After using Interactive Brokers for a number of years, I feel that it’s a good a time to write a review on the popular online discount brokerage.  In late 2014, IB finally delivered on their promise to offer RRSPs and TFSAs to Canadians.  Although it comes with a $50/year maintenance fee, the low trading fees will be attractive to many investors.

Trading Platform(s):

  • The TWS software trading platform is extremely powerful, but a bit tricky to use. Once you get accustomed to the GUI, you will wonder how you ever traded without it. They have demo software on their site so that you can give it a test run before you commit.
  • They also have a web based trading platform which is not as powerful but extremely user friendly. The web based platform is convenient when away from your main computer.

Low Trading Commissions

  • $1USD/200 shares (US), $0.005 / share > 200 shares (0.05% max)
  • $1CAD/100 shares (CAD), $0.01/share > 100 shares (0.05% max)
  • Example: 400 CAD shares @ $5/share, commissions cost: 400 x 0.01 = $4, or $5 x 400 = $2000 x 0.05% = $10, whichever is less.
  • Commissions can get expensive if trading penny stocks.

Low Margin Rates

  • Prime – 0.23 on balances < = $115,000
  • Prime – 0.73 on balances > $115,000
  • Prime – 1.23 on balances >= $1,150,000 (big wigs)

Low Foreign Exchange Rates:

  • Where the big banks will charge up to a 1.25% premium (each way) on top of the exchange rate, Interactive Brokers charges the going exchange rate x 1 basis point.
  • 1 basis point = 0.0001 (0.01%) with a min. commission of $2.50USD.

Real time Quotes

  • NASDAQ quotes are free providing that you trade at least $30USD/mo worth of commissions. Otherwise they are $10/mo, level II quotes are $20/month
  • TSX I quotes are $10/mo, level II quotes are $14.50/mo.
  • You can find the rest of the data fees here.
  • I personally use my bank brokerage and Questrade for my real time quotes.

Fees

  • Min commissions are $10USD/mo. If you don’t trade at least this amount per month, they will take the difference from your account.
  • EFT deposits are FREE, along with the first monthly withdrawal. Fees apply after first withdrawal.
  • $50/year maintenance fee for RRSP/TFSA.

Opening an Account

  • Requires $10,000 initial deposit.
  • Fairly lengthy initial paper work.
  • Deposits take 5 days to get approved (through EFT).

Who is this brokerage suited for?

  • Active traders looking to reduce their trading commissions.
  • Not suited for penny stock traders as there are cheaper alternatives than Interactive brokers. For example, 8000 shares of a stock @ $0.50/share will cost 8000 x $0.50 = $4000 x 0.05% = $20 in commission + ECN fee on venture exchange.
  • You could make the same trade above with E-Trade or CIBC for $9.95 or $6.95 respectively.
  • Suited for investors who pay more than $120USD / year in commissions which works out to be around 4 trades / year with the big banks.

Conclusions:

  • I personally use and recommend Interactive Brokers for active traders as it will save most traders a bundle of money in commissions. The powerful interface along with fast execution times make it an extremely competitive brokerage for traders.
  • This platform is not only for traders, long term investors who spend more than $120USD/year in commissions should also consider this brokerage.
  • If you are interested in stock trading, check out some of the free stock trading tools that I use.

106 Comments

  1. Charlie on January 21, 2010 at 4:24 pm

    Let’s say that I fund an account with $31,000 U.S., and want to buy the equivalent of $10,000 worth of stock on the Toronto exchange, $10,000 of stock on the London exchange, and $10,000 of stock from Australia, that I may want to hold for a year. [I’d leave $1,000 in cash in the account to pay for the monthly inactivity fees.]

    It sounds as though I can either do this using margin, without any currency exchange, but then I’d be paying margin rates. Alternatively, I can exchange the U.S. dollars for Canadian dollars, Australian dollars, and G.B.P., and buy the stocks without owing margin fees.

    It seems that it would be much better to do the currency exchange? Why would someone instead want to buy on margin–is that just for people who want to buy a foreign stock on a very short-term basis, and who therefore wouldn’t incur margin fees? FrugalTrader said that operating on margin allows one to avoid the currency risk, but I don’t follow that.

  2. anh2 on April 21, 2010 at 5:24 am

    IB did rape me with those automatic margin call automatic sell or cover short sale orders. Funny thing is they always pick your losing position so you immediately recognize a lost. I lost about 100K with them because of this rule. eg.: short sale rimm knowing pattern that before their earning reports they tend to drop significantly between after hours and pre-opening then recover about a wk later. I had gain in HAL but instead of selling HAL to cover a measly grand or two or another stock like AMD with unrealized gain. They covered with 100 shares of RIMM which is spiking during after hour. So next day as expected I covered my position with remaining 100 share making a net loss of couple hundreds instead of having a gain of 3K. This happen several times usually costing me several thousands per month.

  3. Allen Mass on April 29, 2010 at 1:40 am

    Good reviews. Trading platform which is not as powerful but extremely user friendly. I had gain in HAL but instead of selling HAL to cover a measly grand or two or another stock like AMD with unrealized gain.

  4. Linda on July 27, 2010 at 12:08 am

    Very bad experiences with IB. Their customer service is deplorable. I was away from my computer one day and got a margin call, instead of liquidating the smaller position that would have covered the call… they liquidated my larger position to the tune of a few thousand dollars. When I called to complain and try to put the situation right, they said they have no control over their computers, that they randomly pick a position to liquidate. They were downright mean to me on the phone and said you have to make sure in your account window to check which positions arebto be liquidated first, or they will take whichever one they want at random. I just bet they always take the largest one that will give you the biggest loss. I was furious and never, ever, got any satisfaction. They refused to credit my account with the larger position and take the smaller one instead.

  5. Binary Options Guy on July 29, 2010 at 4:02 pm

    I would like to know more about the forex aspect of interactive brokers – ie maybe a blow-by-blow of costs / real numbers of setting up a simple carry trade with 10:1 leverage.

  6. Dave on October 4, 2011 at 1:12 am

    I’ve had NO problems with IB for 7 years.

    Just don’t overmargin yourself. They don’t mess around, they WILL liquidate you, but they are a business and have to protect themselves.

    Their $1 commissions are simply the best.

  7. Jiminey on February 14, 2012 at 3:07 am

    I already posted this in FrugalTraders “Canadian Online Discount Stock Brokerage Comparison”, but for Interactive Brokers Canada clients, I recently put a feature request for Interactive Brokers Canada clients to be permitted ACH transfer to USA bank accounts a this link: http://www.interactivebrokers.com/en/general/poll/index.php?sid=8079

    If we get enough votes they might implement this. Currently, for Interactive Brokers Canada clients a wire transfer is required to withdraw funds from Interactive Brokers Canada to a USD bank account that is located in the USA, and although there is no charge from Interactive Brokers, USA banks typically charge a $15 incoming wire fee.

  8. Park on July 7, 2012 at 10:45 pm

    If your strategy involves long term leverage using a margin account, there is no better brokerage than IB in Canada. If someone has a better alternative, I would be interested in knowing it.

  9. Matt Correia on July 24, 2012 at 5:13 pm

    I agree with Jack Snapper, they will auto liquidate you intraday, i lost a good deal of money to them trading credit spreads, an option strategy with fixed margin requirements and fixed loss. Apparently they don’t know basic math and thought i was a threat and blew up my spreads with their algo. I’ve been trying to recover my money through FINRA for over a year now. They are scammers and should be shut down. Their new scam is to loan you $1mm for every 200k in your account, auto liquidate you and take your house.

  10. IB complaint HK on August 12, 2012 at 2:41 am

    No possibility to complaint with Interactive brokers Asia

    Due to instability of Interactive Brokers systems and incompetence of “Salvatore Recco”, I lost lot of money. I could have recovered it with a competent and professional broker. But Salvatore Recco(Head of Institutional Services Asia) was slow, not polite, unprofessional, giving lame excuses and possibly make big money on my back.

    0/you will notice that IB asia has no independent complaint officer( in fact the manager but he wont bother to answer). If any problems happens, especially a senior IB staff is incompetent, you could not complain.No one is checking what they are doing in Asia, so manipulations of the records/transactions and wrong doing can be done by their staffs in Asia.
    1/ zero transparency: you wont get any records ( transaction, transcripts,…) even with a lawyer. “Salvatore Recco” is blocking our access to any records because he make the mistakes.
    2/ you will not be able to speak or see face to face, “Salvatore Recco”or a manager or a complaint officer in Hong Kong or Asia. They will just hide and send you a small potato guy.The small potato told us different things so I discovered that Salvatore Recco was lying and the staff know of his wrong doing.
    3/ even spending money with a lawyer wont be helful as they will hide and refer you to a US complaint or any virtual manager in other continents.
    4/ their methods in order that you give up your complaints, its their complaints tickets systems, for sure it will take many months/ years. They will tell you that they will get back to you within few days but instead give you lame excuses few month later. By that times all records could be modified by IB.
    5/they have many others tricks so be careful, they can make you push to accept new rules at same time when you later login,…
    6/ they are not going to compensate you for their staffs mistakes for sure! Because They do not have any compensation fund aside in Asia !

    I wonder how can a broker operates without transparency!

    I discover on internet others complaints about “”Salvatore Recco”, if you have any problems with him or IB, please help me. I took a lawyer and complaint SFC and regulator without any answer!!!
    I will appreciate if someone can help me because “Salvatore Recco” is blocking my complaint as he was the one involved and possibly make a big money in my back!

  11. Chris on September 23, 2012 at 10:10 pm

    Even though they have no transparancy, and auto-liquidate you on margin accounts, I still am considering IB very strongly. I don’t have $25000 cash but I would like to day trade with a small amount. Is there any way to get around the day trading requirement? Or maybe I have to stick to 3 trades a week?

  12. Paul on October 14, 2012 at 5:02 pm

    From any one who has interective broker account. Could you tell me what is the best data plan subscribe to, i am only trading canadian securities and which is mostly ETF’s. so don’t need 10 dollar US fees structure. they offer monteeal exchange fees for $6 and another $9 for level 2 data. Also TSX Level 1 for 6 and level 2 for 10+6=$16. my understanding is that either of these fees are waived based on volume.

    Can someone help .

    Paul

  13. FrugalTrader on October 14, 2012 at 6:34 pm

    @Paul, I use another brokerage for my quotes and IB for trades to help save on fees.

  14. Sam on June 11, 2013 at 2:58 pm

    Hey Great Review sort of dotated …

    So do you have three brokers? One at Questrade, one at your bank and IB? Why not consolidate?

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