Interactive Brokers is an international organization with two main target groups: active, sophisticated traders and institutional investors worldwide. The company also serves less experienced traders and is always introducing new products, services, and education resources targeting less active investors. They are working on making the experience more welcoming to newer investors. They are very competitive regarding their core market of experienced traders and active investors.
Interactive Brokers advantages
- Highly intelligent order router
- Wide variety of offerings across classes of assets
- Affordable ETFs through their proprietary mutual fund replicator
Interactive Brokers disadvantages
- Data can only be streamed on one device at a time
- Inactive or small accounts generate high fees
- Order router can’t be used by IBKR Lite clients
According to authority sources, this broker’s order execution engine has what is perhaps the most intelligent order router in the industry. It tracks all market condition changes to re-route parts or your whole order to maximize rebates, achieve better prices, and attain optimal execution.
IB has a practically infinite range of offerings. They have a large variety of fixed income products as well as direct access to global exchanges. They also have many government bonds denominated in Euro and European corporate bonds. Their state of the art mutual fund replicator helps users discover affordable ETFs, which are basically the same as costlier mutual funds. With regard to the latter, IB has almost 13,000 available.
Ease of Use
To get your account to work, you need to sign a few forms electronically. However, you’ll find you can use most features as soon as you open an account. You don’t need to make a deposit immediately. If you fail to do so within three months, the account will be closed.
Your next step is accessing the Client Portal, which makes tools much easier to find. To help users, the company has an AI-powered digital assistant available.
The core of IB is TWS (Traders Workstation). This is a highly customizable and very powerful platform that customers can download. With time, it’s gaining perks like the “For You” list, which saves links to your most often used tools. In appearance, TWS is like a spreadsheet. It takes some getting used to. Its inbuilt Mosaic interface is much more visually appealing. You can build a workspace by arranging the tools like building blocks.
Opening an Account
Opening a real stock trading account is done entirely online via the “Open an account” button. After filling in the form, you will receive a link-invitation from Interactive Brokers, through which you can log in to their system and fill in the necessary information. Once you do so, your account will be approved by IB in about two business days. The replenishment of the account with funds is carried out only after its approval. You have 45 days from the approval of the account to top it up. This is done through a foreign currency bank transfer to Citibank, and the client pays the transfer costs. Regarding the exact amount of bank commissions, you should contact your bank. There are no fees for opening / closing a real account for trading in shares on international markets. For zero activity of the client (no concluded transaction in a given month) a symbolic fee of 1.00 USD is paid only for this month.
In the wake of Brexit, it was reported that Interactive Brokers had transferred all their clients to their Irish branch. At the moment, the guaranteed amounts is not EUR 100,000, but only 20,000.
According to EU law, the broker is obliged to keep the cash and shares of clients separate from their assets in so-called segregated accounts. The cash is kept in a separate bank account, and the shares – with a company other than the broker. The company that holds the shares has a list of which shares belong to which client. This is written on the Interactive website, as well as on some official EU websites. And the financial regulator of the respective country monitors compliance with these rules. At the moment, it’s not known whether anyone has lost their shares after a broker in the EU or the United States filed for bankruptcy. Cash can be lost more easily if it is above the guaranteed amount, because the money in the external bank account is shared by all the customers of the respective institution.
What are Introducing Brokers?
Introducing brokers have direct relationships with users, but they transfer the work of trade execution and floor operation to another futures vendor, usually an FCM (futures commission merchant). Through some, you have a contract with Interactive Brokers and you send the money to the account of Interactive Brokers. The inactivity fee is negligible, something like $1 per month. There are higher transaction fees compared to direct registration. Other brokers mandate you send the money to their account. In most cases, the transaction fees are higher compared to if you were to sign up with IB directly. The withdrawal fee is not written in the tariff, which will be sent to you to read. This can be avoided if you have an account in the same bank – for example a term deposit (there are no monthly fees and no withdrawal fee upon maturity).
It seems to be most advantageous to have a term deposit in the same bank and to withdraw at maturity, and the next most advantageous option is to receive a transfer in euros within the EEA – then you pay just 10 euros.
Keep in mind that some introducing brokers in the EU withhold a higher dividend tax. This is because the Double Taxation Avoidance Agreement does not apply. If you buy instruments that do not pay dividends, this is not a problem. The problem is that IB does not provide information to the issuer and therefore the issuer withholds tax as much as is withheld in the general case, without applying the DTAA. In addition, Interactive Brokers does not apply DTAA to shares in Germany. According to experts, they only have the option for France to refund overpaid taxes when paying large fees.