Interactive Brokers Review- All You Need To Know About IBKR In 2024 

Welcome to the Tokize guide to Interactive Brokers (IBKR). Read on to learn all about the platform, its history, ecosystem, processes, and pros and cons. 

What is Interactive Brokers? 

Interactive Brokers is an online brokerage company headquartered in the United States. Founded in 1993, it was one of the first companies to introduce electronic trading systems, at a time when brokers still relied on traditional open outcry trading. Since then, the company has expanded beyond the United States and now has offices in major cities worldwide, including the United Kingdom, Canada, Australia, Ireland, Singapore, India, Japan, Hong Kong, and Hungary.

Today, Interactive Brokers operates one of the world’s largest electronic trading platforms, as evidenced by its average daily trading volume. Many brokers use IBKR to access global stock markets, especially those who lack the necessary connections and liquidity to participate directly. Interactive Brokers also caters to institutional investors such as hedge funds, fund managers, and family offices.

The broker currently boasts 2.3 million client accounts, with 76.5% being individual accounts, and the remainder likely belonging to institutional players. This explains why IBKR handles over $2.5 million in average daily revenue trades (DARTs) and has equity capital of $10.48 billion.

Interactive Brokers: A Brief History 

Interactive Brokers’ success dates back to 1977 when Thomas Peterffy chose to become an individual market maker instead of a software developer for Mocatta Metals. A pioneer in the field, Peterffy envisioned a revolution in commodity trading that did not involve the traditional short-selling system. Instead, he developed a system that decoded electronic signals and transmitted them to his office at the American Stock Exchange (AMEX). Initially, the company was named T.P. & Co. before being renamed Timber Hill Inc. Later, he computerized trading on the Chicago Board Options Exchange (CBOE), the Philadelphia Stock Exchange, and the New York Stock Exchange (NYSE).

Peterffy was also a prolific software developer who introduced the first fully automated algorithmic trading system. In 1983, he deployed the first handheld computers for trading, showcasing his significant influence on the stock market.

In 1993, Interactive Brokers was born, initially serving as the technology backbone for Timber Hill. As the company continued to expand and penetrate European and Asian markets, it was rebranded as Interactive Brokers in 2001, handling 200,000 trades per day. Goldman Sachs attempted to acquire the company in 1999, but the offer was rejected.

What Can You Trade on Interactive Brokers?

Given that IBKR is one of the largest stock trading platforms, you can expect a wide array of offerings. With IBKR, you gain access to multiple global stock exchanges and a diverse range of asset classes. Among these asset classes, you will find currency pairs, stocks, indices, options, futures, mutual funds, bonds, commodities, and more.

All these services come with relatively low commissions compared to other brokers, making the platform accessible to both individual and institutional investors.

The Interactive Brokers Ecosystem

The Interactive Brokers ecosystem offers thousands of assets that you can trade from your computer or smartphone with the Interactive Brokers app. The company has connections to exchanges in 33 different countries and 150 markets. However, for the purposes of this guide, we will primarily focus on cryptocurrencies, which might be the main reason you’re considering using IBKR.

Available Cryptocurrencies 

While IBKR has access to a vast network of markets and exchanges, its offering of cryptocurrencies is still relatively limited. Currently, the only cryptocurrencies you can trade on the platform are:

• Bitcoin (BTC)
• Ethereum (ETH)
• Litecoin (LTC)
• Bitcoin Cash (BCH)

The reason for such a limited selection is that IBKR does not hold the cryptocurrencies you choose to purchase on the Interactive Brokers app/platform. Instead, the trading and custody of cryptocurrencies are facilitated by Paxos Trust. Thanks to IBKR’s connections to various exchanges, you can also buy Bitcoin and Ethereum futures contracts on the platform.

Assets Available Beyond Cryptocurrencies 

Where Interactive Brokers truly shines is when you look at the other products it offers beyond cryptocurrencies. For instance, with access to 83 stock markets, including major and emerging economy markets, you can trade over 5,000 company stocks either as physical stocks or in the form of CFDs. When it comes to ETFs, you have a choice of over 10,000 titles to trade, but there are no CFDs on ETFs, only on stock indices.

Other available instruments include:

• Currency pairs: Over 100 pairs
• Mutual funds: Over 400 funds
• Bonds: Over a million government and corporate bonds
• Options: 34 options markets on major and minor exchanges
• Futures: 32 futures markets on major and minor exchanges

How To Trade Cryptocurrencies on Interactive Brokers

Trading cryptocurrencies on Interactive Brokers is a straightforward process that involves five simple steps:

Step 1: Create Your Account

The first step is to join the Interactive Brokers community by creating a new account on the platform. Since IBKR has many subsidiaries, you will be redirected to the one that suits you best based on your location.

• Go to the IBKR website and click on “Open an Account.”
• Provide your account details, such as email, password, and geographical location.
• Confirm your identity via email, and your account will be activated.
• Log in to your IBKR account with the provided details.
• Provide personal information linked to your account, including your name, address, and tax identification number.
• Answer additional questions about your employment, source of funds, and security to prevent money laundering.

Step 2: Verify Your Account

• Verify your phone number by entering it and waiting for an SMS confirmation.
• Choose between a margin account, which allows leverage trading, and a cash account. Margin accounts are suitable for active and professional investors, while cash accounts are recommended for beginners.
• Complete a series of questions regarding your income, net worth, investment goals, and investment experience. Based on your answers, Interactive Brokers may restrict some of your trading access to prevent unexpected losses.
• Select the markets and assets you want to trade to streamline your trading platform.
• You have the option to lend your stocks to short sellers and earn 50% of the stock lending income.
• Confirm your tax residence by providing tax-related details.
• Validate your account by providing a document proving your address, such as a bank statement or government-issued document displaying your residential address.

Step 3: Fund Your Account

• From your account dashboard, accessed after logging in, go to the “Transfer and Payments” tab and select “Deposit.”
• You can deposit funds only via bank transfer (SEPA). However, IBKR supports 23 base currencies for investors in countries other than Europe, while nine base currencies are available in Europe.
• Enter your banking details on the following page and specify the amount you want to deposit. The transaction may take up to three business days.

Step 4: Download the Trading Platform

Traders Workstation (TWS) is IBKR’s proprietary trading platform and can be downloaded to your computer or mobile device. This platform offers professional-grade analysis tools and charts, making it ideal for active traders.

For new traders, it’s recommended to initially use the web client portal to become familiar with the TWS platform. You can also download IMPACT or GlobalTrader for mobile, which are more user-friendly.

Step 5: Make Your First Trade on Interactive Brokers

With these steps completed, you’re ready to start investing in cryptocurrencies on Interactive Brokers. As advised, we will use the web client portal as it is more user-friendly. Simply navigate to the “Trade” tab from your account dashboard and select “Cryptocurrencies,” where you can search for the cryptocurrency in which you want to invest.

What are the Interactive Brokers Fees? 

When investing in cryptocurrencies on Interactive Brokers, the platform charges a commission ranging from 0.12% to 0.18% based on your monthly trading volume.

The minimum commission charged on any single transaction is $1.75, but it cannot exceed 1% of the transaction value. Additionally, IBKR does not impose extra fees like spreads, making it one of the most cost-effective platforms for cryptocurrency investors.

Regulation of the Interactive Brokers Platform 

Over its nearly three decades of existence, Interactive Brokers has established multiple subsidiaries, each regulated by the financial authority of its respective region.

While the broker is not officially regulated by the AMF (Autorité des marchés financiers), it operates with full authorization from the institution.

Is it Safe to Trade on International Brokers?

Yes, absolutely. Interactive Brokers has been in existence for nearly three decades, and as we’ve seen, it has been at the forefront of much innovation in online trading. Interactive Brokers’ customer service is really strong and IBKR continuously improves its solutions to provide the best experience for its clients, which is why over 2.3 million accounts have been created on the platform.

Interactive Brokers is also listed on the Nasdaq stock exchange, which adds an extra layer of security for investors. Publicly traded companies undergo more rigorous scrutiny by regulators and investors, ensuring transparency. IBKR is subject to constant regulatory oversight, and the broker provides information about its operations.