The Bottom Line: Interactive Brokers is an award-winning, no-frills first-mover in the electronic brokerage space. Trade almost anything you want, virtually anywhere in the world, all for a fraction of the cost of other brokerages.
If you are an experienced trader looking for a low-cost online trading platform, then Interactive Brokers (or IB for short) is the perfect broker designed specifically for you.
It is a very powerful platform with a robust set of features that is reliable for any seasoned trader.
In this review, I will cover Interactive Brokers features, technology, fees, pros and cons, and if it is an online broker that I recommend.
Minimum Investment: $10,000
Trades: $0.005/trade $1.00 minimum
Promotion: Free Trial
What Is Interactive Brokers?
Interactive Brokers Inc. (IB) is a leading, long-standing US-based brokerage firm. Known as one of the first online brokers, IB offers ultra low-cost trading in over 65 order types on exchanges worldwide.
To date, it is the largest electronic trading platform by number of daily average revenue trades.
IB is an online brokerage offering direct-access trading in a variety of investments, from stocks to bonds, futures to precious metals — and just about everything in-between.
The brokerage trades publicly on the S&P 400 Component under the name Interactive Brokers Group Inc. (IBKR).
The brokerage hosts an array of tools for the modern trader, including an advanced trading platform and a more streamlined version for less experienced users.
IB continues to score top marks as a go-to platform for experienced traders seeking high-volume, low-cost, and no-frills access to global markets.
Barrons 2019 listed IB as a top-five Best Broker, similar to TD Ameritrade and Charles Schwab, but with low commissions and a focus on large customers.
The story of IB began in the 1970s with founder, chairman, and CEO Thomas Peterffy.
Peterffy, a Hungarian-born programmer-businessman, emigrated to the United States and quickly recognize that computers would transform trading.
Known for his insistence on automation and algorithmic trading, Peterffy’s relentless pursuit of efficiency in stock trading led to the genesis of T.P. & Co, a market maker created in 1977 — later renamed to Timber Hill Inc.
In 1993, the IB that we know today was created alongside Interactive Brokers Group Inc. Timber Hill and IB are held under Interactive Brokers Group as subsidiaries.
IB boasts 24 offices in 12 countries as of this writing. The company is publicly traded, with 16.6% publicly held and the remainders held by Peterffy and the employees at IB.
The brokerage is regulated by the NYSE, SEC, FINRA, FCA, and by other applicable agencies worldwide.
Drive by Peterffy’s focus on technological automation, IB was able to establish itself as a low-cost brokerage for experienced traders. The company touts a committed following of traders worldwide.
Interactive Brokers Features
How Does Interactive Brokers Work?
IB is a full-service brokerage offering a range of products and services. This brokerage is not for the faint of heart.
Novice traders are encouraged to steer clear as at times IB is not user-friendly — in fact, it is mostly geared towards the experienced, sophisticated trader.
To get a better understanding of IB, we are going to dive into its full range of products and services and will follow this up with an overview of the trading platforms IB offers.
A Smorgasbord of Investment Products
For the modern trader, opening up the product section of IB is like hitting the jackpot.
At your fingertips, you’ll have access to and the ability to trade a tremendous range of investment products.
IB boasts over 60+ investment products, which can be traded in over 120 exchanges globally. Below is a tantalizing taste of just what IB has to offer.
- Penny stocks
- Futures options
- Exchange traded funds (ETFs)
- Single stock futures (SSFs)
- Exchange of futures for physical (EFP)
- Mutual funds
- Precious metals
- Fixed Income
- Structured products
- Contract for difference (CFD)
Cash Products and Investment Services
Need some fuel to fan the flames of your investment desires? IB offers industry-leading margin rates and a handful of margin methods to get you off to the races.
IB is keen on giving you the tools you need, the fuel you need, and the extra cash you need to get the trades flowing.
Beyond margin, IB offers a range of cash products to keep your hard-earned dollars in their coffers. Here’s what caught our attention:
- Interest on certain idle accounts
- Stock yield enhancement program
- Borrow against your account
- IBKR debit Mastercard
While IB is trying to put money back into your pocket, they are also hard at work helping you trade at your best.
The brokerage offers three core services for the professional trader.
1. Interactive advisors. IB will select a portfolio for you, choose from a leading institution, or co-invest with a rock-star portfolio manager.
2. Account management. Get access to the client portal or advisor portal (with a full CRM tool). Manage, analyze, trade, and connect with others all in one place.
3. Investors marketplace. Find business opportunities, third-party integration, and a slew of other services on IB’s hub for investor mingling.
An Account Type for Everyone
IB seems to have thought of everything. Okay, almost. While they don’t have 401ks or 529s, they offer accounts for just about everyone else.
- Individual, Joint, Trust, IRA and UGMA/UTMA
- Family office
- Small business
- Money managers
- Proprietary trading group
- Hedge fund manager
- Compliance offer
- And more
Knowledge is the Path to Stellar Trades
IB knows that sophisticated traders need a range of educational resources. Unlike some other popular brokerages, IB charges for some of its research.
It might not be a leader, but don’t let that stop you. IB offers many research highlights, screeners, feeds, and other advanced portfolio analysis tools.
Traders’ Academy is a focal point for learning. Courses range from introductory courses in options or technical analysis, all the way to in-depth lessons on IB algorithms.
IB also offers webinars and additional training videos for learning on-the-go. Beyond the Academy, IB has Traders’ Insight, a gathering place for commentary from leading traders around the world.
Last, but not least, are the additional support resources for traders. Don’t let this section fool you.
It's name hides a wealth of resources, including three of our favorites:
- Traders’ Calendar App
- Options Strategies App
- Probability Lab
Without further ado, we will turn to the section that all of our investors have been waiting for: The IB trading platform.
Interactive Brokers Commissions and Fees
An astute trader will immediately home in on one of the more important elements of trading: price. IB is known for ruling the brokerage world with bottom-dollar pricing.
IB is equally known for its complicated commissions structure and unfriendly account fees and penalties. Read on as we pull back the curtain on its complicated pricing.
Starting Your Account
IB offers volume-tiered pricing and fixed-rate pricing. For simplicities sake, let’s focus on fixed rate pricing. Volume discounts are available on many products.
Stocks & ETFs
$0.005 per share, $1 minimum, 1% trade max.
$0.25 to $0.70 per contract, $1 minimum
Lesser of $14.95 or 3% * trade value,per transaction
0.20 basis point * trade value, $2 minimum
Futures and future options
$0.85 per U.S. contract
0.15 basis point * trade value, $2 minimum, + storage and borrow fees
Note that IB offers over 48 commission-free ETFs and over 4,100 no-transaction-fee mutual funds.
Interest on Idle Cash
IB will pay those investors who keep idle cash in accounts with the required account balance. As of July 2019, IB offers 1.91% on account balances over $10,000. Anything less and the rate is 0%.
IB is known for leading the industry with its margin lending rates. At the time of writing, IB has the following margin rates.
$0 - $100,000
$100,000.01 - $1,000,000
$1,000,000.01 - $3,000,000
$3,000,000.01 - $200,000,000
$200,000,000.01 and above
Other Costs and Fees
Unlike some other brokerages, IB charges for some of its research and news services. Fees range from $20 for research services up to $600 for premium news services
Platform and Technology
If you’ve heard anything about IB, you’ve likely been cautioned to stay away unless you are a pro. Novice and intermediate investors that come into contact with IB often report a complicated platform, something akin to the cockpit of a Boeing 737 — and not the newer versions.
The IB Desktop Trader Workstation, or TWS for short, is the flagship platform. This is where IB puts much of its time and energy.
While complicated, it is full of technology for the sophisticated trader. TWS is not beginner-friendly, but should it be?
Within TWS is a completely customizable workspace that IB calls Mosiac. Add, organize, and subtract everything from charts to scanners, watchlists to alerts.
For the novice traders looking for a challenge, lured in by the ultra-low fees and a slew of investment products, IB has you covered.
WebTrader is an HTML-based simplified and streamlined version of TWS. WebTrader was built for ease-of-use and works behind firewalls.
Traders on the go can trade through IB’s mobile app, available for both iOS and Android. Users can download the IBKR mobile app to trade whenever inspiration strikes.
Also available is the IB Client Portal. The portal consolidates all key information into one easy-to-view dashboard.
Check account balances, quotes, make trades, and explore key performance indicators.
Last, but not least, for those who find that trading with their hands isn’t fast enough, IB offers iBot.
IBot is an integrated natural language processing tool built into all IB’s trading platforms. Control your trading with voice commands.
Who Interactive Brokers is Right For?
IB occupies a very precise niche within the professional trading world.
Led by a business guru focused on squeezing the utmost out of trading through optimization, IB is well-known and well-loved among its diehard adherents.
This brokerage is certainly not for everyone — but for those with specific needs, IB is the right platform at the right price.
The low, Industry-leading commissions and margin rates make IB particularly appealing to professional traders who don’t need a lot of bells and whistles.
Investors with deep pockets are served well by IB’s low rates, volume discounts, and idle cash interest rates. Those trading on margin will be well-served by the low margin rates.
While IB is seen as a professional, no-frills platform, the brokerage offers many useful resources for the young or novice traders.
Despite the steep learning curve, IB continues to offer a variety of trading products at low rates worldwide. No wonder IB continually ranks at the top of brokerages within the industry.
- Low commission rates, especially compared to peers
- Industry-leading margin rates
- Comprehensive list of securities available to trade
- Access to 120 international markets
- Variety of trading platforms for professional, novice, and those traders on-the-go
- Free trial account
- Referral program
- Tons of extras, from research to business opportunities.
- Complicated fee structure
- TWS has an aged interface
- High minimums for some traders
- Complicated, no-frills platform
- Monthly account fees
- Reputation for poor customer service
- Hard-to-access for inexperienced investors
Interactive Brokers is perhaps one of the most comprehensive stock brokers for active and advanced traders. It offers professional customer service, and execution of trades is easy.
Should You Trade With Interactive Brokers?
IB really pulls out all of the stops for the professional trader: unfettered access to different investment products, countless markets, ultra-low commission rates, and industry-leading margin rates.
The brokerage offers tons of support services, research, educational tools, and different platforms — really something for every occasion.
While novice traders may be discouraged, the experienced traders IB targets are well-served by its award-winning offerings.