Rating: 
Interactive Brokers Review - Pricing
- Stocks and ETF's: $0.005 per share ($1 minimum)
- Options: $0.70 per contract
- Bonds: $1.00 per $1,000 face value
- Mutual Funds: $14.95 per transaction
Interactive Brokers Important Fees and Surcharges
- Extended hours surcharge: $0
- Large order surcharge: $0
- Penny stocks surcharge: $0
- IRA setup fee: $0
- Annual IRA fee: $30
- Maintenance fee: $0
- Inactivity fee: up to $20 per month
Interactive Brokers Advantages
- Best margin rates
- Lowest commissions on stock and ETF trades of up to 600 shares
- Professional, feature-rich trading platform
- Rich selection of products
- Access to over 100 markets worldwide
Interactive Brokers Disadvantages
- Complicated fee structure
- $10 per month minimum commission requirement to avoid $10 monthly fee ($20 monthly if account balance is less than $2,000). The fee is waived for accounts over $100,000.
- $10 monthly fee for market data feed (waived if trade commissions are more than $10 per month)
- $10,000 minimum to open most accounts
- $7.50 quarterly fee for IRA accounts
- Trader Workstation is difficult to learn
- Expensive to make large trades
- Many customers complain about poor customer service
- Strict margin tightening and quick margin calls
- Minimum mutual fund purchase is $3,000. Only no-load funds are offered.
- Frequent technical problems with website and trading platforms
Interactive Brokers Overview
Interactive Brokers is a direct access broker that caters to professional traders and offers low commissions on a pay-per-share basis. With an advanced trading platform, IB attracts a lot of interest. However, with excessive monthly fees and a history of poor customer service, potential clients need to be aware of the pros and cons of this firm.
Opening a New Account
IB's application forms are lengthy and tedious to complete. After submitting the application, the broker makes two deposits in the bank account of the applicant, who then must verify the deposits. Once verified, IB sends a letter to the new customer's home address with codes that need to be entered on-line before the customer can start trading. Obviously, IB's application process is rather cumbersome.
Pricing and Account Minimums
Because IB is a direct access broker, all orders are routed directly to the exchange, bypassing the broker. For stocks and ETF's, U.S. customers pay $0.005 for each share traded, with $1 minimum and a maximum of 0.5% of trade value. Trades of up to 1,000 shares are an excellent value at $5 or less. But larger trades are can get rather pricey: orders with 2,000 shares are $10, and orders with 5,000 shares are a costly $25.
The minimum amount to open an account is quite high by industry standards—$10,000 for a regular brokerage account, $5,000 for an IRA, and $3,000 for investors under the age of 26.
IB has a $10 monthly minimum commission requirement. If there is no activity in the account, IB charges a $10 inactivity fee ($20 per month if the account balance is
less than $2,000). Market data also costs $10 per month (waived for accounts generating at least $10 in monthly commissions). Some investors could end up paying
up to $240 annually in fees ($360 if their account balance is less than $2,000).
Trading Tools
Customers have two options when logging into the IB site. Either they have to use a table of log-in codes IB sends in the mail, or they can use a small device to generate a code during each log on. The company states that it will not be held liable for fraudulent activity if customers do not use IB's secure login process.
Once logged in, the broker offers three trading platforms. Their basic platform is QuickTrade, which is browser-based. It takes several clicks just to get to the platform. The interface is slow to load and tends to have a lot of technical glitches. The dropdown menu is dysfunctional, and order entry is slow. When entering an order, fields are sometimes pre-filled with wrong values.
A step up from QuickTrade is WebTrader, which launches in a separate window. It is much more stable than QuickTrade. It offers more features and is more convenient to use. Traders can enter multiple orders without sufficient funds to cover them; if one order is executed, and the account doesn't have enough cash to cover the other orders, they are automatically canceled. Traders new to Interactive Brokers should probably start with this software.
The broker's flagship platform, Trader Workstation (TWS), is one of the best software programs in the industry. TWS has advanced charting and research services, risk management tools, dynamic streaming quotes, and over 50 order types. Users can download TWS as a stand-alone application or run it from the browser. The browser version seems a tad bit slower. Both versions are Java-based. The disadvantage of having such a sophisticated trading platform is that it's not user-friendly. It will be especially difficult for new investors to learn.
Interactive Brokers has mobile apps for iPhone, iPad, Android phone and tablet, and mobile web. A version of TWS for BlackBerry is also available. Users get real-time quotes, charting, and market scanners. Standard order types and complex option spreads can be entered on the mobile platforms.
Trading Experience
IB has many fees, compared to other online brokers. Describing these fees takes several pages on the firm's website. It gives the impression that the broker excessively charges its clients. This is the only firm that allows just one free withdrawal request every 30 days and charges customers for additional ACH withdrawals ($1) and check withdrawals ($4).
Traders should be cautious when using margin here. The broker liquidates positions almost as soon as an account gets into negative territory. IB seems to be faster than other brokers on this issue. The firm tightened margin requirements during the 2008 economic crisis, and many customers who were using margin had their account positions liquidated. IB did this without warning, and it created a perception that the firm has no regard for its clients, at least not when its own money is at risk.
Interactive Brokers has a notorious reputation in the investment community for appalling customer service. Combined with the complexity of their trading platform, IB is definitely not a brokerage for novice investors. They actually discourage beginners from opening an account.
Interactive Brokers Review Summary
Interactive Brokers targets a client base of experienced, professional investors. It delivers an excellent trading platform, quick
executions, and best margin rates. The firm is an excellent choice for anyone who trades less than 1,000 stock or ETF shares per trade. IB is not a good choice for investors who trade infrequently, place orders over 1,500 shares, or engage in "buy-and-hold" investing.
We recommend Interactive Brokers to day-traders, hedge funds, and other sophisticated traders.
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Interactive Brokers
reviewed by TopRatedFirms.com
Rating: 3.5