Interactive Brokers

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Interactive Brokers (IB) is an online discount brokerage firm founded in 1993. IB is the largest retail broker as measured by Daily Average Revenue Trades (DARTs) [1]. The firm is founded by Thomas Peterffy who is credited as the father of digital trading by Forbes [2]. Interactive Brokers Group has a market capitalization of $15 billion as of January, 2017 after combining both private and public float [3].

Cost structure for passive investors

Interactive Brokers is a low cost operator in the brokerage industry. The firm is highly profitable despite its low commission structure due to its highly automated trading platform, active client base and low touch service.

Passive investors can take advantage of low trading cost and breadth of product offerings from IB, provided two caveats relevant for certain investors: 1.For accounts with equity below $100,000, IB charges a $10/month minimum activity fee. This fee is reduced by the amount of commission generated for the month. 2.IB charges a fee for real time market data subscriptions. This fee is passed-through from exchanges that actually sell the data product. Passive investors are not advised to subscribe to real time market data as it is unnecessary for the investment style.

Interfaces for trading

Interactive Brokers offers four different trading platforms called QuickTrade, WebTrader, Trader Workstation (TWS) and Mobile TWS. QuickTrade and Mobile TWS are the simplest and thus most suitable for passive investors.

Mutual funds

Approximately 300 Vanguard fund tickers can be purchased through IB. In total, more than 8,100 mutual funds from 130 fund families are accessible through IB as of January, 2017.

Although most funds are US based, several European domiciled funds are also available through IB.

A complete list of North American funds is available here.

Interactive brokers charges $14.95 per Mutual Fund trade. Firm also offers more than 2,900 No Transaction Fee (NTF) funds where the broker is compensated with 12b-1 fee rather than a trade execution fee.

ETFs

Interactive Brokers provide access to thousands of ETFs from 13 different countries including Irish domiciled ETFs.

For the US market, execution fee for ETF is .0035/share with minimum execution fee of 35 cents under its tiered pricing structure. IB offers commission free trading for several ETFs.

Products Availability and International investing

The majority of Interactive Brokers clients are located outside of United States [4]. Clients can trade in over 100 market centers in 24 different countries through its platform. IB has offices in Australia, Canada, China, Hong Kong, India, Japan, Russia, Switzerland, UK and US [5].

Following table illustrate breadth of IB's products offering. Note that local regulatory restriction may effect client's trading permissions in any specific market.

Country Stock ETF Mutual Funds Bonds Options Futures Future Option Single Stock Futures Warrants Structured Products Forex Metals Indices CFDs
United States x x x x x x x x x x x x
Canada x x x x x x x
Mexico x x x x x x
Austria x x x
Belgium x x x x x x x
Czech Republic x
Denmark x
Finland x
France x x x x x x x x x
Germany x x x x x x x x x x x x
Italy x x x x x x x
Netherlands x x x x x x x x x
Norway x x x x x x x
Portugal x x x x
Spain x x x x x x x x x
Sweden x x x x x x x x
Switzerland x x x x x x x x x
United Kingdom x x x x x x x x x x
Australia x x x x x x x x
Hong Kong x x x x x x x x x x x
China - Shanghai-HK Connect x x
India x x x x x x x
Japan x x x x x x
Singapore x x x x x x
South Korea x x x x x

In addition, IB allows following currencies for account funding or withdrawal.

See also

References

  1. IB Due Diligence Memo, page 5
  2. Forbes Profile, [1]
  3. IB Due Diligence Memo, page 1
  4. Investor relations presentation, slide 17
  5. 201410K Filing, page 36