IBKR Review – Know if Interactive Brokers is Legit or not?

Interactive Brokers (IBKR) stands out as one of the premier trading platforms globally. Traditionally focused on institutional and high-volume traders, IBKR has consistently delivered exceptional services to this demographic.

After this Interactive Brokers review, we can say that it has earned accolades as the top choice for advanced trading, international transactions, algorithmic trading, managing risks and handling cash, along with other types of management. What’s particularly noteworthy is IBKR’s dedication to supporting newer and less experienced investors and traders.

The introduction of a commission-free pricing model marks a significant shift, and the enhancements to the IBKR Lite pricing plan reflect a commitment to accessibility. Additionally, the development of the mobile IBKR Global Trader and the new IBKR Desktop platforms showcase a tailored approach to meet the needs of this emerging group of traders.

Beyond the platforms, IBKR is also focused on enriching its educational resources and creating features that simplify the trading and investing experience for everyday traders and investors. With a diverse range of offerings, Interactive Brokers is well-equipped to serve all types of investors.

Introduction to Interactive Brokers Review

Interactive Brokers, known as IBKR, was established in 1977 by Thomas Peterffy. It operates out of Greenwich, Connecticut. Right from the beginning, IBKR embraced technology in financial markets and continues to lead in offering cutting-edge trading tools and technology.

As a publicly traded company, IBKR has a robust financial position with $14.1 billion in equity capital. It oversees more than 2.75 million client accounts, demonstrating significant trust from its users.

The company has a workforce of over 2,900 employees across the globe. What truly distinguishes IBKR is its vast selection of markets and financial instruments available for trading on its platforms, providing more choices than any other company in the industry.

Interactive Brokers Review – Pros and Cons

Pros

• Unmatched variety of trading markets: No other brokerage firm can rival the extensive access to global markets and trading instruments that IBKR provides. With its platform, traders can tap into 150 market centres across 34 countries and 28 currencies. It offers a diverse array of options including equities, ETFs, mutual funds, debt instruments, futures, foreign exchange, cryptocurrency, and more, all consolidated within a single trading interface.
• Highly competitive commission and margin rates: As per our IBKR review, it stands out with its low commission rates, which are tiered based on monthly trading volume, particularly benefiting institutional and active traders. Additionally, their margin rates are also very competitive, decreasing as the account balance grows.
• Superior trade execution: IBKR has invested in advanced order routing technology, enabling users on the IBKR Pro platform to optimize their order routing for the best possible trade execution.
• Diverse trading tools: IBKR provides an extensive suite of tools designed to assist traders, including stock screeners, direct trading from charts, advanced order routing, options analysis tools, and straightforward order entry options. Customers also gain access to both fundamental and technical indicators that can enhance their advanced order capabilities.
• Commission-free trading option: To attract non-institutional traders and remain competitive with other online brokers, Interactive Brokers has introduced the IBKR Lite plan, which allows for commission-free trading of stocks and ETFs.

Cons

• Learning to navigate TWS can be a daunting experience: For newcomers and less experienced traders, the advanced Trader Workstation (TWS) platform can feel overwhelming due to its extensive features and functionalities. To address this challenge, IBKR has introduced more user-friendly options, such as the IBKR Desktop and IBKR GlobalTrader platforms, designed specifically for beginners.
• Understanding commission structures can be tricky: While IBKR offers competitive low commissions for high-volume traders, its pricing model differs from many other brokerage firms that typically use a simple flat rate for options trades. Instead, IBKR employs a tiered commission system based on monthly trading volume, which can complicate the process of estimating trading expenses.
• Choosing the commission-free option comes with trade-offs: Similar to many online brokers today, Interactive Brokers provides a commission-free trading plan that allows the firm to earn revenue through payment for order flow (PFOF). However, customers opting for this plan must relinquish control over order routing in exchange for the absence of commission fees.
• Limited opportunities for IPOs and OTC stocks: As IBKR is not an underwriter, it typically does not receive allocations for initial public offerings (IPOs). Additionally, trading over-the-counter (OTC) stocks may not be as cost-effective on IBKR compared to other platforms.

Usability

IBKR has successfully made its platforms more user-friendly. Now, opening an account is easier, and there’s no need to deposit funds right away.

You’ll still have to provide personal information due to know-your-client (KYC) rules. If you wish to trade in different markets, additional forms like options and margin agreements may be required.

A client portal is available, which can be accessed on computers and mobile devices through either a desktop application or a web-based version.

IBKR provides various desktop and mobile platforms to meet different client needs. They have introduced two new platforms specifically designed to assist beginners and those less familiar with IBKR’s technology.

Selecting the right platform can alleviate the intimidation new traders often feel with IBKR’s Trader Workstation (TWS). All platforms efficiently integrate markets and tools, allowing access to news, analysis, charts, and trading across various investments from one platform.

On February 28, 2024, Interactive Brokers launched a new desktop platform called IBKR Desktop. This platform, shaped by user feedback, combines powerful tools with an intuitive interface suitable for beginners and intermediate traders.

Additionally, in March 2022, IBKR introduced a mobile app for less experienced traders called IBKR GlobalTrader. This app features a simple interface that enables global trading of stocks, ETFs, and options.

IBKR Review – Range of Offerings

When you compare IBKR to other online brokers, the range of global markets and unique trading options they offer is truly remarkable. Here’s a detailed overview:

• U.S. Equities and ETFs: Access to over 17,000 U.S. stocks for both long and short positions, with borrowing options available.
• Global Options: Trade options across more than 30 market centres worldwide.
• Exchange-Traded Funds (ETFs): Choose from over 150 ETFs with no transaction fees if held for a minimum of 30 days.
• Over-the-Counter Bulletin Board (OTCBB): Known as “pink sheets” or “penny stocks,” with fixed fee pricing for IBKR Lite customers.
• Futures and Options on Futures: Engage in trading futures and their options.
• Precious Metals: Spot trading is available for gold and silver.
• Mutual Funds: Access to over 43,000 funds from more than 600 families, with over 19,000 available without fees.
• International Exchanges: Trade across 150 market centers in 34 countries and 28 currencies.
• Foreign Exchange: Trade in 24 currencies and over 100 currency pairs.
• Cryptocurrency: Hold assets in Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
• Spot Bitcoin and Ethereum ETFs: Invest in ETFs for these cryptocurrencies.
• Debt Instruments: Options include corporate, municipal, treasury, CDs, and international issues.
• CME Event Contracts: Available exclusively through the IBKR EventTrader app.
• Robo Trading: Automated trading options are also offered.

Interactive Brokers – Commissions and fees

Interactive Brokers offers two main pricing plans: IBKR Pro for professionals and IBKR Lite for casual investors, catering to different trading preferences.

1. IBKR Lite: This plan allows you to trade U.S. stocks and ETFs for free, with no market data fees. Options trades cost $0.65 per contract. IBKR Lite generates revenue through payment for order flow (PFOF), which can lead to slightly less efficient trade executions, though the impact is minimal, affecting trades by only a few pennies per $1,000.
2. IBKR Pro: This plan is ideal for frequent traders who prioritize superior trade execution. Stock trades start at $0.0035 per share, with a $0.35 minimum, and costs decrease with increased trading volume, going as low as $0.0005 per share. Options pricing ranges from $0.65 to $0.25 per contract depending on the premium. Importantly, IBKR Pro does not utilize PFOF, ensuring higher trade quality, much like Fidelity offers.
3. Margin Rates: Interactive Brokers is known for its competitive margin rates, which vary based on currency, account type, and loan amount. For USD loans, IBKR Lite adds 2.5% to the benchmark rate, while IBKR Pro uses a tiered rate: 1.5% added for the first $100,000 and 0.5% for amounts over $50 million. By January 2025, for loans under $100,000 in USD, the margin rate is 6.830% for IBKR Lite and 5.830% for IBKR Pro, which is lower compared to major brokers like Fidelity and Charles Schwab.
4. Mutual Funds and Penny Stocks: Interactive Brokers provides access to over 48,000 mutual funds worldwide, with more than 11,000 available in the U.S. Over 4,000 of these funds have no ticket charges. For other funds, the fee is either 1.5% of the trade value or $14.95, whichever is lower, offering a competitive rate. However, IBKR Pro might not be the best choice for penny stock traders due to potentially high per-share commissions.

Trading Technology

Trading Technologies of Interactive Brokers stands out for its excellence in the brokerage sector. As a pioneer in using computer technology within its systems, it remains at the forefront of innovation.

One standout feature of IBKR’s trading technology is its order routing system, which efficiently executes trades to deliver maximum value to customers. Users of IBKR Pro have the added benefit of controlling their order routing.

IBKR provides additional features like fractional share trading, choosing specific tax lots, and tax loss harvesting. This helps account holders optimize their tax situations by managing losses and gains while keeping wash sale rules in mind.

Advanced tools at IBKR include the ability to set up orders in advance, use automated and algorithmic trading strategies, and access a probability lab for easier options analysis.

The Scale Trader tool assists with handling large-volume orders to reduce the impact of price drops. Plus, there are features for optimizing both options and foreign exchange trading.

IBKR also offers paper trading for those who want to practice without risk, although it does not have a feature to back-test trading strategies on historical data.

Portfolio Analysis

IBKR provides tools to help investors analyze their portfolios, even if some investments aren’t held with them. Their free service, PortfolioAnalyst, allows you to create reports and view historical data. It’s used by 250,000 people and supports 28 different currencies.

With PortfolioAnalyst, you can link accounts like checking, savings, investments, credit cards, mortgages, and student loans to get a clearer view of your finances.

The tool analyzes this information to give insights into portfolio performance, risk levels, asset types, geographical spread, and an overall environmental, social, and governance (ESG) score.

This tool also includes a retirement planner and is available for free.

Education

Interactive Brokers is dedicated to educating its customers and offers a range of resources to help them learn. Through Trader’s Academy, traders can access newsletters and courses tailored for beginners, intermediates, and advanced levels. These courses guide users on how to navigate IBKR platforms, comprehend market dynamics, and develop trading skills.

In February 2024, IBKR launched the IBKR Desktop platform and introduced a free course with 10 lessons to help traders effectively use this new tool. The educational offerings also include financial courses at Trader’s Academy, articles focused on quantitative analysis, finance webinars, market-related podcasts, a student trading lab, and a glossary of trading terms.

The IBKR Desktop platform is specifically designed for traders who don’t require the full features of the more advanced IBKR Pro (TWS). This initiative underlines IBKR’s commitment to supporting and expanding its community of non-professional traders.

Interactive Brokers Customer Service

IBKR provides customer support through email, live chat, and around-the-clock phone service. They have an AI tool called IBot, integrated into their system, which helps users find online resources to answer their questions.

There’s also a comprehensive FAQ page available for additional support. For those needing assistance with trades, brokers can be hired for an extra fee.

IBKR is working on reducing phone wait times, as they have been an issue in the past. Improving this is important because they want to attract new customers who may not be as experienced as large institutional traders. To better serve these clients, IBKR plans to continue investing in upgrading its customer service.

Interactive Brokers Security and Reliability

Interactive Brokers stands out with an authentication and security system that surpasses those of other brokerage firms. They implement two-factor authentication and biometric security measures, along with user-controlled unique codes.

Additionally, IBKR’s real-time risk management system proactively manages customer positions, ensuring protective liquidations to safeguard the capital of all clients. A notable advantage is that IBKR refrains from making proprietary trades, significantly reducing the risk of a major incident that could adversely affect customer accounts.

They also maintain a daily segregation of client cash and securities, supplemented by an extra cash buffer. Notably, IBKR was the first broker-dealer authorized by FINRA to adopt this daily reserve calculation method, while most in the industry operate on a weekly or monthly basis.

Furthermore, while SIPC coverage extends to $500,000 (with a cash limit of $250,000), IBKR enhances client protection with additional insurance from Lloyd’s of London. Lastly, IBKR has maintained a clean record with no major data breaches over the past four years, reinforcing its reputation for security and dependability.

Transparency

Interactive Brokers offers a variety of platforms and facilitates trading across a broad spectrum of products and services globally. The business is quite intricate, and there’s a lot to learn to grasp all the technology and tools they provide. On the bright side, the company is open about its offerings and the associated costs and commissions.

They display the commissions for each product and explain how they generate revenue through payment for order flow, especially for accounts using IBKR Lite, which allows commission-free trading of stocks and ETFs. They also provide detailed information on exchange, clearing, and pass-through fee schedules.

Available Account Types

IBKR has a variety of account options to suit different needs, such as individual, joint, UGMA/UTMA, and retirement accounts.

For retirement, IBKR offers several options, including traditional IRAs, traditional rollovers, traditional inherited IRAs, Roth IRAs, Roth inherited IRAs, simplified employee pensions (SEP), and Savings Investment Match Plans for Employees (Simple IRAs).

Beyond retirement accounts, IBKR provides more options for different users. These include accounts for non-professional advisors, family offices, small businesses, advisors, money managers, Brokers & Futures Commission Merchants (FCM), proprietary trading groups, hedge funds, mutual funds, compliance officers, administrators, and investors in institutional hedge funds.

Is Interactive Brokers Right for You? IBKR Review

IBKR has long been the top choice for seasoned, high-volume traders who demand full control over their order routing, precise trade execution, and robust analytical tools. Recently, IBKR made significant investments to cater to newer and less experienced traders by introducing a range of platforms and interfaces tailored to their needs.

This development now positions IBKR as an excellent option for nearly anyone looking to open an online trading account. Moreover, those interested in trading on margin will find IBKR’s margin rates particularly appealing when compared to other platforms.

Conclusion

As per our Interactive Brokers review, it has established itself as a premier brokerage firm catering to institutional and high-volume traders for many years. Its competitive commission and margin rates, combined with extensive access to global markets and a variety of trading instruments available on a single real-time platform, are truly remarkable.

Moreover, IBKR offers top-notch trading technology and tools, allowing clients to tap into news, third-party research, and proprietary resources like screeners, reports, and interactive charting with drawing capabilities.

The convenience of trading across multiple markets with a secure single sign-on adds to its appeal. This impressive suite of features and reviewing Interactive Brokers has consistently made IBKR our top recommendation for professional online brokers.

In addition to its robust platform and technological prowess, IBKR is dedicated to enhancing the trading experience for beginners and intermediate investors. The firm has introduced new desktop and mobile platforms tailored for less experienced traders.

It has developed educational resources to help users grasp market dynamics, trading strategies, and effective use of the IBKR platform. As a result, IBKR has become an excellent option for traders of all skill levels.