Review: Interactive Brokers - moolahgeeks (2023)

The Bottom Line

Interactive Brokers (IB) is an American online broker, operating and regulated in more than 30 countries, including Singapore and US.

IB is by far the cheapest broker in Singapore for investing in most countries as they offer the lowest trading commissions, lowest FX conversion spreads and include a number of external fees and charges within their quotes rates. The all-in trading cost on IB can be 80%+ lower than most peers.

Using IB over another broker could save you anywhere from S$100 to S$1000 a year, when investing S$50K.

IB allows you to trade US, Europe, UK, Singapore, Hong Kong, Japan, Australia but do not provide access to many Asian markets like Korea, Taiwan, Indonesia, Thailand etc.

They offer three trading platforms. The web-based Portal & the mobile app are easy to use and offer all the basic functionality. The desktop based TWS is the most advanced trading platform for retail investors in Singapore with an unmatched set of tools and data but suffers from a dated user interface.

Overall we found Interactive Brokers to be that rare beast – the best product at the lowest price and it is our pick as the best broker for most people in Singapore.

Our pick

Interactive Brokers

Lowest rates and best tools

Interactive Brokers' commission are 80% lower than peers while their FX spread are 1/100th of market average. They have the best tools and data sets for investors.

Review: Interactive Brokers - moolahgeeks (1)

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What is Interactive Brokers?

Interactive Brokers (IB) is an American broker / dealer operating in more than 30 countries and offering online trading services for stocks, derivatives, funds and bonds. They are based out of Greenwich, Connecticut and are licensed and regulated the US SEC, CFTC, FINRA and the MAS, among others.

IB is licensed by the MAS

For customers in Singapore, IB offer access to the following countries and products:

CountriesProducts
SingaporeStocks / ETFs
Hong Kong Options / Warrants
ChinaFutures
USADLCs
UKFX
JapanBonds
AustraliaCFDs
EuropeCryptocurrencies
Mutual Funds
Hedge Funds
Securities Lending / Borrowing
Margin Financing

Countries and Products covered by Interactive Brokers

IB primarily targets professional & institutional traders and offers the same tools and access to individual investors as well. It is listed on NASDAQ (Ticker: IBKR), generated profits of US$1.38bn in 2020 and has a market capitalization of more than US$30bn.

How is it different from other Brokers?

Pricing IB is consistently the cheapest broker for Singapore residents in every market they cover and usually they are the cheapest by a wide margin.

IB is the only broker to include exchange and regulatory fees within their already lowest quoted price, while other brokers charge these separately. Their FX conversion commission of 0.002% is 1/100th of what most peers offer and is what really separates them from the pack.

Our pricing comparison is on an all-in basis but excluding taxes i.e. apart from trading commission we include the cost of converting currency outside of Singapore and also custody and other charges where applicable.

Tools & Data IB offers the widest range of charting, trading, analytical and reporting tools of all the brokers we reviewed.

They also had the best data included with the basic platform and are the only one to offer a marketplace where you can subscribe to external research and data providers from within the trading platform.

Coverage IB provides access to most major markets like USA, UK, Europe, Japan, Australia etc. However, unlike a number of Singapore Based brokers, IB does not offer the option of trading stock markets in Korea, Taiwan, Indonesia, Thailand, Malaysia, Philippines and Vietnam. This was one of the very few areas where IB is behind the competition.

What are their fees like?

IB was consistently the cheapest broker for every market and product that we compared. We were blown away by the absolutely vast gap in the all-in fees charged by IB compared to every other broker. Other brokers charge 1.5-60 times as much as IB for the same trade on an all-in basis.

While IB’s advertised broking commissions are lower than peers, a large part of this gap is because IB charges nearly 1/100th of what other brokers charge for FX conversion and they include a number of external charges in their quoted commission while other brokers charge those separately.

FX Spreads charged by currency

We found it difficult to believe that such a large pricing gap could exist in a free market for basically an identical product. As it turns out, in our opinion IB actually has a better product too.

IB offers two pricing structures, Tiered and Fixed. The Fixed structure pricing is more relevant for individual investors as the benefit of Tiered pricing often kicks in only if you trade millions of dollars a month.

In the Fixed structure, IB offers a single low price in each market that includes most external charges like exchange and regulatory fees and only the transaction taxes need to be paid separately. This is unlike all other brokers, who charge the exchange fee on top of their advertised commission rate.

CountryCommissionMinimumMaximum
Singapore0.08%S$ 2.50N/A
USA0.5c per shareUS$ 11% of trade value
Hong Kong0.08%HK$ 18N/A
China0.08%CNH 18N/A
UK0.10%GBP 4 / USD 6N/A
Japan0.08%JPY 80N/A
Australia0.08%A$ 6N/A

For USA, IB has an unusual commission structure. They charge 0.5 cent per share traded with a minimum of US$1 and a maximum of 1% of trade value. All other brokers charge as a percent of traded value for USA as well.

To compare IB’s US market pricing with other brokers, we converted the traded value to a share count by assuming a share price of US$36. On the day of comparison, 90% of the stocks in S&P500 had a higher share price than this. This means that for 90% of the stocks in S&P500, IB’s actual trading cost will be same or lower than what we have estimated.

If you often trade shares with very low prices, TDAmeritrade may be a cheaper option. However IB was cheaper than every other broker even for shares with prices as low as $2.

IB also claims that their SmartRouting algorithm provides a US$0.47 price improvement per 100 shares traded, through better execution in US. If this is really the case, then the improvement almost completely offsets the commission rate (US$0.5 per 100 shares). However, if true, this is likely to be effective over 100s of trades rather than for each trade individually. Finally, IB also passes back the rebates received from market makers and exchanges in certain cases, which could further reduce the overall trading cost for investors.

To compare fees, we calculated the total annual cost for investors at each broker in two scenarios, for a Buy & Hold type investor and a more active Trader.

For the Buy & Hold investors, we assumed they invest their annual savings over 10 equally sized trades and have an average balance equal to 3x their annual savings in custody at the broker. In other words, a person investing S$50K in a year carries out 10 trades of $5000 each and has a portfolio worth S$150K in custody with the broker.

All-in S$ cost for a Buy & Hold investor deploying S$50K in USA

All-in S$ cost for a Buy & Hold investor deploying S$50K in Hong Kong

All-in S$ cost for a Buy & Hold investor deploying S$50K in UK

All-in S$ cost for a Buy & Hold investor deploying various amounts in Singapore

All-in S$ cost for a Buy & Hold investor deploying various amounts in USA

All-in S$ cost for a Buy & Hold investor deploying various amounts in Hong Kong

All-in S$ cost for a Buy & Hold investor deploying various amounts in UK

For an average trade size of $$5000 in US listed stocks, most brokers charge 10-60 times(!) on an all-in basis vs. what IB charges. Only TDAmeritrade possibly charged the same as IB for larger orders and was cheaper for smaller orders.

For UK listed stocks, with the same trade size, every other broker we reviewed charged 6-25 times as much as IB and for Hong Kong listed stocks, that was 2-10 times.

In Singapore, other brokers are 1.5-7 times as expensive. Its worth noting that under the fixed pricing system, IB’s commission rate of 0.08% INCLUDES the 0.04% total trading and clearing fee charged by SGX, while other brokers charge it separately. So IB’s effective commission rate in Singapore is 0.04%.

For the active Traders, we assumed that they turnover their entire capital 4x a year i.e. if they are trading with S$50K of capital, their total traded amount is S$200K over the year and the average annual balance in custody is S$50K.

All-in S$ cost for an active Trader managing an S$50K portfolio in Singapore

All-in S$ cost for an active Trader managing an S$50K portfolio in USA

All-in S$ cost for an active Trader managing an S$50K portfolio in Hong Kong

All-in S$ cost for an active Trader managing an S$50K portfolio in UK

All-in S$ cost for an active Trader managing different portfolio sizes in SG

All-in S$ cost for an active Trader managing different portfolio sizes in USA

All-in S$ cost for an active Trader managing different portfolio sizes in UK

IB was also the cheapest provider for margin lending across all major markets including Singapore, with rates lower than peers by 1-4%. Unlike peers, IB does not fix the amount of leverage offered but instead provides what they call “Risk based” leverage.

IB is also the cheapest for Margin Lending

What tools & data do they have?

Interactive Brokers offers 3 trading platforms, the web-based Portal, the mobile app and the Trader Work Station (TWS).

The Portal and the Mobile App are simple to use and we were able to create our basic set up and perform our test tasks relatively easily on both. This includes monitoring portfolio positions and performance, creating watchlists and charts, placing orders and managing deposits and withdrawals.

While the Portal does not have as many pre-set reports as some other platforms, it allows you to create customized reports of your trading activity and portfolio performance with a lot of flexibility.

The Portal has a cool feature called PortfolioAnalyst. If you own a lot of ETFs, the PortfolioAnalyst can “parse” or “look through” into the underlying stocks in the ETFs you hold and generate a true breakdown of your portfolio by country and sector. This feature can also generate an ESG score for your portfolio.

You can also either connect your other broking and financial accounts to the PortfolioAnalyst or manually enter your other positions. It then track the performance of your overall portfolio, not just the positions held at IB.

We did not see these features on any other platform.

The Portal is simple to use for less active traders

The Portal offers all the major functions you would expect

The Portal offers all the major functions you would expect

IB is the only broker to provide earnings estimates for stocks

IB is the only broker to provide ESG scoes for stocks

PortfolioAnalyst can look through into the underlying stocks in your ETF Portfolio

PortfolioAnalyst can look through into the underlying stocks in your ETF Portfolio

PortfolioAnalyst can provide an aggregate ESG score for your portfolio

Traders Work Station (TWS) is IB’s desktop based trading platform for active traders. As with other advanced trading platforms, it is highly customizable across multiple screens. However, the TWS is the most feature packed pro-platform we reviewed. It has a number of very advanced tools that are simply not available on any other platform we tested. These are largely relevant for more advanced traders but really set IB apart from competition.

For example, we loved the portfolio rebalancing function, where you can simply set the desired weight of each security in your portfolio, including new positions, and it automatically generates the required trades to get there.

Another great tool, Risk Navigator, lets you run “What-if” scenarios for your portfolio and shows the impact on gross & net exposure, margin requirement, value at risk etc. of simulated trades.

While not relevant for retail investors, they also offer a wide array of order types, trading algorithms, and other tools used by professional traders.

TWS also provided the most data for fundamental analysis of all platforms we tested. For instance they are the only ones to provide equity research analysts’ estimates for a company’s future profits (3 years) while every other platform only provided historical data. IB also had better data on major shareholders and their trading activity for a stock. IB also offers the option of subscribing to hundreds of paid third party research and technology services from within the platform.

TWS is highly customizable over multiple screens and with many tools

Rebalance Portfolio tool is unique to IB and potentially very useful

Risk Navigator allows traders to run What-if analysis scenarios

IB offers the widest range of order types and trading algos

IB is the only broker to provide earnings estimates for stocks

IB provides more detailed shareholding data

IB Marketplace offers access to 100s of 3rd party service and research providers

However the very large feature set comes with an even larger number of settings to customize them and the whole platform can be somewhat intimidating for novices.

We found the search, discovery and setup of these tools and data sources to be somewhat less intuitive than at Saxo, although we were able to do what we wanted with a little extra effort.

Featrue packed platform suffers from a dated UI and can be challenging to navigate

We sometimes struggled to locate basic items e.g. changing the region (US, Europe, China, Asia) in the settings does not change the system clock for the app to the correct time zone. Instead that option is hidden in the login screen! The slightly dated look and feel also doesn’t help.

Overall, though, the TWS is the most powerful trading software offered by any broker in Singapore. The fact that it comes for free with the lowest trading commissions is just the cherry on top.

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