Interactive Brokers Reviews And Information

Interactive Brokers (Often abbreviated as "IB") in many ways is the ultimate example of the trade-off in priorities between traditional service-oriented brokers and online stock brokers. Their commissions are razor-thin, their spreads are extremely tight, and their product offering is large and growing. However, their customer service is next to non-existent, and their interface is unforgiving for anyone who is not skilled technically. Further, their low expenses are offset in part by poor interest paid on cash balances.

Interactive Brokers Services

Interactive Brokers' service selection is one of the broadest of any brokerage on the Internet. Customers can trade stocks, bonds, options, Forex, warrants, and futures. They are one of the few online brokerages to offer single-stock futures. Last but not least, they have a huge selection of overseas stocks. Apart from the major U.S. exchanges, exchanges are supported from Canada, Australia, Japan, Belgium, France, Germany, the Netherlands, Sweden, Switzerland, the U.K., and Hong Kong. Overseas trades are made directly on the local exchanges, freeing traders from the huge spreads of thinly traded ADRs and third-party clearing houses. Few other online stock brokers offer such broad support for overseas stock trading, and no other brokerage can match Interactive Brokers' low prices for trading international shares.

Traders' Workstation is the core trading platform at Interactive Brokers. It offers direct-access trading, real-time streaming quotes, and the ability to enter multiple orders simultaneously. Further, the interface is highly customizable. It takes some getting used to, but Interactive Brokers provides excellent help documents and training materials, so independent-minded investors can get up to speed quickly enough.

The firm also offers a purely web-based platform which is somewhat simpler, but less sophisticated functionally.

Cheapest Online Stock Trading for Some — Not All

The commission structure at Interactive Brokers is somewhat complicated. Most orders are charged a per-share commission of half a cent, with a $1.00 minimum. This results in commissions that are often lower than any other brokerage out there (apart from the free trades offered at Zecco). Larger orders can end up being more expensive than other brokers, but traders who are making orders of that size will likely find the expenses negligible. For huge traders, turning over millions of shares per month, they offer a separate "unbundled" commission structure which can drive these costs down even further. Then end result is that there is a "sweet spot" where IB is the cheapest stock trading platform available, but not all traders will fall into it.

Further, commissions are capped at .5% of the order size, so traders working with the tiniest of penny stocks won't find big chunks of their orders eaten up by commissions.

Interactive Brokers Reviews in the Media

Interactive Brokers media reviews have been mixed. Their huge product selection has been roundly praised, along with their excellent order routing, and execution speed and quality. The main criticism has been their poor customer service.

Downsides to Consider

As noted above, interactive brokers is not a customer-service oriented firm. They provide a fantastic range of features, and execute extremely well. However, you are expected to figure things out for yourself. No one will hold you hand and walk you through anything. That being said, their documentation is excellent, so the resources are there for those who take the initiative.

In addition, IB's research offerings are somewhat thin. They have the basics, but by and large you will be doing your research elsewhere.

You should also be aware that IB does not offer mutual fund trading, so if yo want to work with funds, you'll either need to stick to ETFs, or set up a separate account. They also charge a monthly $10 fee for market data for traders who generate less than $30 in commissions. This is somewhat annoying for those who trade infrequently. However, you can avoid this fee by waiving market data and getting your quotes form someone else. Not the ideal situation, perhaps, but it is the price that must be paid to keep trading expenses so low.

Bottom Line

The experience of working with Interactive Brokers can best be understood by the fact that independent brokers and professional money managers often use them for client accounts, and have an almost cult-like devotion to them. Individual traders, on the other hand, give them mixed reviews. They are difficult to beat for traders who know exactly what they are doing and want as few impediments to doing it as possible. For anyone else, the price of slightly higher commissions is often worth it for more tools and occasional service requests.

In short, Interactive Brokers is the perfect brokerage for traders with the right mindset, but most cost-conscious traders will likely be happier working with slightly friendlier operations such as Zecco.com or TradeKing.com, instead.

For traders with a heavy emphasis on overseas stocks, though, Interactive Brokers is our top choice. Their direct access to overseas exchanges is unmatched in the industry.

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