Founded in 1993, Broker IBKR or Interactive Brokers (aka “IBKR”) has a streamlined approach to brokerage services that focuses on broad market access, low costs, and superior trade execution. Customers can trade stocks, options, futures, forex, bonds, and funds on 135 markets from a single integrated account. In late 2020, the company launched its Impact Dashboard, which helps you evaluate assets with a socially responsible investing (SRI) lens.
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Overall, ForexMedia News has consistently found Broker IBKR (Interactive Brokers) to be one of the best brokers for professional traders and sophisticated, active traders who want to take advantage of a powerful suite of tools and global access to a wide range of assets.
We’ll take a deeper look at Interactive Brokers to help you decide whether it is the right fit for your investing needs. Aside from this Interactive Brokers review, we’ve also reviewed the Interactive Advisorsrobo-advisor service.
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IMPORTANT: Broker IBKR (Interactive Brokers) was Investopedia’s winner for Best Online Broker for Day Trading, Best Broker for Advanced Day Traders, Best Charting Platform for Day Traders, Best ETF Research, Best Broker for Low Margin Rates, Best Broker for Fractional Shares, Best Broker for International Trading, and Best Online Broker for Non-U.S. Investors in our 2021 Best Online Brokers Review.
KEY TAKEAWAYS
- Broker IBKR (Interactive Brokers) consistently scores high in our trading and low-cost awards categories.
- Interactive Brokers offers an extensive range of asset classes (including stocks, options, futures, and bonds) in 135 markets across 33 countries.
- IBKR boasts an advanced trading platform with excellent technical and fundamental analysis.
- IBKR accepts clients from more than 220 countries and territories, with offices in the U.S., Switzerland, Canada, Hong Kong, U.K., Australia, Hungary, Russia, Japan, India, China, Luxembourg, Estonia, Singapore, and Ireland (the last two were new in 2020).
Who Broker IBKR (Interactive Brokers) is For
Broker IBKR (Interactive Brokers) is ideal for institutional investors and sophisticated, active traders who want a robust trading platform and access to a long list of asset classes.
The broker has attempted to broaden its appeal, introducing new products, services, and educational content aimed at less active traders and investors.
However, IBKR’s reputation as a professional-level platform may still scare off less-experienced investors. The company accepts clients from more than 220 countries and territories and supports trading on 135 markets across 33 countries, using 23 currencies.
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Pros and Cons
Pros:
- Wide range of offerings around the world and across asset classes
- Superior order execution
- Excellent trading tools
- Low margin interest rates
Cons:
- Broker IBKR’s SmartRouter is not available to IBKR Lite clients
- Can be intimidating to less experienced and less active investors
- No backtesting of custom trading algorithms or automated trading
Pros Explained
- Broker IBKR (Interactive Brokers) supports an extensive lineup of trading products (including stocks, options, futures, forex, bonds, and funds) on 135 markets across 33 countries. In addition to direct access to global exchanges, IBKR supports a large inventory of fixed income products, including various European corporate bonds and Euro-denominated government bonds.
- IBKR’s ‘SmartRouting’ software provides clients with the best price execution in the industry. It searches for the best firm stock, option, and combination prices available when you place an order and seeks to immediately execute your order. A third-party transaction analysis provider determined that IBKR has a net price improvement of $0.62 per 100 equity shares.
- IBKR’s Trader Workstation (TWS) platform is powerful enough for professional traders but designed for retail traders and investors, too. You’ll find tons of technical analysis tools, Social Sentiment by Social Market Analytics, ESG scores from Refinitiv, and access to company fundamentals data on stocks and mutual funds through Fundamentals Explorer.
- IBKR’s margin interest rates are significantly lower than the industry average. The company uses a blended rate based on tiers: For example, for a balance over $1 million, the first $100,000 is charged at the Tier I rate, and the next $900,000 at the Tier II rate.
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Cons Explained
- IBKR’s SmartRouter is not available to IBKR Lite clients. The Broker IBKR Lite order router prioritizes payment for order flow (PFOF), which IBKR does not share with customers. Additionally, IBKR Lite customers don’t have access to the IBKR Web Trader platform or IBKR APIs.
- Interactive Broker’s powerful platform can be intimidating to less experienced and less active investors. IBKR offers a lot—products, tools, resources, services, and so on—and the steep learning curve can be overwhelming at first.
- While IBKR is a very advanced platform, there are some gaps. Traders can’t currently backtest custom trading algorithms (algos) or automate trading with the standard IBKR software. Advanced traders looking for these features will need to use a third-party application programming interface (API).
Usability
IBKR’s onboarding process has gotten easier in recent years. You can even open an account without funding it right away (you have 90 days to do so). The website is well-designed, and the Client Portal and IBot—an AI-powered digital assistant—can help you find what you need.
Broker IBKR (Interactive Brokers) supports multiple trading platforms, including desktop, web, and mobile versions (IBKR Mobile), which are available for Android and iOS devices.
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The Broker IBKR monthly fees (Interactive Brokers) app has nearly the same functionality as the web platform, though neither is as robust as Trader Workstation (TWS), the company’s flagship trading platform.
You can trade the same asset classes on any platform. Similarly, you have access to real-time streaming data, charting, drawing tools, research, and news on all the platforms.
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News is available from dozens of sources, including Benzinga, Dow Jones, Morningstar, Seeking Alpha, Thomson Reuters, Refinitiv, and in-house commentary.
Premium news subscriptions are available for a monthly fee. Any mobile watchlists you create are shared with the web and desktop platforms.
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Trade Experience
IBKR’s Client Portal is a good place to check on positions, get a real-time view of your accounts, and place basic trades. It’s easy to access a trade ticket and set up trade defaults. That being said, most investors who are looking to make the most of an Interactive Brokers account will be using Trader Workstation (TWS).
TWS offers a lot more functionality and is designed for active traders and investors who demand flexibility and trade multiple products. You can define hotkeys to place orders quickly, and you have the option to stage orders for later execution—either one at a time or in a batch.
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You can set a date and time for an order to be transmitted or submit a conditional order that becomes active after specific conditions are met, such as when an existing order executes. You can even connect an application to TWS to place automated trades or subscribe to trade signals from third-party providers.
You can place, modify, and manage orders directly from the chart. You’ll find streaming real-time quotes, charting, and news across platforms—even if you’re using multiple devices simultaneously.
Mobile Trade Experience
You can trade the same asset classes and order types (including conditional orders) on IBKR mobile and TWS. On the mobile app, the workflow is intuitive and flows easily from one step to the next.
The mobile platform offers the same research capabilities as the Client Portal, including screeners and options strategy tools.
Range of Offerings
Broker IBKR (Interactive Brokers) has the largest selection of asset classes in the brokerage industry. It regularly adds new products based on customer demand and links to new electronic exchanges as soon as practical.
Customers can trade nearly 35,000 mutual funds, about 8,300 of which are no transaction fee funds (all funds in its marketplace are no-load).
Order Types
IBKR Broker supports a flexible array of order types on the Client Portal and mobile app, as well as over 100 order types and algos on Trader Workstation. One-triggers-other (OTO) orders are supported on TWS with attached orders and on mobile as part of bracket order functionality.
With one-cancels-other (OCO) orders, you can choose from and combine logical conditions from price, time, and volume variables (using, =, operators), as well as margin cushion, daily P&L, percent change, number of shortable shares, and rebate rate.
Trading Technology
IBKR’s SmartRouting technology incorporates both spray and sequential order routing methodologies, depending on the order and specific market conditions.
A third-party transaction analysis provider shows that IBKR has a net U.S. dollar price improvement of $0.62 for 100 shares, which is $0.47 better than the industry average of $0.15.
Broker IBKR (Interactive Brokers) order execution engine reroutes all or part of your order to achieve optimal execution, attain price improvement, and maximize any potential rebates.
To help provide price improvement on large volume and block orders—and take advantage of hidden institutional order flows—IBKR includes eight dark pools in its SmartRouting logic. For options traders, SmartRouting represents each leg of spread orders independently and submits each leg at the best possible venue.
Keep in mind that IBKR Lite customers don’t have access to the company’s smart routing technology. Instead, the border router for Lite customers prioritizes payment for order flow, which IBKR does not share with customers.
The TWS Portfolio Builder tool lets you analyze the historical performance of a set of stocks chosen using one of the available investment rules.
However, you can’t backtest custom algos or automate your trading using the IBKR software—you’ll need a third-party API application if you want these features.
Costs
Interactive Brokers’ pricing scheme is complicated. It includes three types of commissions for U.S. equities:
- Fixed per-share pricing of $0.005 per share traded with a $1.00 minimum and a maximum of 1% of the trade value. Includes all exchange and most regulatory fees.
- Tiered per-share pricing based on monthly order activity. This ranges from a high of $0.0035 per share for less than 300,000 shares per month to $0.0005 per share if you trade more than 100 million shares per month, with a minimum of $0.35 per trade. It does not include exchange and regulatory fees.
- The IBKR Lite program, which offers free trades for the U.S.—listed equities and ETFs (via the Client Portal and IBKR Mobile). Trades are routed to generate payment for order flow.
Here’s a closer look at IBKR commissions and fees, assuming you use the fixed rate per share system:
- A transaction for one share or less (for those trading fractional shares) generates the lesser of 1% of total trade value or a minimum charge of $1.00. Trading 1,000 shares cost $5.00 (free for IBKR Lite clients).
- The same fees are charged for OTCBB (penny) stocks, though you must meet specific requirements to trade this asset class.
- There is no per-leg fee for trading options. You’ll pay $0.65 per contract for options trades with a minimum commission of $1.00. Low value contract fees drop to $0.50 (premium $0.05–$0.10) or $0.25 (premium under $0.05).
- Trading a single contract is $1.00. Trading 50 contracts costs $32.50.
- Covered call trade of 500 shares plus five contracts costs $5.75.
- Mutual fund fees are the lesser of 3% of trade value or $14.95 for funds that aren’t on the no-transaction fee list. 4.95 Euros for international funds.
- Margin interest for Pro customers is 1.59% for balances up to $100,000 and 2.59% for Lite customers. These are the lowest interest rates among the brokers surveyed. Margin interest for Lite customers is 1% higher than the Pro rate.
- No fees to close or transfer an account.
- No inactivity fees on any accounts as of July 2021.
- No fee for exercise and assignment or voluntary reorganizations.
- Clients can send one wire per month at no charge; there is a fee of $10.00 for each subsequent wire sent. There’s no fee to receive a wire.
- Clients can send one paper check per month at no charge; there is a fee of $4.00 for each subsequent check sent.
- Futures trades are $0.85 per contract (plus exchange and regulatory fees). Volume tiered between $0.25 and $0.85 per contract.
- Forex trades cost between 0.20 and 0.08 basis points, depending on volume.
- 96 ETFs can be traded with no commission for clients on the fixed or tiered commission plans—otherwise, it’s $0.005 per share with a minimum of $1.00 per order.
- Broker-assisted equity trades are $30.00 and are limited to closing trades. Clients can place trades through a live broker for large block orders and for fixed income transactions; fees vary.
How This Broker Makes Money From You and for You
The fees and commissions listed above are visible to customers, but there are a few behind-the-scenes ways IBKR makes money from you (and for you):
- Interest on cash: Like most brokers, IBKR generates interest income from the difference between what you are paid on your idle cash and what it can earn on customer cash balances. Some brokers pass part of these earnings on to customers. As of April 2021, IBKR clients earn no interest on any cash balances.
- Payment for order flow: Many brokers generate income by accepting payment from market makers for directing orders to those trading venues. This is called payment for order flow. As of 12/31/2019 (the most recent data provided by Interactive Brokers), IBKR received an average of $0.0167 per share in payment for order flow on orders in U.S. exchange-listed equities. For options, IBKR received an average of $0.3612 per contract.
- Stock loan programs: Stock loan programs generate revenue for brokers when stocks held in customer accounts are loaned to other traders or hedge funds, usually to sell that stock short. IBKR pays you 50% of the income it earns from lending the shares. The program is available to customers who have been approved for a margin account or have a cash account with at least $50,000.
- Price improvement: IBKR’s smart order router seeks out price improvement and attains an average of $0.47 per 100 shares traded.
- Portfolio margining: Eligible IBKR clients can apply for portfolio margining, which can lower the margin you need based on the overall calculated risk. Typically, portfolio margining works best for customers who trade derivatives that offset the risk inherent in their equity positions.
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