Complete Interactive Brokers review

Gergely Korpos, 04 August 2017

Interactive Brokers is a US-based online brokerage firm, a public company listed on NASDAQ. It conducts its broker and proprietary trading businesses in over 100 destinations worldwide. Below is our complete Interactive Brokers review, which consist of the following sections:
 

Interactive Brokers review -  

Investor protection scheme and regulation

Interactive Brokers is a truly international service provider. The Interactive Brokers Group has 7 independent entities - in the UK, US, Canada, Australia, India, Japan and Hong Kong - which are all regulated by different authorities.

If you are a European investor, your account will be handled by the UK subsidiary, which is backed by the FSCS (Financial Services Compensation Schemes). FSCS provides protection up to GBP 50,000. European clients can open only UK-based accounts, opening a US account as a European citizen is not possible.

Interactive Brokers review -

Opening an account

★★☆☆☆

Who can open an account?

Interactive Brokers is present on all continents hence other than legal restrictions - like a complete ban on CFD trading in the US - we did not encounter any limitations.

Your base currency (a currency in which you maintain your book of accounts) can be any of the following:

Account types

Interactive Brokers offers two types of accounts for Europeans: individual and joint accounts.

• An individual account is owned and used by a single trader or investor;

• A joint account is owned and used by two individuals.

Account opening process

The account opening process is overly complicated and slow. It takes about 30 minutes to go through the 5-step registration process where users must provide lots of personal information, namely:

• Proof of identity and date of birth;

• Proof of residency;

• Your employer’s name, address and phone number;

• Bank or third-party broker account numbers and routing numbers for check deposits.
   

The documents can differ from country to country but these are the standard requirements. Clients can send the documents via fax or email, so the process is fully online. New accounts are usually approved between 1 or 2 business days if all the application requirements are satisfied. Once approved and your funds are received, you can start trading right away. All in all, opening an account at Interactive Brokers is a long and complicated process.

Interactive Brokers transfer fees -

Money transfer and withdrawal fee

★☆☆☆☆ 

At Interactive Brokers, you can fund your account through a bank transfer. However, there are some other funding options in certain currencies, e.g. cheque transfer for US dollars.

You can fund your account in a wide range of currencies, such as Australian Dollar, Canadian Dollar, Swiss Franc, Chinese Offshore Yuan, Czech Koruna, Danish Krone, Euro, British Pound, Hong Kong Dollar, Hungarian Forint, Japanese Yen, Mexican Peso, Norwegian Krone, New Zealand Dollar, Russian Rouble, Swedish Krona, Singapore Dollar or US Dollar.

Depending on your bank, it can take 1-4 days for the money to arrive. Non-US banks are usually at the longer end of the range.

Money withdrawal methods accepted by IB are wire and SEPA (Single Euro Payments Area). Clients without Secure Login System are limited to a maximum withdrawal of USD 50,000 per day and a maximum withdrawal of USD 100,000 within 5 business days. There is no charge for the first withdrawal in a calendar month, however, Interactive Brokers charges withdrawal fees for subsequent withdrawals, which depends on the currency in which you would like to receive your money. In the case of euro, it costs EUR 8.

If you receive money in your account in a different currency than your base currency, conversion rates are identical to the forex trading conversion rates.

Interactive Brokers review -

Product portfolio

★★★★★
 

IB offers an exceptionally wide range of products. Asset classes available for trading are:

• Stocks

• Funds (Mutual Funds and Hedge Fund Investing as well)

• ETFs

• Forex

• Bonds (government and corporate bonds as well)

• Options

• Futures

• Certificates, CFDs

The CFD product range includes shares, forex and indexes. In case of stock trading, you can access every significant market around the world, including North America (US, Canada, Mexico), Europe (Austria, Belgium, France, Germany, Italy, Netherlands, Norway, Poland, Portugal, Spain, Sweden, Switzerland, UK) and the Asia-Pacific region (Australia, Hong Kong, India, Japan, Singapore). You can see it in more detail on Interactive Brokers’ website.

Interactive Brokers has just introduced a new Asset Management service - previously called Covestor, a startup acquired by IB. It enables clients to copy professional portfolio managers at IB, so they can automatically make the same trades as the professionals. Only registered investment advisers and hedge fund managers can become portfolio managers. Clients can choose a portfolio manager whose style fits them the most and check the real time performance of their portfolio on IB’s website or on their mobile phone. Portfolio managers invest their own money in the portfolio they offer, which makes the whole service a lot more credible. Clients are free to switch portfolios whenever they want without fees or penalties, which is a great plus. The cost of the service consists of the usual brokerage commissions plus an annual management fee ranging from 0.08 to 1.5 percent. All in all, Asset Management combines the benefits of an actively managed fund and a low cost, automated ETF.

You must open a separate account if you want to use Asset Management, which means that it is not completely integrated into the brokerage system. This makes the whole account opening process overcomplicated and a bit shady. According to the customer care representative, as an EU citizen - unlike with normal IB accounts - you can and have to open a US account to use the service. The account minimum depends on the portfolio you want to invest in, currently the lowest investment is USD 5 000. Due to these factors we did not open an account, all we know is based on the information provided by the customer care. Overall, we faced many complications and drawbacks, so you need to have a very strong commitment to open an Asset Management account. 

You can get more information on Interactive Brokers Asset Management's site.

Interactive Brokers review -

Fee structure

★★★★★

Trading fees

Interactive Brokers has outstandingly competitive commissions and fees - even among the discount service providers

The only service provider whose prices are comparable to Interactive Brokers fees is DEGIRO which is also a discount player. IB is cheaper in terms of stocks and CFDs and yearly fees for novice traders are also more advantagous at IB. For more information, check out our comparison table.

The company provides fixed rate and tiered price plans as well. Fixed rate plans typically charge a single rate per contract or share which covers all commissions and exchange fees; while tiered plans charge broker commissions which decrease based on volume, plus exchange, regulatory and clearing fees.

In case of stocks, ETFs and warrants, both options can be chosen. Below, you can find the standard fixed pricing structure of stocks, ETFs and warrants:

Option prices at IB are a bit more expensive than DEGIRO’s prices, but much cheaper than any of the other established brokers’ fees. Stock and index options are both available, below you can find the standard stock options prices:

The standard fixed futures trading fees range from USD 0.85 per contract (US futures) to AUD 6.25 per contract (Australian futures):

When it comes to Forex trading, IB offers a single pricing structure based on the monthly trade amount. If you trade less than USD 1,000,000,000 a month, the commission is 0.20 basis point of the trade value. Of course, you can get better conditions if you are a hardcore Forex trader: the commission is only 0.08 bps of the trade value if you trade more than USD 5,000,000,000 a month. 

IB offers bonds in the US, European and Asia-Pacific market as well with highly competitive, tiered commission structure, which means that commissions are calculated based on volume. Commission rates are around 0.1% if you are trading relatively small amounts.

You can trade with share, index and forex CFDs. To share and forex CFDs applies a volume-tiered pricing, while index CFDs use a fixed pricing structure. IB has very low commissions regarding CFDs.

Non-trading fees

Interactive Brokers imposes withdrawal fees as well, the amount of it varies depending on the currency in which you want to withdraw your money. 

You can see the most important fees which are not directly related to products summarised below:

The Interactive Brokers platform -

Trading platforms

IB has web, desktop and mobile platforms as well. The core and most advanced platform is the desktop, while the web and the mobile are simplified versions of that.

Web platform
★★☆☆☆ 
 

Interactive Brokers' web trading platform, called IB Webtrader, is good for execution with a very advanced order management panel, but some of the standard functions like technical analysis are missing or underdeveloped. It is obvious that this is not the core product of IB, they are optimising their efforts for the desktop version.

At first sight, the platform looks quite complicated and indeed, it is not a user friendly framework. However, if you have some trading experience, after a couple of days of practice and after reading this review you should become comfortable with it.

If you are a beginner, we definitely do not recommend starting with this.

Login

You can choose between the normal and the beta Webtrader. In this review, we tested the normal version since the beta is permanently subject to testing and changes in functionality.

Interactive applies a normal online login system, but you can also protect your account with their so called Secure Login System. This system has two-step authentication, using a plastic card that you receive with codes and numbers on itfor the login. It is certainly safe, however a bit outdated. The mobile app is more convenient for added safety.

The functions

After the market info window, you arrive to the main control panel. As you can see, the design is very 90s style.

The layout is highly customisable, so it provides great flexibility in optimising your platform layout to your needs.

The platform is available in many languages: English, German, Spanish, French, Italian, Dutch, Russian, Slovenian, Chinese and Japanese, this can be changed within the platform.

Apart from the customisability of the windows, you have several options to change the trading preferences, the display and to manage the watch lists. For example, you can switch to expert mode that allows you to execute your trades with fewer clicks.

The platform is like a browser where you have default tabs with default functions. You can add your own tabs and you can also change the content of the default tabs.

The default tabs are the following:

• Market
• Account
• Options
• Products
• Scanner
• Market pulse
• Search

The available extra windows to play around with are:

• Chart
• Market data
• Option chain
• Balances
• Book trader
• Market value
• Margin requirement
• Market view
• Portfolio news
• Portfolio
• Position

Most of them are self-explanatory, but let us describe a few. With the Book trader, you can basically see a deeper book (bid and ask prices) of an asset if you have a subscription for that stock exchange. The Market data and view are quite similar functions, the first is presenting the market info for one instrument while the latter is for all the items in a watch list. By using the Portfolio news, you can check the latest news related to the instruments you are holding.

Within each tab, you have a default window but you can add other windows as well. The Market tab provides the market information of the selected watch list items. Clickable prices might be a stress factor, but do not panic. If you are not in the expert trading mode, this only generates a preview of an order, but not a firm one.

The Account tab is straightforward, here you can check your balance, the margin requirements and so on.

The Options tab is focused on options trading with options chain for one or more underlyings.

The Product tab can be filled with charts and with other market info. If you don’t need this, just hide it.

The Scanner function is not the most sophisticated in the market in terms of parameters, but you can scan US corporate bonds as well, which is missing from the competitors. Within the equities you can scan US, American non-US, European and Asian stocks. The parameters mostly concentrate on trading activity and price movements (e.g. top gainers) rather than on valuation (e.g. P/E).

The Market pulse gives you a high-level overview of the daily market moves in the biggest equity, sovereign debt and forex markets, plus information about the equity volatility in the US, Germany and Japan. It is a very handy tool, using this you can get market information in an effective way.

The Search function is not so potent. For example, if I search for Apple in the simple view I would expect to have Apple Inc. listed on the NASDAQ as the first result. Instead, the first 6 results are certificates from the German stock exchange and Apple Inc. can be found only in the middle of the result list. The Search function is separate from the platform which is not convenient at all. Even if you find your target instrument, you need to go back to the platform and find it there again based on the ISIN code.

You can improve the search results if you first select the asset class and then you start the search process. In this case, the results are more structured, but you have to know what you are looking for, since the result list contains each stock exchange where Apple Inc. is listed.

The Search function has a large database, but products cannot always be found within the right asset class tab. For example, you receive an endless list of the structured products for a stock search, but the Japan iShares ETF is listed within the stocks.

The interactive chart function is very basic. The only thing you can adjust is the time frame, that’s all, no indicators and technical analyses tools.

Quite surprisingly, a lot of quasi-basic functions are missing from IB Webtrader:

• no technical analysis
• no alerts
• no general news panel (only portfolio related)
• no fundamental data
• no possibility for research.

Obviously, the web product is not the main focus of IB.

Order types and order management

At the bottom of the web platform, you have an order management panel that has pretty advanced functions - way more advanced than what the competitors have. The panel has three tabs: new order, orders and trades. In new order, you can place your orders; while in the orders, you can follow your open orders. Trades tab lists your previous trades.

The order inserting panel looks like an excel row. At first, you think there should be something else, a nicely designed window with big buttons, but nope, that’s it.

You have a great selection of order types, some of them are designed for advanced or professional traders:

• market
• limit
• stop
• stop limit
• market on close
• market on open
• limit on close
• trailing stop
• trailing stop limit
• discretionary
• bracket

The order terms also provide some specialties beyond the typical ones:

• day order
• good till cancelled
• at the open
• immediate or cancel
• good till date/time
• good after date/time

You can also define the place of execution (which exchange) or you can choose Interactive’s smart routing that promises the best price. If you prefer to trade outside the regular trading hours, no problem, IB provides an option for this as well.

Before submitting your order you can preview it, a useful function for correcting potential mistakes.

Mobile platform
★★★★☆  
 

The mobile trading app is handier than the web platform. You can feel that it is a more up to date interface with a completely different structure and design.

If you have a mobile phone with a fingerprint sensor, after the first login the app requires fingerprint authentication, a convenient and safe solution.

In general, it is annoying that the back button opens the previous window but always goes back to the main view.

At the bottom of the app, you have a menu list. Here you can check:

• your account information,
• your portfolio,
• news related to your portfolio,
• the market information of your watch list,
• a scanner function,
• and a “More” button for other functions.

Chatbot

The most innovative and exciting function within the app - also available on the desktop version - is the chatbot.

This is a nice function if you want to execute an order or close a position very quickly or you need basic information very fast, e.g. only by typing “oil chart”.

It is a beta version, but quite fun to play around with. In general, it understands the basic order commands like “apple price” or “buy 1 apple share”. On top of this, you can also search for company fundamentals, like dividend yields, PE ratios or target prices. Some of the functions like the chart are also live within the chatbot.