Interactive brokers

Interactive Brokers was founded in 1977 by Thomas Peterffy and is headquartered in Connecticut, United States. Interactive Brokers is a publicly traded company on the NASDAQ stock exchange, symbol “IBKR”.

Pros
  • Variety of investing choices
  • Fractional shares
  • Margin rates
  • ESG scoring
  • Two-step for safer login
Cons
  • Account fees
  • High forex fees
  • Complex desktop trading platform
  • Complicated account opening process
  • Credit/Debit card not available

Trading Platforms & Tools

The flagship platform Interactive Brokers offers is Trader Workstation (TWS). TWS is a downloadable platform that is difficult to learn but comes packed with trading tools and features.

For less experienced traders, Interactive Brokers offers the Client Portal web platform through its website. In summary, Client Portal includes all the core features necessary to trade and manage a basic portfolio.

Client Portal: Client Portal, Interactive Broker’s web platform, is much more user-friendly than TWS while still offering a variety of great features. Client Portal enables you to view your portfolio and watch list, get news on global markets, research assets, conduct charting studies, and place trades.

Trader Workstation (TWS): While certainly not beginner friendly, TWS offers a diverse selection of professional trading tools, including the Mutual Funds Scanner, Bonds Scanner, Options Strategy Lab, Volatility Lab, Risk Navigator, Market Scanner, Strategy Builder, and Portfolio Builder, among others. Combine that with over 100 different order types and algos and professional traders will be in awe at the power and customization that TWS offers.

TWS Charting: Interactive Brokers offers 137 technical indicators and 9 drawing tools on TWS. Almost everything is customizable, giving the user complete control, although utilizing some of the more advanced tools can be cumbersome.

IBKR Mobile: The IBKR mobile app is excellent compared to other offerings in the UK market. Over 70 technical indicators are available, as well as most of the research available on Client Portal. The app is powerful, easy to use, and is amongst the top mobile offerings in the UK.

Artificial Intelligence: Interactive Brokers is on the forefront of integrating artificial intelligence into stock trading, thanks to innovations such as “for you notifications” and IBot. “For you notifications” provide status updates on open orders, dividends and interest collected, and links to relevant tools. IBot acts as an assistant, using artificial intelligence to service customer requests via chat (or voice in the iPhone app). Requests can include placing trades, getting detailed quotes, or merely getting account information, amongst other features.

 Interactive Brokers

Interactive Brokers IBKR Trading Platforms

Fees & Commissions

Interactive Brokers offers two primary pricing structures: tiered and fixed. There are no custody charges with either pricing structure, making Interactive Brokers an attractive option for UK residents who aren’t seeking a direct SIPP/ISA account.

For professionals, Interactive Brokers delivers. That said, infrequent traders will have to assess the inactivity and data fees imposed to decide if Interactive Brokers makes sense price wise.

Tiered Pricing: Tiered pricing at Interactive Brokers varies by which stock exchange a client is trading on, as well as monthly trading volume. Trading stocks, ETFs, and Warrants costs 0.05% of the trade value, with a £1 minimum per order. At this tiered rate, a stock trade with a £2,000 trade value would only cost £1.00 (2,000 x .0005). Institutional clients can receive cheaper rates if trade value requirements are met.

Fixed Pricing: Fixed pricing charges £6 flat for trades up to £50,000 in value, and £6.00 + 0.05% of incremental trade value for trades > £50,000. With this fixed rate, both a £1,000 trade and a £10,000 trade would cost a flat £6.

Fund Pricing: All funds at Interactive Brokers are commission-free or start at EUR 4.95 (or equivalent) with no custody fees. With over 8,300 commission-free funds available, Interactive Brokers is the only UK broker we’ve tested that offers funds without custody fees or dealing charges, although there are minimum monthly commission requirements.

Market Data: By default, customers receive free delayed market data for available exchanges. To access real-time streaming market data, customers must subscribe to each exchange individually, by paying between £1 – £10 a month per exchange. For example, LSE UK Top of Book market data costs £5.00 / month.

Inactivity Fee: Interactive Brokers charges inactivity fees which are assessed in USD. For UK residents, Interactive Brokers charges the equivalent GBP rate at the current exchange rate for that day (see Google for current GBP to USD exchange rate).

  • Account balance < USD 2000 – If monthly commissions are less than $20, Activity Fee = $20 – commissions.
  • Account balance > $2000 – if monthly commissions are less than $10, Standard Activity Fee = $10 – commissions. These fees are waived in the first three calendar months and for accounts with > $100,000.
  • The account owner is < 25 – If monthly commissions are less than $3, Activity Fee = $3 – commissions. These fees are waived in the first three calendar months and for accounts with > $100,000.

Bottom Line: If you only make a handful of trades each year, there are cheaper options. Alternatively, if you trade several times per month, then Interactive Brokers quickly becomes one of the cheapest options available.

Scenario Pricing: When calculating annual share dealing costs, trading frequency and account balance are the two most important factors to consider. Assuming a £30,000 portfolio in a traditional, taxable share dealing account, here are four scenarios of how much Interactive Brokers would cost based on trade frequency:

  • 5 deals per year (£5,000 trade value) = £12.50 (£2.50 x 5) + inactivity fees (est. £59.5) + real-time quotes (£60)
  • 12 deals per year (£5,000 trade value) = £30 (£2.50 x 12) + inactivity fees (est. £42) + real-time quotes (£60)
  • 36 deals per year (£5,000 trade value) = £90 (£2.50 x 36) + inactivity fees (est. £6) + real-time quotes (£60)
  • 120 deals per year (£5,000 trade value) = £300 (£2.50 x 120) + real-time quotes (£60)
  • 3 fund deals per year = £14.85 (£4.95 x 3) + inactivity fees (est. £57.15) + real-time quotes (£60)

Interactive Brokers Education

For UK residents, the educational offering at Interactive Brokers is mixed. The vast majority of educational content found on the site is focused on understanding the products and tools available on TWS, IBKR Mobile, and Client Portal.

Platform education aside, Interactive Brokers does offer investment focused educational content through its Traders’ Academy; however, it is designed for the US market, with lingo focused on US stock trading, not UK share dealing.

Research

For professionals, Interactive Brokers offers a comprehensive selection of research tools. Alongside numerous screeners, traders can back-test strategies and conduct institutional grade portfolio analysis.

For casual investors, stocks, ETFs, and funds all come with a variety of research, including analyst ratings, research reports, forecasts, ESG ratings, and more.

Fundamentals Explorer: Both TWS and Client Portal provide access to the Fundamentals Explorer tool. Pulling a stock quote displays a company overview, company news, a chart with several indicators, analyst ratings, financials, analyst forecasts, ESG ratings, and more. News pieces even include research reports from companies such as Reuters.

Fund research: Available for hundreds of UK funds, research includes a style matrix breaking down the fund’s growth objective, a breakdown of fund holdings, and performance compared to peers. Lipper Leader Ratings are also available for some funds. These ratings give each fund a 1 – 5 score on total return, consistent return, preservation, tax efficiency, and expenses. Lipper Ratings are more widely available for U.S. funds, although they are present for several popular UK fund families.

Conclusion

For professionals and frequent UK traders seeking an institutional grade trading platform coupled with some of the lowest commissions for global trading, Interactive Brokers is a winner.

For beginners and infrequent investors, I recommend calculating your expected trading volume and frequency to see if you will pay a monthly inactivity fee. Cost aside, Client Portal and IBKR Mobile provide an easy way to research, trade, and analyze your portfolio without learning the intricacies of the TWS platform.

Interactive brokers Details

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