Interactive Brokers caters to diverse requirements, offering competitive fees alongside a wide array of trading options such as stocks, ETFs, options, futures, and various other assets spanning the globe. It distinguishes itself as a top-tier brokerage, particularly appealing to traders and investors seeking a straightforward trading experience. With Interactive Brokers’ user-friendly platform, users can execute trades seamlessly, benefiting from competitive spreads that enhance cost-effectiveness. While novices might initially perceive the platforms and services as intricate, investing time in familiarizing oneself with them proves immensely valuable, unlocking a plethora of robust tools for investment endeavors.
Safety
Founded in 1977 and headquartered in the USA, Interactive Brokers has sustained its position as a prominent entity in the global brokerage market for over four decades. This resilience through numerous economic crises serves as a positive indicator of the broker’s reliability and stability. They operate under the regulation of multiple financial authorities, including esteemed organizations such as the SEC in the US and the FCA in the UK. Additionally, its parent company is listed on the US NASDAQ exchange.
In Australia, Ireland, Hungary, and the United Kingdom, Interactive Brokers offers negative balance protection to retail clients trading CFDs. However, this protection does not extend to professional clients.
Moreover, you have the opportunity to hear directly from Thomas Peterffy, the Chairman and Founder of Interactive Brokers, regarding the safety of client funds held both generally at brokerage firms and specifically within the Interactive Brokers account by watching his CNBC interview.
| Country | Legal Entity | Regulator | Protection Amount |
|---|---|---|---|
| United Kingdom | Interactive Brokers (U.K.) Limited | Financial Conduct Authority (FCA) | £85,000 |
| United States | Interactive Brokers LLC | Financial Industry Regulatory Authority (FINRA) & US Securities and Exchange Commission (SEC) | $500,000 ($250,000 cash limit) |
| Northern & Western Europe | Interactive Brokers Ireland Limited | Central Bank of Ireland (CBI) | €20,000 |
| Central & Eastern Europe + Cyprus, Malta, Greece | Interactive Brokers Central Europe Zrt. (IBCE) | Central Bank of Hungary (MNB) | €100,000 |
| Canada | Interactive Brokers Canada Inc. | Canadian Investment Regulatory Organization (CIRO) | CAD 1,000,000 |
| Australia | Interactive Brokers Australia PTY LTD | Australian Securities and Investments Commission (ASIC) | No protection |
| India | Interactive Brokers (India) PVT. LTD. | Securities and Exchange Board of India (BSE) | No protection |
| Japan | Interactive Brokers Securities Japan Inc. | Financial Services Agency (FSA) | No protection |
| Hong Kong | Interactive Brokers Hong Kong Limited | Hong Kong Securities and Futures Commission | No protection |
| Singapore | Interactive Brokers Singapore Pte. Ltd. | Monetary Authority of Singapore | No protection |
Account Opening Process
The account opening procedure at Interactive Brokers can be quite complex. Opting for the IBKR Global Trader app might offer a smoother experience and help alleviate some of the hassle. However, transitioning to more complex products later may necessitate answering additional inquiries.
The account opening process is entirely digital despite being somewhat challenging. Following online registration, the account verification typically takes approximately two business days, slightly longer than the standard verification period observed at most brokerage firms.
Throughout the account opening procedure, you’ll be prompted to furnish personal details and respond to queries regarding your trading background.
Ultimately, you’ll need to verify both your identity and residency by uploading the necessary documentation.
Interactive Brokers has a global presence, making it feasible to open an account from nearly every continent. Exclusions typically apply only to countries with notably unstable political or economic climates, such as North Korea.
Account Types
| Account Type | Description |
|---|---|
| Individual | Account owned by an individual |
| Joint | Account owned by two individuals |
| Trust | Account held by a separate legal entity |
| IRA | Individual retirement account (Only United States) |
| Advisor | Account for minor clients (Only Unites States) |
| Money Manager | Account for an individual managing client administration and client funds |
| UGMA/UTMA | Account for minor clients (Only United States) |
| Family Office | Account for a Family Office Manager |
| Friends & Family | Account for a group of up to 15 members |
| Small Business | Account for small companies |
Products
Interactive Brokers grants you access to an extensive array of markets encompassing a diverse range of assets. From ETFs and bonds to more unique offerings like warrants and structured products, Interactive Brokers boasts a robust selection of products, although its Forex pair and CFD choices may be comparatively narrower. The availability of these products varies depending on your country of residence.
With access to approximately 150 exchanges worldwide, including alternative services such as Interactive Advisors, a hybrid of robo-advisory and social trading. Interactive Brokers provide sufficient investment opportunities.
Moreover, Interactive Brokers offers an Overnight Trading Hours service featuring a list of over 10,000 US stocks and ETFs. This service enables trading of these US equities nearly 24 hours a day, five days a week.
Stocks
Interactive Brokers offers access to a broader range of stock markets compared to its competitors. This encompasses major exchanges such as NASDAQ, the New York Stock Exchange (NYSE), and the London Stock Exchange (LSE), along with minor ones like the Warsaw Stock Exchange and Mexican markets. Additionally, besides regular stocks, penny stocks are also accessible.
Interactive Brokers facilitates the buying and selling of fractional shares, enabling traders to invest small amounts while diversifying their portfolios. Fractional shares are available for US and European stocks, as well as all stocks listed on the Toronto Stock Exchange and CBOE Canada.
Fees
Interactive Brokers offers competitive trading fees and boasts the industry’s most favorable margin rates. Additionally, for accounts with a net asset value of $100,000 or more, Interactive Brokers provides interest payments on cash balances, with rates reaching up to 4.83% for USD. Furthermore, US clients can benefit from commission-free stock and ETF trading by opting for the Lite plan.
Low Stock Commissions
Interactive Brokers’ fees for US stocks are significantly below the industry average, amounting to less than half. The calculation for US stock fees is as follows: Under fixed pricing, it is set at $0.005 per share with a minimum of $1 and a maximum of 1% of the trade value. For US clients who opt for the IBKR Lite plan, trading US stocks is completely free.
| Stock Type | Commission Cost |
|---|---|
| US Stock | $1 |
| UK Stock | $3.8 |
| German Stock | $3.2 |
For clients subscribed to IBKR Pro, SMART routing continuously monitors rival markets and autonomously directs orders to the most advantageous market based on price while also considering factors like the availability of automated order execution.
Low Margin Rates
Among the brokers we evaluated, Interactive Brokers offers the most competitive USD margin rate fees. These fees are calculated based on a tiered structure. At the lowest tier, the rate stands at 6.83% for IBKR PRO (7.83% for IBKR Lite).
| Margin Rate Currency | Annual Margin Rate |
|---|---|
| USD Margin Rate | 6.8% |
| EUR Margin Rate | 5.5% |
| GBP Margin Rate | 6.7% |
Interactive Brokers offers highly competitive margin rates for IBKR Pro customers, positioning them among the industry’s finest. However, opting for the IBKR Lite plan incurs a higher annual rate. For instance, under $100k, the markup for IBKR Lite is 2.5%, compared to 1.5% for IBKR Pro.
Withdrawal, Inactivity & Other Fees
Interactive Brokers does not impose a monthly inactivity fee, nor does it charge account or deposit fees. The initial withdrawal each month is complimentary, with subsequent withdrawals incurring a fee (e.g., $10 for USD withdrawals).
| Fee Type | Fee Value |
|---|---|
| Account Fee | ❌ |
| Deposit Fee | ❌ |
| Conversion Fee | 0.02% |
| Inactivity Fee | ❌ |
| Withdrawal Fee | ❌ |
Conclusion
In conclusion, Interactive Brokers is an excellent choice for active stock traders, especially those individuals who can qualify for the broker’s cheaper volume and pricing setup. With the availability of free trades through IBKR Lite, all types of traders can categorize Interactive Brokers as one of the optimal choices for their trading journeys. However, it is worth noting that the provided services might be slightly more complex compared to some of the other industry-leading brokers. That said, beginner traders might need more time to familiarize themselves and adapt to Interactive Brokers.
