Interactive Brokers is one of the largest automated global electronic broker with a market value of more than $21 billion. It was started in 1978 by Thomas Peterffy, who serves as the chairman and of the company. The company has more than 1,400 employees and more than 598k institutional and individual brokers. In 2018, the company had more than $1.8 billion in revenues. The company prides itself for offering low costs and automated risk control tools. In this article, we will highlight everything that you need to know about Interactive Brokers.
What Services Does Interactive Brokers Offer?
As a company, Interactive Brokers is made up of two segments. The first segment is the electronic brokerage product that enable customers to buy and sell financial assets online. This segment is responsible for 96% of all the company’s revenue. Some of the products that the company offers in this segment are trading, integrated investment account, investors marketplace, model portfolios, and asset management.
The second segment of the company is market making, which represents 4% of the total revenue. In 2018, the company announced that it was selling the market making products to Two Sigma, which is a large automated trading company.
What Assets Can You Trade/Invest with Interactive Brokers?
The company has one of the largest groups of assets that you can trade in. With it, you can easily trade or invest in the following:
- Stocks. You can buy and sell North American, European, and Asia-Pacific stocks.
- Options. You can also buy and sell options of North American, European, and Asia-Pacific stocks.
- Futures. Futures are financial products that are priced into the future. For example, you can agree to buy the stock of Apple at a certain date when it is trading at a lower price.
- Futures options
- Exchange-Traded Funds (ETFs). You can buy and sell ETFs from North America, Europe, and Asia-Pacific.
- Warrants. You can buy and sell warrants from North America, Asia, and Europe.
- Structured products from Europe and Asia.
- Single stock futures
- Forex. This refers to the currency pairs like EUR/USD and GBP/USD
- Metals like gold, silver, and platinum.
- Indices like S&P 500, Nasdaq, and Dow Jones Industrial Average.
- Fixed Income like bonds.
- Mutual Funds.
What is the Pricing of Interactive Brokers?
Interactive Brokers is known for the large discounts it offers to its traders. Indeed, the company has been ranked as the best broker in the US by Barrons for more than 18 years straight as shown below.
According to the company, its costs are 83% lower than those of its key competitors like Schwab and Fidelity. This is because it charges $1 to buy a stock, while ETrade, Fidelity, Schwab, and TD Ameritrade, which charge between $4.95 and $6.95. This can be seen in the chart below or follow this link to find more information about the company’s pricing structure.
What Are the Benefits of Using Interactive Brokers?
There are several reasons why you might consider using Interactive Brokers. These are the reasons why more than 598k people use the company’s services. These reasons are:
- Low costs. As mentioned above, Interactive Brokers has some of the lowest costs in the online trading space. While the average cost is usually not a big one, they could add up especially when you are a frequent trader.
- Automated risk controls. The company has invested huge resources in technology to mitigate risks by calculating the margin requirements on a real-time basis across all the assets.
- Smart routing. As a trader, speed means a lot. This is because a microsecond can determine whether your trades will be successful. The company provides a smart routing product that ensures that the data is received as soon as possible.
- Advanced charting tools. The company has invested a lot of resources on ensuring that the charts are of the best quality. As such, the company provides quality and advanced tools to the investors.
- Probability Lab. The probability lab provides customers with an excellent and intuitive visual method to analyze the future stock price movements based on the current option pricing.
- Investors marketplace. This marketplace connects traders with qualified sell-side analaysts.
- Portfolio builder. This tool allows customers to set up an investment strategy based on the research and rankings from top buy side providers.
- Many assets. As seen above, Interactive Brokers offers more assets than its peers like Schwab and Fidelity.
Summary of Interactive Brokers
Having a good broker is an important thing that investors and traders should always have. This is because the broker they chose can help to determine the costs and success of these traders. In this article, we have looked at Interactive Brokers, which is one of the best-known brands in the US. Still, if you are just starting out, we recommend that you use a broker like Robinhood that charges no commissions.
Watch This Video on Interactive Brokers
Crispus is a finance professional with more than a decade experience in the industry. Over the years, Crispus has written in-depth articles on leading platforms like CCN, Marketwatch, and Seeking Alpha. He also runs a Forex education and managed account company called WestEndFx.