Interactive Broker is a renowned discount broker based in the United States of America that provides remarkable online services for hundreds of thousands of beginner and advanced level traders worldwide. The company was founded in 1978 which makes it one of the oldest and largest online brokerages in the world. Since then, they have expanded their business much fold.
In the following article, we will be reviewing the Interactive Broker on the basis of the different services that are provided by them. We will be analyzing the different regulations, the quality and number of trading platforms provided by them, the aspects which makes this brokerage safe to trade with, their trading fees and commissions (if/any), bonuses or promotions, the different type of account types, funding methods for depositing and withdrawing your money for the trades amongst other things.
The aim of this review is that by the end of the article you should be able to decide whether to select Interactive Broker for your trading purposes or to select any other broker that would serve you better.
Brief Overview of Ava Trade:
- Secure: Being regulated by the top tier financial regulatory bodies, Interactive Broker has deemed itself safe to trade with.
- Advanced Trading Platforms: Their trading platforms are more suited for advanced and seasoned traders.
- Experienced: Founded in 1978, they have since launched many products and have been presented various accolades for their exemplary services.
Interactive Broker – Company Profile:
The Interactive Broker group was founded by an American trader, named Thomas Peterffy in the year 1978. Mr. Peterffy began his journey by purchasing a seat on the American Stock Exchange in the year 1977, which allowed him to trade as an individual maker in equity options.
Over the past 40 years, the Interactive Broker group has had many names, including TP & CO and Timber Hill Inc. Since 1993, they are known as the Interactive Brokers Incorporation.
Interactive Broker is one of the largest discount brokers in the world and the largest in the USA. The company is an industry leader as it offers the lowest trading fee in the market, and due to its accessibility for international trading.
Apart from the US, Interactive Broker has offices in Canada, India, Hong Kong, Japan, and the United Kingdom.
Interactive Broker – Regulations:
The various financial regulatory bodies are graded as top, bottom, and average tier regulatory bodies. Understandably, the top-tier regulatory bodies only provide licenses to the best of the best broker in the world. Hence, when reviewing a broker, we need to be mindful of the grading of the regulatory body as well.
Interactive Broker is regulated by the top-tier United States Security Exchange Commission (SEC) and the United Kingdom’s Financial Control Authority (FCA). Their parent company is also listed on the Nasdaq Exchange.
Interactive Broker also provides the advantage of negative balance protection. Hence, we conclude that trading with Interactive Brokers is safe and reliable.
Interactive Broker provides an advanced trading platform which is its curb appeal. The main focusing point is the Trader Work Station (TWS). This platform can be used to trade a variety of instruments including ETFs, futures, and cryptocurrency. The platform is available for Windows, MacBook, and Linux users.
The platform is downloadable. The default setup of the Trader WorkStation is the Mosaic setup. Additionally, users can also access the Classic Trader Work Station which is the original version of this platform.
The platform provides all the essential features that a trader might require. Earning calendars can also be used with ease as well as backtesting and setting trail stop limits come as the standard.
The platform can be regarded as user-friendly and is very secure as it requires two-step verification.
Their watch list is very straight forward. Traders need to only type in any stock symbol and instantaneously, a summary of all the available securities will appear. Watch lists can include a variety of things. As a matter of fact, up to 338 different columns can be made on a watch list. Therefore, the entire platform is highly customizable.
Various account types are available at Interactive Broker. They include:
1. Cash Accounts – these are particularly useful to enter long securities positions, long option positions, and covered short option positions.
2. Margin Accounts – This allows the trader the ability to purchase the security on margin. This enables the trader to short security positions, futures positions, and naked options positions.
3. Portfolio Margin Accounts: The positions are the same as that of the margin accounts. The difference is that traders can use an alternative method for calculating margin requirements. A minimum account balance of $100,000 is needed. Plus, foreign accounts are not eligible and so international trading with such an account is tedious.
4. Universal Account: A long list of instruments is available for the trader. Since it’s a universal account, clients can trade around the world without having the need to open different international accounts.
If you sign up with Interactive Brokers, you also get a demo or a practice account, free of charge. This allows traders to experience trading in real, life-like scenarios but with zero risks. By using the demo account, traders can polish their trading strategies and polish their knowledge. It also proves to be a great way of testing out the trading platform.
As with the normal live accounts, clients get access to various trading tools and financial instruments with the demo account as well.
Minimum Initial Deposit:
Post verification of your account, you need to deposit the money within your account to begin trading. The minimum deposit at Interactive Brokers is quite high. Individual accounts, trading group masters, and broker masters, all are required to make a minimum deposit of $10,000 USD. Certain exceptions to this amount include;
Age under 25 – you can make do with a $3000 deposit.
Indian Residents: Indian account holders need to make a minimum deposit of 100.000 INR.
Non-Indian residents: Indian account holders must deposit 500,000 INR.
Spreads and Commissions:
Forex fees are competitive. Most professional traders choose to trade with Interactive Brokers. Their commission is pretty low and fixed with a rate of $0.005 with a $1.00 minimum on all products and comparable rates.
Other Trading Fees:
There are multiple other costs you should be aware of. Like, for example, accounts having less than $100,000 must meet a minimum of $10 in commission each month.
Luckily, traders who are under 25 have to meet a minimum quote of just $3 in monthly trade commissions.
The activity fees are therefore high however it’s significantly lower than their counterparts.
Deposit and Withdrawals:
2 types of deposit methods are available. They include deposits that actually transfer money and deposit notifications.
They offer many base currency options. The deposits are free of charge. Credit/debit card facilities and online payment methods are not available.
The withdrawal methods include bank transfer and Single Euro Payment Area (SEPA). The first withdrawal is free of charge. After that, a withdrawal fee is charged on all subsequent withdrawals. The withdrawal fee depends upon the geographical location.
Market and Trading Products:
They have a huge variety of trading products. They exhibit an exceptional range of ETFs and bonds. Interactive Broker offers some of the most exotic assets, like warrants and structured products. They provide more than 100 currency pairs. IB has access to more than 250 fund providers, worldwide. Trading options with a cryptocurrency like Bitcoin and Ethereum is also available. They provide access to approximately 150 exchanges worldwide.
The user interface is complex and not very well executed. However good trading charts, extensive research possibilities, numerous trading ideas, and huge data on asset fundamentals is available.
You can contact Interactive Broker via phone, email, and live chat. However, customer support was lacking in terms of the response time except for the live chat, which was quickly responded to. The operator was respectful and had adequate knowledge of the different products and basic queries.
They can also view your account status, close the account for you, and assist you in transferring funds, in case the need arises. They also inform you about the new promotions and can guide you through the platform. The customer support staff is adequately informed and has the capacity to resolve minute disputes and queries. Customer satisfaction is guaranteed.
Interactive Broker is regulated by several financial regulatory bodies worldwide. This makes trading with Interactive Broker a safe and reliable option.
Their account opening process is tedious and consumes a significant amount of time. They have the lowest commission fees. Deposits and withdrawal options are limited. Deposits are free of charge. The first withdrawal is free of charge. However, a considerable withdrawal fee depending upon the location is charged on subsequent withdrawals.
Their platform is available for all kinds of devices. Their customer service is satisfactory. Their user reviews are also mostly positive.
The main drawback includes the very high minimum deposit fees and various other types of intricate processing fees.