Interactive Brokers targets active traders with low-cost trades, a high minimum ($10,000), fast trade execution and access to foreign markets. It's a favorite of day traders and financial experts, but the U.S. commodities regulator has fined the company nearly $1 million since 2012 for failing to properly manage customer funds and not complying with reporting rules.
A trading platform for professionals. Interactive Brokers isn't for the average investor but stands out among professionals for its low costs, trading options, plethora of tools and services and access to foreign markets. It's been knocked in recent years, however, by U.S. commodity regulator fines. Based in Greenwich, Connecticut, the company requires a steep minimum and is easily accessible to clients around the world (fees and other services are laid out for traders in different countries and regions).
Trades can be executed directly -- a major plus for professional day traders and hedge funds who often pay much higher fees for these services. The interface is detailed and customizable, but may be too confusing for nonprofessional traders.
Most reviews are not recent enough to include a major issue with Interactive Brokers: The U.S. commodities regulator, the Commodity Futures Trading Commission (CFTC), has fined the company $925,000 since July 2012 for violating broker rules, including not keeping enough U.S. dollars to "meet obligations to commodities customers." It's praised as being excellent for professional day trading, however.
Ultra-cheap trades, but a $10,000 minimum and inactivity fees. Interactive Brokers caters to active traders -- as a result, it's no surprise that the company has a $10,000 minimum on accounts. You'll also pay upwards of $20 per month if you don't trade regularly. But for active traders, the fees can't be beat. The investment types are impressive: bonds, ETFs, easy-to-borrow stocks, futures, options, stocks and more. Clients have access to global markets, including dozens in Asia and Europe, extensive research and "enough bells and whistles to make a technical analyst giddy," Barron's says. (The magazine named Interactive Brokers the top online broker in 2012 and 2013.) If you want low trading costs but are not a frequent trader, Scottrade (Est. $7 per trade) or TradeKing (Est. $5) might be a better option.
Fines for mismanagement. Interactive Brokers is a darling of traders and wins awards for its rock-bottom prices and trading options. There is one major drawback, however: in 2012 and 2013, the CFTC fined the company $700,000 and $225,000, respectively, for failing to properly manage and supervise client accounts. Interactive Brokers said it immediately corrected the problems, which occurred between 2008 and 2011. Otherwise, feedback on its customer service is mixed; there are phone numbers for agents around the world as well as chat, email and fax, but they're not available 24/7. Reviews.com, which is one of the few to report on the fines, notes that Interactive Brokers has top-notch security. In a StockBrokers.com test, Interactive Brokers had the quickest reply to email but the longest phone hold time (20 minutes) among 10 competitors.
This is the only review to address a critical issue with Interactive Brokers: the U.S. commodities regulator, the CFTC, fined the company nearly $1 million for violating broker rules, including not keeping enough U.S. dollars to "meet obligations to commodities customers." Reviews.com praises Interactive Brokers for being excellent for professional day trading, however.
Review: Interactive Brokers Review, Ed Carlson, June 7, 2013
Interactive Brokers wins the top spot and has 4.5 out of 5 stars in this annual Barron's ranking of online brokers, a much relied-upon source of information for investors of all types. It scores especially high on research, reports and trading experience and technology.
Review: Back Online!, Theresa W. Carey, March 9, 2013
Investor's Business Daily's website, Investors.com, identifies the best online brokers based on a survey of 10,250 Investor.com readers. Twelve categories are weighed, including low commissions and fees, customer service, research tools, investment research, tax preparation tools, mobile platform/trading and more.
Review: Top 5 Online Brokers Ranked for Every Investor Type, Victor Reklaitis, Feb. 5, 2013
4. Wall Street Letter
Wall Street Letter gives its second annual Institutional Trading Awards to "brokerage firms, exchanges and financial technology companies for achievements and innovation over the last year." Interactive Brokers is picked as the best broker for options and futures for the second year in a row; in 2012 it won an award for the best use of technology by a broker.
Review: WSL Institutional Trading Awards 2013, Editors of Wall Street Letter, Not Dated
5. Technical Analysis of Stocks & Commodities Magazine
As in previous years, Interactive Brokers is voted best stock brokerage, best futures brokerage and best Forex (foreign-currency trading) brokerage. Subscribers to this magazine are frequent traders who want electronic access to the best real-time data, technical analysis tools and trade execution tools.
Review: 2012 Readers' Choice Awards, Editors of Technical Analysis of Stocks & Commodities, 2012
StockBrokers.com reviews 17 online brokers and weighs each on several factors, including commissions and fees, ease of use, platforms and tools, research, customer service, offering of investments, education and mobile trading. Interactive Brokers comes in second for active trading, and ranks first for commissions and fees.
Review: Online Broker Review 2013, Blain Reinkensmeyer, Feb. 19, 2013