IB Rating: 
Overview of Interactive Brokers
Whether you’re a buy-and-hold investor, a day trader, or anything in between, Interactive Brokers wants your business—and it has a lot to attract it. This survey will judge the company in vital categories and make some recommendations for you.
Range of Investment Products
Traders at Interactive Brokers get a very large smorgasbord of assets to buy and sell. In fact, it’s the longest list we have found in our many research studies: stocks (including both penny stocks and over-the-counter stocks), ETF’s, closed-end funds, mutual funds, option contracts, warrants, currencies, precious metals, fixed-income securities, structured products, EFP’s, inter-commodity spreads, futures (including bitcoin futures), options on futures, contracts for difference, single stock futures, and IPOs.
We told you it was a long list. Oh, wait a minute, there’s more. Interactive Brokers also is one of the best investment firms in the industry for trading global securities. In fact, it received top honors from Barron’s in this category. IB offers accounts denominated in foreign currencies plus direct access to many foreign markets. We found exchanges in Austria, Belgium, Germany, the Netherlands, Israel, Poland, Sweden, Hong Kong, Australia, Japan, Singapore, and more. To trade on these exchanges, IB provides currency exchange.
Level II Data
Interactive Brokers customers get to use Level II data on the company’s very advanced desktop platform (more on that up ahead). This service does come at a cost, however. Data packages range from $3.50 per month up to $25.00, depending on the information you need.
Extended Hours
Interactive Brokers clients can trade securities during the regular session and outside these hours as well. The company’s pre-market period starts at 4:00 am and runs to the closing bell. The late-night session starts at the closing bell and ends at 8:00 pm. That’s 16 hours of total trading. Each security entered on the desktop platform displays its available trading hours. Interactive Brokers does not provide any ETF’s for overnight trading.
Customer Service
US-based customer support is available over the phone from 7 o’clock in the morning until 7 in the evening, Monday through Friday. The company is closed on Saturday, but there is a Sunday session from noon until 6 pm. Online chat (for clients but not guests) is available during the week from 8 in the morning until 8 in the evening. Although the firm doesn’t have any branch locations, it does have a dedicated bond desk.
Because IB caters to global traders, there are phone numbers for customers in Europe, Canada, and Hong Kong. An e-mail messaging system is available to both guests and account holders.
Mutual Funds
Although Interactive Brokers is known primarily for equity and options trading, it does have a decent selection of mutual funds. We
counted more than 10,500 from 244 fund families. On this list, most of the funds are no-load products; and there are roughly 4,200
that have zero transaction fee. All other mutual funds cost $14.95 per transaction.
Exchange-traded Funds
Interactive Brokers has jumped on the bandwagon of commission-free ETF’s, but it hasn’t done a very good job of it. We counted less than 50 funds that have zero commissions. Some of the fund families are O’Shares, Salt Financial, and Global X. Certainly not the biggest names in the industry. The broker’s desktop software has an ETF screener.
Pricing
Customers in the U.S. pay just 0.5¢ per share for stocks and ETF’s (that aren’t commission-free). There is a minimum commission of $1 and a maximum of 1.0% of trade value. A second schedule is based on total monthly volume. With this plan, the commission ranges from 0.35¢ per share to 0.05¢. The minimum commission is 0.35¢, and the maximum once again is 1.0%.
Commissions for options are based on the amount of the premium and account volume. The commission ranges from 15¢ to 70¢ per trade, with a $1 minimum.
Mutual funds that aren’t on the broker’s transaction-free list cost $14.95 per transaction (or 3% of trade value, whichever is lower).
Foreign securities traded on foreign exchanges have their own pricing. Commissions tend to be a little higher.
An account at Interactive Brokers must generate at least $10 in monthly commissions if it doesn’t have a balance of $100,000 or more. Accounts below $2,000 must pay at least $20 in commissions. The company’s minimum opening deposit requirement is no longer enforced.
Retirement and Education Accounts
Coverdell and 529 accounts aren’t available through Interactive Brokers. The company does offer UGMA/UTMA custodial accounts for minors who are U.S. residents.
As for retirement accounts, there are Roth, Traditional, SEP, and Inherited varieties. We didn’t find a SIMPLE plan. IRA’s follow the same policies as regular brokerage accounts for fees and minimums.
Margin
In addition to custodial and retirement accounts, Interactive Brokers offers margin accounts. Currently, IB’s rates are some of the lowest in the industry, ranging from 2.7% up to 3.9%.
As for margin requirements, the broker-dealer follows Regulation T parameters, which require 50% as initial margin and 25% as maintenance. On short positions, IB increases the 25% to 30%. Stocks priced below $16.67 have higher requirements.
A nice service IB offers in this category is updated margin requirements on its trading platform for any ticker symbol entered (just click on “advanced” and then “Check margin” on the order ticket).
Investment Advice
Interactive Brokers does not offer robo or traditional portfolio management. It also doesn’t offer financial planning services. There is a network of independent financial advisors who use Interactive Brokers for custodial and software services.
Desktop Trading
The crown jewel for Interactive Brokers is perhaps its desktop software, which is free for all clients. Called Trader Workstation, it has many professional-level features. It’s impossible to discuss them all, but we’ll try to point out some of the highlights.
There are two basic setups: mosaic and classic. Although classic is the older layout, we found it powerful and easy to use. Either choice offers a lot of customization and tools.
Charting can be done either in a small window or in full-screen mode. The software delivers more than one hundred technical indicators, several drawing tools, multiple timeframes, 30-second intervals, a great deal of customization, and the ability to save a chart as a template for later use.
A right-click on a chart produces a small menu with several choices. Buy and sell buttons are displayed along with icons for alerts, a quote window, company fundamentals, time & sales data, and option chains.
The order ticket appears in the top-left portion of the program. While it is there by default, it can be moved by unlocking the layout (the unlock button appears at the top right of the platform). Direct-access routing is enabled, and extended-hours trading can be selected. In the top-right corner of the trade ticket is a drop-down menu for adding many features for the entered ticker symbol, such as Level II data.
Another handy feature on the platform is iBot. This is an artificial intelligence that can answer some questions. They can either by typed or spoken using a microphone. During our testing, it failed to answer complicated questions such as, “When does the Fed release data on interest rates?”
Besides its desktop platform, the brokerage firm also has a client portal for basic account management and limited trading ability. There’s a browser platform with simple charting and direct-access routing.
Mobile Platform
The IB mobile app has a lot of powerful features not found on other phone or tablet platforms. For example, iBot makes an appearance. The order form delivers bracket, take-profit, and stop-loss orders. An order can be tagged for extended hours, and duration choices include GTC and at-the-opening. Despite these nice features, there is no direct-access routing.
A chart on the app has up to five years of price data, three display choices (mountain, bar, and candlesticks), and several technical indicators. The smallest interval is one minute. Company events can be overlaid, and we like horizontal mode.
Another highlight is a wheel-entry order system. It’s possible to select a limit price by scrolling in the left column and then modifying the price in the next column with bid and ask adjustments. Columns on the right side display order sizes and cash values. The middle screen has the final buy and sell buttons.
Despite all these strengths, there are some features we were hoping to find but didn’t. There is no mobile check deposit, no streaming video news (there are some on-demand videos), no mutual fund trading, and no funds transfer of any kind.
Cash Management
Interactive Brokers has a debit Mastercard that is free. Purchases above $1,000 must be pre-authorized, a slight nuisance. The card works with Android and Apple Pay services. Checkwriting is not available, and ATM fees are not reimbursed.
Free cash balances above $10,000 earn 1.7% interest currently (if total account value exceeds $100,000).
Trading Option Contracts
Derivatives can be traded on the mobile app, browser platform, and the desktop system. The latter of the three has the best tools. Orders can be routed to specific option venues. Chains on the desktop platform display calls and puts, and there are some pre-programmed multi-leg strategies.
The best highlight in this category is the collection of option tools the desktop software delivers. We found a probability lab, several volatility tools, a strategy performance graph, Greek values, rollover and writing tools, a strategy lab, and even more.
Financial Education and Stock Research
Trader Workstation has a stock screener with the ability to search specific exchanges. Some of the security criteria include most active, halted, highest implied volatility, after-hours gainers, and more. Stock profiles show valuation trends from Reuters, peer comparison for some stocks, open interest, implied volatility, and ESG ratings.
On the downside, Interactive Brokers doesn’t offer free stock reports (or any for a fee for that matter), a common practice nowadays.
As for financial education, the broker’s website does have articles, webinars, and videos on a range of topics, including geopolitical risk, technical analysis, protective puts, and interest rates.
Comparison
The most similar brokerage house to Interactive Brokers is probably
TradeStation. The latter company has a tiered pricing schedule that starts equity trades at a penny per share, which drops to 0.6¢ per share after 500 shares in a trade. There is a $1 minimum commission with this schedule, which charges no routing fees.
A monthly volume-based schedule starts at a penny per share and decreases to 0.2¢. This schedule has a 50¢ minimum. Unlike Interactive Brokers, TradeStation does not impose any minimum monthly commission charges.
TradeStation’s desktop platform is very similar to TWS. The one notable exception is the software’s App Store, where apps can be purchased. They are mostly technical studies that aren’t included in the default package.
TradeStation offers access to global markets, and actually partners with IB on this.
The primary downside that TradeStation has on the two commission schedules we mentioned is that software has fees. The desktop
platform costs $99.95 per month if less than 5,000 shares are traded, or less than 50 option contracts are traded, or the account
balance is under $100,000. A flat $5 commission plan offers the platform for free.
Recommendation
Because of the complexity of its primary trading platform, we don’t recommend Interactive Brokers for
beginning investors.
Active traders who have a sufficient level of trading experience will do well here. We also recommend Interactive Brokers for global traders, and anyone interested in something besides stocks and options.
Because of IB’s fee schedule, we cannot recommend the company for
small accounts. Due to its lack of mutual fund resources and a small
list of commission-free ETF’s, we also don’t recommend it for fund trading. TD Ameritrade would be a better pick.
Although IB does offer Individual Retirement Accounts, better retirement resources (and more IRA types) can be found at
Ally Invest and E*Trade.
Interactive Brokers Review Summary
For professional-level traders, Interactive Brokers is hard to beat.
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