Interactive Brokers: Overview & Fees

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Aja McClanahan is a personal finance writer who has a story of getting out of over $120,000 in debt. She's been featured in Yahoo! Finance, MarketWatch, U.S. News and World Report, Kiplinger and has written for publications like Business Insider, Credit Karma, Inc., and many others. Aja writes about investing and personal finance for Wealthsimple. In her spare time, she manages her own investment portfolios for herself, husband, and two kids. Aja double majored in Spanish and Economics and holds a Bachelor of Arts degree from University of Illinois at Urbana-Champaign.

Interactive Brokers allows you to trade various asset classes from around the world while taking advantage of features like fractional and margin trading while searching for shortable securities and loaning your shares out on interest. This platform would likely be overkill for a novice investor or someone who does not trade frequently.

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What is Interactive Brokers?

Interactive Brokers is a trading platform that offers a large variety of features for the advanced trader. Online trading platforms essentially make it possible for investors to place their own trades for assets like stocks, bonds, ETFs, futures, foreign exchange, metals, or pretty much anything that trades on a market.

These advanced features include international trades, options contracts, trading on margin, and access to a large body of advanced research and trading tools for technical analysis. Day traders who need to see dashboards with multiple widget options and minimal latency will benefit from trading charts and related data sets in real-time.

Because of the sheer complexity and magnitude of IB, it’s probable that the average investor wouldn’t need or use most features IB offers. One of the major draws is that traders who engage in heavy volume trading will benefit from the low fees IB charges on trades.

However, it is helpful to know that IB has recentlly debuted a scaled-down version of their site known as IBKR Lite, which charges its retail clients $0 in commissions on U.S.-listed stock and ETF trades. Users of IBKR also have no account minimums and no inactivity fees.

What services does IB offer?

Here’s a summary of the services IB provides to its customers.

Bond Marketplace

Interactive Brokers has a massive bond selection, including both U.S. government bonds, corporates, and municipal bond options along with tens of thousands of CDs. There are no mark-ups on bond prices, and the platform allows users to interact with one another by posting bids and offers.

Mutual funds marketplace

Interactive Brokers’ fund marketplace offers access to 34,000+ mutual funds at some of the lowest costs in the industry. Over 8,300 funds are available with no transaction fee. These funds come from a variety of fund families including, Allianz, American Funds, BlackRock, Fidelity, Franklin Templeton, Invesco, MFS, and PIMCO. You can use the IB “Mutual Fund Inventory Search Tool” to identify funds by country of residence, commission rate, fund type, or fund family.

No transaction fee ETFs

IB offers access to various commission-free ETFs. In some cases, your trades must meet certain criteria to get access to commission-free or commission rebates on ETFs. When these options are not available, you can still trade ETFs for as low as $0.005 per U.S. share, all-in.

Trading ETFs with IB gives you many options to choose from when you want to invest in certain indices. According to IB, you can “invest in a wide range of equity and bond indices on 28 exchanges in 14 countries, including short ETFs and leveraged ETFs.”

Trading platform

Trading platforms include the Client Portal, accessible by web browser where users can place trades, see account balances along with reports and important metrics regarding their trades.

The trader workstation (TWS)

The TWS can be installed, downloaded, and operated locally from a trader’s personal computer. It’s designed for active traders that trade multiple products. Known as IB’s flagship product, it also features news, research, market data, real-time monitoring, risk management, and paper-trading (simulation).

IBKR Mobile

This mobile app allows users to place trades directly from a smartphone. Though it doesn’t contain all of the features as the TWS desktop application, you can access advanced order types and many trading tools from the app. Advanced quotes and research are available via 50+ columns of data on the mobile interface.

Miscellaneous services

The IB service offerings are pretty vast and it would take a long time to cover each and every one. Here are a few other IB services and tools to be aware of:

  • Short Securities Availability": An interactive tool that allows users to search for “shortable” securities

  • PortfolioAnalyst: Provides real-time updates on your IBKR portfolio and complete financial performance

  • Cash Management: A direct integration into your IBKR; facilitates borrowing at low costs in case cash is not readily available in your account for trades.

  • Third-Party Integration: A reporting data feed for integrations with third-party apps

  • Interactive Advisors: Advisory services that curates investments based on your personal financial goals

What are IB’s fees?

IB fees vary based on the services you’ll be utilizing on the platform and which version of the platform you’ll be accessing. The fee structure can be somewhat complex, so be sure to get clarification on your costs before placing trades.

Tiered

You only need to use this fee structure should you find yourself carrying out voluminous trading on a daily basis. The costs per trade decrease as your trading volume increases. It also varies based on exchange, regulatory, and clearing fees. Trading less than 300,000 shares per month costs USD 0.0035 per trade plus 1.0% of the trade value. If you trade at 100,000,000 shares per month or more, your price per share would be USD 0.0005.

Fixed

The price structure for stocks, ETFs, and ETPs charges a fixed amount per share or a set percent of trade value. This also includes all IB commissions, exchange, and most regulatory fees with the exception of the transaction fees. Pricing also will vary based on region.

Free

Users of the IBKR Lite platform receive unlimited, commission-free trading in US-listed stocks and ETFs. This simplified trading experience is available via the IB Client Portal and IBKR Mobile.

The takeaway

Interactive Brokers is a platform that caters mainly to high volume traders, such as day traders or hedge fund managers. If you’d like to explore features, you can sign up for a free trial, where you can trade $1,000,000 in a simulated account.

Last Updated October 10, 2018

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