Last updated: 17th Sep 2024
Interactive Brokers is a trusted, multinational online brokerage with an Australian-based operation that’s fast becoming a favourite among everyday Aussie investors and traders due to its extensive market coverage and low costs.
Novice investors and traders may initially be deterred by IBKR’s reputation as a platform for professionals, but it caters to investors of all levels through multiple web and mobile interfaces.
Having said that, there are barriers to getting the most from IBKR and drawbacks to be aware of.
(Related: CMC Markets Review: Pros, Cons & Verdict).
Best Features Of Interactive Brokers:
- Global Market Access: Whether you’re simply looking to build a portfolio of Australian and US stocks and ETFs, or you’re keen to trade derivatives or foreign currencies, you can do it all from one platform. Excellent for people looking to get deeper into trading.
- Trading Platforms: Its flagship Trader Workstation is a top-notch interface for experienced traders and day traders, especially those using algorithmic trading. There’s also a comprehensive mobile app, and a streamlined web interface and mobile apps for beginners.
- Research & Analysis Tools: As an Interactive Brokers client you’ll get free access to a huge range of market and company research from groups like Motley Fool, Seeking Alpha, and Morningstar. A variety of algorithms, analysis and trading tools cater to most strategies.
Main Downsides Of Interactive Brokers:
- Complex Fees: There are different fee structures between stocks, options, forex and futures, with further variation in how fees are applied depending on the geographic region. That makes costs hard to predict if you’re trading in multiple share markets.
- Choice Overload: A full-featured platform also means that Interactive Brokers presents a lot of options and tools beyond simply trading stocks, forex and commodities. Multiple features you didn’t know you needed can be distracting, or lead to trades you wouldn’t otherwise make.
- Proprietary Platforms: If you’re closer to the intermediate/expert end of the experience spectrum and are deeply familiar with Metatrader tools (MT4, MT5), you may be disappointed that Interactive Brokers only offers its own proprietary platforms that you’ll need to learn.
Interactive Brokers At A Glance.
| Trading Fees To Watch Out For. | Added regulatory, clearing and exchange fees on tiered commissions. |
| Non-Trading Fees To Watch Out For. | AUD$15+GST withdrawal fee (after 1 free withdrawal per month). |
| Available Share Markets. | 90+ markets incl. ASX, NASDAQ, NYSE, AMEX, Euronext, HKEX. |
| Available CFD Markets. | Forex, shares, indices, commodities. |
| Available Crypto Markets. | Bitcoin futures, and trading of BTC, ETH, LTC and BCH. |
| Available Forex Markets. | 100+ currency pairs on 24 currencies. |
| Support. | 24/7 email support + live chat (Sun-Fri US time) can be accessed via your account. Phone support available Mon-Fri 9.30am-7pm AEST. |
| Trading Platforms. | Trader Workstation (TWS), IBKR Desktop & Mobile, IBKR GlobalTrader for simplified stock trading, IMPACT app for sustainable investing. |
Is Interactive Brokers Good For Beginners?
Interactive Brokers is good for beginners — but it depends on what type of beginner you are.
- It’s a great fit for people new to trading who are committed to developing their investing and trading skills over time, and exploring a wide range of markets. You can start with the user-friendly client portal and stock trading app, then progress to the more powerful desktop trading platforms and mobile apps with advanced analytics.
- It may be too much for investors with a low-touch approach, an aversion to tech, or a desire to be guided by an expert peer community. Cautious investors can easily be put off by the complicated fee structure; variety of platforms, assets and features; and lack of social trading.
The jury’s still out on whether IBKR can be described as user-friendly.
The fact that there’s so much going on within the platform means the navigation is bloated, making it challenging for beginners to get started confidently.
For example, a lot of Aussies choose Interactive Brokers to access US stocks and exchange-traded funds (ETFs).
Important!
The platform allows for fractional share purchases, which makes it easier to build your ownership in expensive companies like Microsoft (at over US$400 per share).
For a buy-and-hold investor who wants to diversify into international stock markets, Interactive Brokers is an intelligent choice due to its low commissions, low minimum investment amount, free withdrawals and no penalties for inactivity.
Features That Make Interactive Brokers Great For Beginners:
- Demos and a free trial account. A trial account requires only an email address: then you can play around with the tools, make and monitor virtual trades and access research/news feeds.
- Clear written guides, videos, courses, webinars, podcasts, blogs and more to help you understand trading concepts and take advantage of its platform features.
- Account management tools that help you assess your performance, such as real-time views of account balances, positions, profits or losses, buying power and “what-if” scenarios.
- Automated recurring investments can be set up so you can regularly invest a specific amount in specific US, Canadian or EU shares on a weekly or monthly basis, to gradually increase your exposure.
- Customer support, including email and phone support, is manned from Mon-Fri between 9.30am-7pm Australian time. US-based live chat is available in the app, with enough overlap with Australian waking hours to be useful.
- Active online community accessible via the platform so you can chat with, and learn from, other users.
Access to investment news, company research and analyst insights is a core strength of Interactive Brokers.
But for the inexperienced, the breadth and depth of free research could be overwhelming.
It can be hard to filter out extraneous information and focus on what’s important to you unless you clearly understand your investing strategy and how you’ll use the platform to achieve it.
Is Interactive Brokers Good For Experienced Traders?
Yes, in fact, Interactive Brokers describes itself as the “experienced trader’s gateway to the world’s markets”.
Being geared towards serious traders, it includes many advanced features which make it attractive to experienced day traders, swing traders and algorithmic traders.
The key reasons experienced traders prefer Interactive Brokers include:
- Its highly competitive tiered commission structure which makes trading exceptionally cost-effective at high-volumes and high values.
- You can invest and trade in virtually any market and product globally, with Interactive Brokers’ comprehensive coverage, giving you 24/7 opportunities and over 90 order types and algos.
- The ability to choose your base trading currency from a selection of global currencies rather than being locked in to AUD or USD.
- Quality analytical, research and reporting tools that help you execute almost any trading strategy and keep track of your positions and success rate.
- Individual and joint account structures with up to five optional Power of Attorney users, and ease of switching between different entity or family accounts while logged in under one user ID.
In addition to the web-based client portal and IBKR GlobalTrader — a basic stock-trading app — the company offers three platforms specifically designed to cater for intermediate to expert/professional traders:
- Trader Workstation (TWS): An award-winning platform unique to IBKR that’s aimed at active traders who invest across multiple products and markets. Includes advanced algos, charting and other trading tools. While its tools/layouts are highly customisable, it can take time to set up to your satisfaction.
- IBKR Desktop: A mix between TWS’s sophistication, plus unique features and a newer interface, which is easier to grasp. Ideal for intermediate traders, IBKR Desktop is being actively developed and updated by the company with new features in the pipeline.
- IBKR Mobile: A smartphone app for iOS and Android that includes all of the key advanced capabilities from TWS, such as chart trading and options analysis. The app supports trades of all of IBKR’s available product types.
Another aspect of Interactive Brokers that may appeal to serious traders with large portfolios and cash balances in their accounts include:
- The ability to earn a healthy interest rate on your positive settled cash balances held in the securities section of your account. Accounts with NAV above US$100,000 (or equivalent in AUD) can earn up to 4.090% interest on their account balances held in AUD.
- The ability to earn income by lending eligible shares of stock to IBKR Australia, which is available to professional investors with an approved margin account or a cash account with equity greater than USD$50,000 (or equivalent in AUD).
Understanding The Trading Fees, Spreads, And Commissions Charged By Interactive Brokers.
Interactive Brokers uses a commission model for fees. Its commissions are comparatively low, and it doesn’t charge additional spreads, ticket charges, platform fees or account minimums.
The platform’s FX conversion fees are insignificant at 0.0022%, with a minimum of USD$2.20 inclusive of GST where applicable.
Stocks & ETFs.
Trading Australian stocks, ETFs, warrants and certificates have the same fee structure.
There are both fixed rate and volume-based tiered commission payment structures. Tiers only become relevant if you’re trading over AUD$3 million per month.
- The fixed rate commission on these investment products is 0.08% excluding GST.
- The tiered commission system starts at 0.08% (excluding GST) and reduces the more a client trades, getting as low as 0.015% if they trade over AUD$300 million per month.
The fixed rate pricing structure — which is what most retail traders will use — doesn’t include any third party fees, such as exchange fees or clearing fees.
Here’s an example of fees charged for trading an ASX stock:
- You trade 500 shares at AUD$20 per share, for a total value of AUD$1000.
- The cost is 0.08% of 1000, so you’ll incur a commission of $8 (excluding GST).
The minimum commission for a trade, regardless of the value, is AUD$6.
Trading US stocks has a different fee structure, there is both a tiered structure and a fixed price structure. The tiered has lowered fees per trade but includes more third-party fees such as exchange fees, clearing fees and pass-through fees.
- The lowest tier commission is USD$0.0035 for monthly volumes less than 300K shares plus exchange, clearing, regulatory and pass-through fees, with a minimum of USD$0.35 per order and a maximum of 1% of the trade value.
- The fixed pricing model charges US$0.005 per US share traded, with a minimum cost per trade of US$1 and a maximum cost of 1% of the value of the trade.
Options And Futures.
Interactive Brokers has a similar commission structure for options and futures products:
- Options are priced per contract: fixed at AUD$2/contract, or a tiered structure starting at AUD$1.50/contract plus exchange and clearing fees for up to 1000 contracts/month.
- Futures are also priced per contract, with the commission being AUD$5/contract on the fixed fee structure.
Spot Currencies.
Commissions range from 0.08 to 0.20 basis points of the trade value.
Interactive brokers is known for low spreads on all its trading products. Its foreign currency exchange (Forex) spreads in particular are considered extremely low — in some cases as low as 0.1 PIP.
Contracts For Difference (CFD) Fees.
CFD pricing is also based on commission, with the rate paid dependent on the client’s trade volume.
- On Australian share CFDs, if trade volume is under AUD$10 million per month the commission rate is charged at 0.05% with a minimum of AUD$5 per order. Over $10 million per month is charged at 0.03%. All rates exclude GST.
- On US CFDs commissions vary depending on how many contracts you trade each month – not contract value. Charges start at $0.005 per contract for under 300,000 contracts/month and drop to $0.003 at over 100 million contracts/month. The minimum fee is US$1. All fees exclude GST.
Margins Loan Interest.
Interest charged on margin loans by IBKR is one of the lowest around. Charges work on a tiered system:
- The first AUD$100K is charged at the tier 1 rate of 5.865%.
- From AUD$100K to AUD$250K the rate is 5.656%.
- From $250K to $500K the rate is 5.506%.
On top of the above rates, Australian users are charged an additional ‘surcharge’ of 1% for loans in AUD and 2% for loans in other currencies.
IBKR lets you borrow in currencies other than AUD. Each currency attracts different interest rates, but based on a similar tiered system.
Interactive Brokers’ Conditions On Deposits And Withdrawals.
Here’s what you need to know about depositing and withdrawing your money from Interactive Brokers:
- No minimum amount you need to deposit to open an account.
- No fees for inactivity, if you’re a buy-and-hold investor who rarely trades.
- You get one free withdrawal per month, and then pay AUD$15 per withdrawal/month after that.
- If you want to switch brokerages later, you’ll pay a minimum of AUD$50 to transfer your assets out of IBKR.
Is Interactive Brokers A Legitimate Trading Platform?
Interactive Brokers is a credible, established trading platform available to Australian investors. The Australian arm of the company has all the important bases covered:
- Holds an Australian Financial Services Licence, regulated by ASIC.
- Has a registered office in Australia, located on Pitt Street in Sydney.
- Is a participant of the ASX, ASX 24, and Cboe Australia stock exchanges.
Internationally, the brokerage is owned by US-based holding company Interactive Brokers Group (IBG Inc), which has been operating since 1993.
If you count its predecessor companies, Interactive Brokers has been around for 47 years — that’s a longstanding enterprise.
In addition to US and Australia, Interactive Brokers has offices in Switzerland, Canada, Hong Kong, United Kingdom, Japan, Hungary, Russia, India, China, Luxembourg, Ireland, Singapore and Estonia.
Interactive Brokers is considered one of the US’ best brokers and is also one of the largest, with over three million client accounts and executing more than 2.5 million trades daily.
Important!
The brokerage is rated ‘A- Outlook Stable’ by the finance industry’s leading credit ratings provider Standard & Poor’s (S&P Global). It’s also rated highly by consumer comparison sites and investing publications.
The parent company IBG Inc. is a publicly-listed company on the Nasdaq stock exchange, with a market capitalisation of US$51.6 billion — but only around 25% of the company is publicly held through common stock.
It’s primarily privately held, with the firm’s Chairman and founder Thomas Peterffy, and other affiliates and employees having the largest ownership.
Is Your Money Safe With Interactive Brokers?
Because IBKR offers interest on account balances and several features aimed at helping people manage their finances more generally — some users, especially in the US, treat it almost like a transaction (checking) account.
However, Interactive Brokers is an electronic brokerage firm and not a bank.
The likelihood of IBKR defaulting or becoming bankrupt appears very low.
And, as part of meeting its requirements under its Australian Financial Services Licence, the company segregates customer funds in special bank accounts in Australia to ensure it has cash reserves needed to protect users.
Its website states:
Alternatives To Interactive Brokers?
Not many direct competitors available in Australia offer a platform of equal comprehensiveness.
But perhaps you want a platform that’s more specialised, or known for its superior usability? Check out these guides to help you decide the best online broker for you:
Answers To Common Questions About About Interactive Brokers Australia.
These are some of the common questions that arise when investors start considering Interactive Brokers Australia:
Can I Use Interactive Brokers In Australia?
Yes, Australian investors and traders can sign up for an account with the local version of Interactive Brokers at www.interactivebrokers.com.au.
Interactive Brokers is a US-based company with an Australian operation that holds an Australian Financial Services licence regulated by ASIC.
How Much Money Do I Need To Start Using Interactive Brokers?
There’s no minimum amount required to open an account with IBKR, so in that sense anyone can use it regardless of how much money you have to invest.
To actually buy stocks or make trades you’ll probably want to start with at least $100.
Given its low fees, Interactive Brokers is a cost-effective option for all investors, including those on a limited budget.
Do You Actually Own Shares With Interactive Brokers?
Yes, the account holder is the owner of the shares in their account.
While Interactive Brokers uses a custodial model — meaning that they hold assets on your behalf — you retain all beneficial rights.
That means you get any returns (dividend/interest) and have complete control over when to buy and sell your assets.
The same is true of fractional shares. According to Interactive Brokers, the client:
Can I Transfer My Assets To Interactive Brokers From Another Platform?
Yes, you simply need to complete the ASX Transfer CHESS Holdings form (and the International Broker to Broker form, if applicable). Y
ou may also need to verify your identity with your broker before proceeding.
Is Interactive Brokers Worth Using?
For Australian investors and traders serious about diversifying their portfolios into international markets, and exploring asset types beyond stocks, Interactive Brokers is a clear winner for the sheer breadth of markets, products and tools on offer.
But trying to cover every base for every kind of investor inevitably leads to complexity.
Interactive Brokers can be hard-to-navigate and although its four distinct platforms contain incredibly useful features — it can create a dilemma about which tools to invest your time and energy into learning and customising to your needs.
Everyone agrees IBKR’s brokerage fees are low. That’s a huge plus.
But as soon as you start trading at higher volumes and want to calculate the cost of trades beyond the basic flat rates, the complicated fee structure may have you tearing your hair out.
It’s powerful, flexible and inexpensive. But will you feel confident using it?
Before using Interactive Brokers, I recommend you trial the trading platforms so you can choose the best one for your skill level, and get absolute clarity on your strategy so you don’t get distracted by the bells and whistles.
Jody
Nelson says:
I attempted to use the “hack” to dodge conversion fees, but sadly after converting AUD to USD on a Wise account, there doesn’t seem to be a way to deposit that money into eToro; i.e. eToro recently disabled Wire transfers and Wise doesn’t support SWIFT transfers for sending USD to a bank in the US?
John Keys says:
CMC Invest are an abysmal in turning around new accounts.
Over 1 month to setup up an account with an investment trust, and still waiting. I was promised 5 business days.
Reg Watson says:
Given that China’s economy is going down the toilet how the heck do we expect an appreciation of the Aussie in 2024 ? We are tied to China.