout the website and trading platforms. Importantly, it can assist consumers in locating the information they need without requiring them to wait for an extended period of time. However, IBKR doesn’t offer only IBot, the other interesting services are as follows.
- There is support available over the phone. Moreover, it is free of charge 24 hours a day, 6 days a week.
- If you need to hang up, but don’t want to lose your place in line, you can use the callback feature to request another call at a later time.
- It also provides an online conversation with a real person which is available within the trading platform or website
- It offers a secure message center.
- IBot, which is driven by AI, guides clients to various online resources and frequently asks questions.
When it comes to the brokerage industry, Interactive Brokers provides the widest number of asset classes available. It frequently adds new items in response to the requests of its customers and links to emerging electronic exchanges as soon as this is practically possible. Customers have access to roughly 35,000 different mutual funds, around 8,300 of which do not charge a transaction fee. The following is a list of all that IBKR offers.
- Long and short positions on stocks (16,500 available to borrow)
- OTCBB (penny stocks)
- Mutual funds (approximately 35,000 total funds)
- Many types of bonds: Corporate, Municipal, Treasury, CDs, and International
- Options for a single leg or several legs, with a maximum of 8 legs
- Futures and futures options
- Interactive Advisors, a form of automated advice, are incorporated into both the website and the IBKR mobile app.
- The global community (135 exchanges in 33 countries)
- Forex (23 currencies and 115 trading pairs)
- Trading in fractional shares of U.S. companies listed on the NYSE, AMEX, NASDAQ, ARCA, or BATS, as well as OTC Pink U.S. penny stocks with an average daily volume of more than $10 million and a market capitalization of more than $400 million.
- Initial public offerings, stock warrants, and single-stock futures
- Bitcoin, Ethereum, Litecoin, and Bitcoin Cash among other cryptocurrencies, as well as cryptocurrency futures, indexes, and exchange-traded funds (ETFs)
The pricing structure of Interactive Brokers is somewhat confusing. It comprises the following forms of commissions for trading in the United States:
- When trading preferred stock, a transaction involving one share or fewer is subject to a minimum charge of one dollar, or one percent of the total trade value, whichever is lower. The cost of trading 1,000 shares is $5.00. (free for IBKR Lite clients).
- OTCBB stocks, often known as penny stocks, are subject to the same costs. However, to trade in this asset class, you will need to fulfill a number of particular requirements.
- Trading options do not incur any fees on a per-leg basis. When you make an options trade, the commission will be $0.65 per contract, with a minimum payment of $1.00. Fees associated with low-value contracts are reduced to $0.50.
- It costs $1 to trade a single contract. It will cost you $32.50 to trade 50 contracts.
- The cost of executing a covered call trade consisting of 500 shares of stock and five contracts is $5.75.
- For funds that are not on the list of funds that incur no transaction fees, the mutual fund fees are the lesser of 3% of the trade value or $14.95. The cost of international funds is 4.95 Euros.
- Consumers with a Pro account pay a margin interest rate of 2.33% on balances up to $100,000, while customers with a Lite account pay 3.33%. Among all of the brokers that were questioned, these are the most competitive interest rates. The interest rate on margin loans for Lite customers is one percent more than the rate for Pro customers.
- There are no charges incurred in order to transfer or close an account.
- There are no inactivity fees associated with any accounts.
- There is no charge for voluntary reorganizations, including exercise and assignment.
- One free wire transfer per month is provided to customers, after which there is a charge of $10.00 for any additional wire transfer. There is no cost associated with receiving a wire transfer.
- The sending of one paper check by a customer every month is free of charge. However, there is a price of $4.00 for each additional check that is sent.
- Futures deals are $0.85 per contract (plus exchange and regulatory fees). There was a tiered volume ranging from $0.25 to $0.85 per contract.
- Depending on the volume of the trade, the cost of forex transactions ranges from 0.20 to 0.08 basis points.
- A fee that is proportional to the trade value is applied to cryptocurrency transactions. The cost is 0.18% for trades worth up to $100,000 USD in cryptocurrency, 0.15% for trades between 100,000 and $1 million USD, and 0.12% for trades worth more than that per month.
- For clients who are enrolled in the fixed or tiered commission plans, trading 96 ETFs incurs no commission fee. For clients who are not enrolled in these plans, the commission rate is $0.005 per share, with a minimum order size of $1.00.
- Deals in broker-assisted equity cost thirty dollars per and are restricted to closing trades only. Customers can place trades for large block orders and transactions involving fixed income through a live broker. The fees for this service vary.
IBKR’s Client Portal and mobile app both allow a wide selection of order types, and the Trader Workstation can accommodate over one hundred different order types and algorithmic trading strategies. On TWS, the functionality of one-triggers-other, or OTO, orders can be found with connected orders. While on mobile, it can be found as part of the bracket order feature. You have the ability to choose from and combine logical conditions when using one-cancels-other (OCO) orders. These conditions include price, time, and volume variables, as well as margin cushion, daily P&L, percentage change, number of shortable shares, and rebate rate.
The process of joining IBKR has become less complicated over the past few years. Even if you don’t plan to fund the account, you can create one. The website has been thoughtfully designed. The features such as the Client Portal and IBot, a digital assistant powered by AI, can aid you in locating the information you require.
Moreover, multiple trading platforms are supported by Interactive Brokers. These include desktop, web, and mobile versions (IBKR Mobile). The mobile version can be downloaded on Android and iOS devices. Although the app and the online platform are functionally comparable to one another, none is quite as advanced as the Trader Workstation (TWS). It is the name of the company’s premier trading platform.
Generally, on whatever platform, you have access to the same asset types for trading. In a similar way, you get access to real-time streaming data, graphing, drawing tools, research, and news across all of the platforms. There are dozens of sources from which one can obtain news such as Benzinga, Dow Jones, Morningstar, Seeking Alpha, Thomson Reuters, Refinitiv, and in-house commentary. However, a monthly charge is required for subscriptions to premium news publications. Importantly, any watchlists that you make on your mobile device will automatically be synced with your browser and desktop platforms.
IBKR’s Client Portal is an excellent platform from which to place simple trades, check on existing positions, and obtain a real-time view of your accounts. It is not difficult to gain access to a trade ticket or configure trade defaults. Having said that, the majority of traders who are interested in getting the most out of their Interactive Brokers account will be utilizing the Trader Workstation (TWS).
TWS provides a significant increase in the number of functionalities available and was developed for active traders and investors that require flexibility and trade a variety of items. Thus, you have the ability to establish hotkeys, which will allow you to place orders in a hurry. In addition, you have the choice of staging orders for later execution, either one at a time or in a batch. You have the ability to specify a date and time for an order to be communicated, or you can submit a conditional order that will only take effect once certain circumstances have been satisfied. An example is when an existing order is carried out. Moreover, connecting an application to TWS enables users to execute automated trades and subscribe to trade signals provided by third-party suppliers.
Besides, directly from the chart, you are able to put, change, and manage any orders that you have. Even if you have many devices open at the same time, you will still be able to access streaming real-time quotes, charts, and news content across all platforms.
Security and Reliability
The security criteria of the industry are met or exceeded by IBKR. These are the following:
- Users of the mobile app can log in using biometric recognition.
- There are several types of two-factor authentication.
- The Securities Investor Protection Corporation (SIPC) insures client securities accounts at Interactive Brokers LLC for up to $500,000, with a cash sublimit of $250,000. Excess SIPC coverage offers up to an extra $30 million, subject to a total limit of $150 million.
- The Bank Deposit Sweep program from Interactive Brokers allows clients to supplement their existing $250,000 SIPC coverage with $2,500,000 of FDIC insurance on appropriate cash holdings.
- The Identity Theft Research Center reported no notable data breaches at any IBKR location until 2020.
- In May 2020, the IBKR Securities Class Action Recovery service went live. It is a computerized service meant to alleviate the administrative complexity of taking part in a securities class action lawsuit.
- The service determines if you are eligible to file a claim for securities purchased or sold at IBKR in the past. When relevant, the service files claims with claims administrators on your behalf and seeks to recover compensation monies. Any recovered funds are transferred directly into your IBKR account, less a 20% contingency fee.
The Financial Industry Regulatory Authority (FINRA) stated on August 10, 2020, that it had penalized Interactive Brokers LLC $15 million for numerous failings in the firm’s anti-money laundering (AML) program. The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) both issued disciplinary procedures and fines on the same day, totaling $38 million in penalties paid to the three agencies. The pricing structure of IBKR is complex. However, specifics are readily available on the website under the pricing option. Commissions are split down by asset type and plan.
News and Education
IBKR offers a variety of investor education programs to customers and the general public. Traders Academy is an online, on-demand resource with a structured, rigorous curriculum designed for financial professionals, investors, educators, and students interested in learning about the asset classes, markets, currencies, tools, and functionality available on IBKR’s trading platforms. Quizzes and tests assess student progress in relation to learning objectives and allow students to learn at their own speed. Introductions to asset classes such as options, futures, forex, international trading, and bonds, as well as how to use margin. They are examples of course offerings. Some courses provide an overview of the main IBKR technology platforms and tools. A trading glossary and FAQ are available on the website.
Moreover, daily webinars are offered by IBKR and industry professionals. These seminars include a wide range of topics such as platform and tool how-to, options education, trading overseas products, and more. On-demand recordings are accessible in a variety of languages, including English, Spanish, Chinese, Italian, and French.
- Suitable Trading Commissions
- Various Investment Options
- High-Quality Trading Tools
- Lowering Margin Rates
- Few Investment Accounts
- No Custom Backtesting or Automated Trading
- Suitable Trading Commissions
Trading commissions are one of the most appealing features for users, and Interactive Brokers is aware of its price structure. Thus, the broker has dropped its minimum monthly activity fee, which used to cost consumers at least $10 each month if they didn’t earn at least that much in commissions. Therefore, it’s even easier for newer investors to get started here now.
- Various Investment Options
Genuinely, the broker provides the standard options such as stocks, bonds, ETFs, mutual funds, and options. However, it goes even further. Traders can also locate futures and metals, as well as trade stocks on overseas exchanges. At Interactive Brokers, you will feel as if you can trade anything. Furthermore, the broker provides bitcoin trading, which is not available at every competitor. Thus, you will be able to exchange Bitcoin, Bitcoin Cash, Ethereum, and Litecoin for a low fee.
- High-Quality Trading Tools
IBKR’s Trader Workstation (TWS) platform is effective enough for professional traders, while also catering to retail traders and investors. There are numerous technical analysis tools, Social Sentiment by Social Market Analytics, ESG scores from Refinitiv, and Fundamentals Explorer access to corporate fundamentals data on stocks and mutual funds.
- Lowering Margin Rates
IBKR’s margin rates are less than average. The company blends tier-based rates. For example, a balance of over $1 million gets taxed $100,000 at Tier 1 and $900,000 at Tier 2.
- Few Investment Accounts
Interactive Brokers may not offer specialist retirement accounts. The broker offers the regular IRA, Roth IRA, rollover IRA, and SEP IRA, but not the SIMPLE IRA or the solo 401(k), which is a superior alternative to the SEP IRA.
- No Custom Backtesting or Automated Trading
While IBKR is a very powerful platform, it does have several shortcomings. With the basic IBKR software, traders cannot currently backtest custom trading algorithms or automate trading. A third-party application programming interface will be required for advanced traders looking for these functionalities (API).
Is Interactive Brokers a Worth Broker to Get?
If you are a sophisticated investor, you will benefit more from Interactive Brokers. However, even if you are a novice investor, you shouldn’t let that stop you from at least checking out the following features of this broker that attract the attention of more seasoned traders:
- More features such as fractional trading and a cleaner login page, have been added by Interactive Brokers to make it more accessible to all investors.
- The Lite tier introduces new investors to the game with no commissions, while the Pro tier remains available for more advanced traders who benefit from it.
- Interactive Brokers is an excellent choice for more knowledgeable investors due to its extremely cheap margin rates, ESG grading, and comprehensive trading platform.
In conclusion, there is a wide variety of products, tools, and technological solutions available through Interactive Brokers. Overall, we discovered that IBKR is most suitable for professional traders as well as sophisticated, active traders who wish to make the most of a comprehensive array of tools and global access to a diverse selection of assets. However, it is important to note that you can trade any of those assets from a single, integrated account, which is a convenience that most brokers are unable to provide their customers.
Even though IBKR is working to make its technology more appealing to a wider audience, there are so many different tools and resources available that it may be overwhelming for many new investors. However, if the services provided by your present broker are no longer sufficient for your needs, or if you anticipate that this will soon be the case, Interactive Brokers may be a logical move for you to take.
Interactive Brokers (IB) is an online brokerage platform that allows you to trade stocks, options, futures, currencies, bonds, and funds.
To open an account with Interactive Brokers, visit their website and select the “Open Account” option. After that, you will be required to submit some personal information, such as your name, address, and social security number.
Interactive Brokers provides many trading platforms, including their flagship Trader Workstation (TWS), which is accessible for both desktop and mobile devices. They also provide a web-based platform known as WebTrader and a mobile app known as IBKR Mobile.
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Source: Investopedia, Bankrate