Interactive Brokers Review: A Powerful Trading Platform

If you're a trader, finding a platform that has the tools and a reasonable pricing structure can be tough. However, that's where Interactive Brokers is looking to gain your business.

Interactive Brokers (or IB for short) was one of the original online brokers. Over time, they've niched their focus to traders, and offer a full suite of tools that can help active traders make a profit.

While they may not be the best for some, they do have a compelling offer for those who are active. Check out how they compare to the top online brokers.

Plus, for those who don't need all their tools, they have Interactive Brokers Lite, which is a commission-free trading platform.

Who Is Interactive Brokers?

Interactive Brokers Group, Inc., or IB as it is also called, was one of the original online brokers. Their past stretches back 40 years. They are a global operation with headquarters based in Greenwich, Connecticut.

They are regulated by the SEC, FINRA, NYSE, FCA and other regulatory agencies depending on the countries they operate in. IB is a NASDAQ-listed company under the symbol IBKR.

IB was founded by its chairman and CEO, Thomas Peterffy. Peterffy owns 75% of the company.

You can find their website at https://www.interactivebrokers.com.

What Do They Offer?

IB is online broker that offers low-cost commissions and a wide range of securities for trading. Basically, if you want to trade it, IB has it. Their list includes:

• Stocks
• Options
• Forex
• Futures
• Metals
• ETFs and mutual funds
• Bonds

They also offer asset management and hedge fund investing.

There is a very large online educational section and community as well. The educational section consists of “Traders’ Academy,” live and recorded webinars, short videos, and a glossary. As part of the educational section, the traders’ community also provides lots of value and includes “Trader’s Insight,” IBKR Quant Blog, and Market Pulse.

You can sign up online for an IB account. The process is similar to that of any other brokerage sign-up process.

Commissions and Fees

IB commissions decrease with more shares or options contracts. Although, most people will be in the first tier with the highest commissions.

To avoid an account maintenance fee, the account must maintain an average daily balance of $100,000 or generate $10 in commissions per month. Otherwise, the monthly fee starts at $10/month and goes up from there depending on account size and other factors.

IB has two different commission structures — fixed and tiered. Fixed is for lower volume while tiered is for higher volume.

In the fixed commission structure, stocks and ETFs are $0.005 per share with a $1.00 minimum. The maximum fee is 1.0% of the trade value.

Tiered pricing starts at $0.0035 with a minimum of $0.35 and maximum of 1.0% of the trade value for 300,000 or more shares. At over 100,000,000 shares, the price drops to $0.0005 with the same minimum and maximum.

For options contracts, there is also a tiered structure. Below 10,000 contracts with $0.10 premium, prices range from $0.25 to $0.50 per contract with a minimum of $1.00. Over a $0.10 premium and the price is $0.70 per contract with a minimum of $1.00. In other words, two contracts will cost $1.40 while one will cost $1.00.

For 10,001 to 50,000 contracts, $0.05 and greater premiums are $0.05 per contract. Less than a $0.05 premium is $0.25 per contract.

The structure for contracts gets a little simpler for the next two tiers. 50,001 to 100,000 contracts on all premiums is $0.25 per contract. 100,001 or more contracts is $0.15 for all premiums.

For mutual funds, No Transaction Fee Mutual Funds do not charge any commissions. Otherwise, commissions are the lesser of 3% multiplied by the trade value or $14.95 per transaction.

​Interactive Brokers Lite (IBKR)

​​If you don't need the full services of Interactive Brokers (maybe you just invest or trade a little), they also offer a commission-free platform called International Brokers Lite (IBKR). 

This platform allows for commission-free trading on US-listed stocks and ETFs.​​

Platform and Technology

IB has an advanced trading platform. It packs in one of the largest feature sets of any online brokerage platform. The platform is broken down into six categories:

• Client portal: See your account balances, do transfers, and most any other account-related activity.
• Desktop TWS: Desktop trading platform.
• IBKR Mobile: Mobile trading platform.
• IBot: Understands natural language commands such as asking for quotes and balances.
• IBKR WebTrader: Web version of desktop trading platform.
• IBKR APIs: Allows developers to integrate their own software with IB’s back-end brokerage and trading services.

IB is oriented toward active traders and gives them all the technical tools necessary to analyze stocks, options, and trades. IB also has fast-trade executions through its SmartRouting system.

“. . . the more trades we do, the better execution we can give because each time we attempt to execute an order, we get a fresh statistical sample of the venue we have tried. The idea about best executions is that we have about 30 venues and we continuously have to have a statistical picture of what the orders are at each venue so that we can send the order to the best one at that moment,” Peterffy told The Motley Fool in an interview.

Whom Is IB For?

IB is a powerful trading platform and can meet the needs of any trader. Because of its volume-oriented trading structure and powerful trading platform, it is more suited for active traders and those that need lots of tooling for analysis.

People who trade infrequently might find IB a little overwhelming and commissions on the higher side.