Is Interactive Brokers Trustworthy? Reviewing the Forex Platform

In today's vast array of forex trading platforms, there are those newly launched and others established decades ago like Interactive Brokers. Longevity somewhat reflects the credibility of a Forex platform. Established since 1977, Interactive Brokers holds significant clout in the industry. In the following article, Mytour will evaluate Interactive Brokers to provide you with essential insights before investing in this Forex platform.

Review of the Interactive Brokers Platform

I - What is Interactive Brokers?

Interactive Brokers (IB) is one of the largest brokerage firms globally, established since 1977 by Thomas Peterffy - known as the father of modern stock trading. Interactive Brokers provides access to over 135 markets in 33 countries worldwide, allowing investment in stocks, options, mutual funds, ETFs, futures contracts, bonds, and currencies.

Interactive Brokers currently manages over $9 billion in equity and executes over 3.31 million trades daily. The company has been in operation for over 40 years, surviving numerous global downturns. Listed on NASDAQ, it boasts impressive financials with nearly $2 billion in annual revenue. Regulated by 11 top financial authorities globally, including four in Europe - the UK's FCA, Luxembourg's CSSF, Ireland's CBI, and Hungary's MNB.

II - Pros and Cons of Interactive Brokers

Like other brokers, Interactive Brokers has its own set of pros and cons, and through the evaluation process, Mytour has summarized them as follows:

1. Pros of Interactive Brokers

- Regulated by reputable supervisory bodies such as FCA, CSSF, CBI, MNB...
- Offers a diverse range of trading products: stocks, options, futures contracts, FOPs, ETFs, warrants, SSFs, forex, metals, indices, mutual funds...
- Executes trades quickly and mitigates risk through over 100 order types and algorithms.
- Very low trading costs for large-volume and margin trading.
- Long-standing experience, overall good reputation.
- No inactivity fees.
- Low spreads and commissions.
- Provides various types of accounts.

2. Cons of Interactive Brokers

- Does not support Vietnamese language.
- Poor customer service.
- Too complex for novice investors.
- Limited deposit and withdrawal methods.

III - Types of Accounts at Interactive Brokers

In assessing Interactive Brokers, Mytour finds that it's hard to find a forex trading platform that surpasses Interactive Brokers in terms of the number of accounts. Interactive Brokers offers a wide range of account types catering to various customer segments.

- Demo Account: Allows traders to experiment with Interactive Brokers' tools and trading platforms, as well as practice trading in a risk-free environment, with $1 million virtual money in the account.
- Individual Account: For an individual managing their own funds. Account holders have access to all features provided by IB and can add other traders through Power of Attorney.
- Joint Account: Similar to an individual account but managed by 2 people.
- Trust Account: A single account managed by a trustee.
- Retirement Account: Only for individuals residing in the US.
- UGMA/UTMA Account: An individual or organization manages the account for a minor until they reach a specific age. Only for US residents.
- Friends and Family Account: A master account linked to individual accounts (up to 15 accounts maximum). The master account is used for fee collection and trade allocation.

Additionally, there are other account types such as Money Manager Account, Broker & FCM Account, Proprietary Trading Group Account, Hedge & Mutual Fund Account, Compliance Officers Account, Administrators Account, Institutional Hedge Fund Investors Account, IBKR Lite, and IBKR Pro. Among all these account types, the individual account is the most popular, and the individual account is further divided into 2 different types:

- Cash Account: For traders 18 years old and above with no minimum deposit requirement.
- Margin Account: For traders 21 years old with a minimum deposit of $2,000.

Like other brokers, to register for an IB account, you need to provide some personal information and submit a copy of your identification documents for identity verification. The account verification process takes about 2 business days.

IV - Interactive Brokers Trading Fees

Regarding costs, exchange rate differentials, and other fees at Interactive Brokers are evaluated to be competitive. This is because the majority of this Forex platform's clients are professional traders and organizations. While most European brokerage firms are moving towards commission-free stock trading, Interactive Brokers maintains a cautious pricing system. Interactive Brokers charges commissions based on the product and trading volume with two types of fees: fixed fees and tiered fees:

- Fixed commission fee: The fixed fee is $0.005 per share and ETF, with a minimum commission of $1 and a maximum of 1% of the total transaction value.

- Tiered commission fee: The tiered rate is based on trading volume starting from $0.0005 per share for customers trading over 100 million shares per month. Exchange and regulatory fees are additionally charged in this package.

In terms of leverage, Interactive Brokers also ranks highly compared to eTrade, Thinkorswim, Tradestation, Oanda, Scottrade, and other competitive rivals. In fact, initial margin rates can range from 1.41% to 1.91% for those with accounts over $1 million.

Interactive Brokers doesn't charge fees for inactive accounts. This is a significant advantage when comparing, evaluating Interactive Brokers with most other brokers.

V - Deposits and Withdrawals

The deposit and withdrawal methods at Interactive Brokers are very limited. For depositing funds, you can only use bank transfer. Credit/debit cards and e-wallets are not supported. If you're in the US, you have a few additional options like ACH, checks, online bill payment, Trustee-to-Trustee, and Direct Rollover.

Similarly for withdrawals, you can only use bank transfer. US residents can also withdraw via ACH or checks. Interactive Brokers doesn't charge fees for deposits and withdrawals.

VI - Trading Platforms Supported by Interactive Brokers

Interactive Brokers offers a range of trading platforms suitable for both retail investors and professional traders.

- Client Portal: Interactive Brokers' web application serves as your single destination to check quotes and place trades, view account balances, P&L and key performance metrics, manage funding, reports...
- Trader Workstation: This is a sophisticated platform with comprehensive risk analysis and global technical research news to help traders conduct serious business activities. This trading platform supports Windows, Mac, and Linux.
- IBKR Mobile: Easily trade and monitor your IBKR account while on the go from iOS or Android devices (tablets or smartphones).
- IBKR API: Access IB's API to customize the TWS platform to your needs.

If you're researching reviews of Libertex, OANDA, then refer to the Libertex review article below.

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VII - Is Interactive Brokers reputable?

Is Interactive Brokers reputable? Is Interactive Brokers safe? These are the questions that many investors are concerned about nowadays. Let's examine the licensing of Interactive Brokers.

Interactive Brokers has been in operation for nearly half a century, regulated by top financial authorities, boasting impressive capital, and providing multiple safety measures to protect client accounts. Moreover, the parent company of IB is publicly listed on the NASDAQ stock exchange, meaning all financial reports are published online for public review.

Specifically, Interactive Brokers is licensed and regulated by the US Securities & Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Conduct Authority (FCA) of the UK, the Investment Industry Regulatory Organization of Canada (IIROC), the Australian Securities & Investments Commission (ASIC), as well as other regulatory bodies.

What happens to your investments if Interactive Brokers goes bankrupt? Although there are only a few examples of major brokers collapsing in history, it can still happen over time. However, stringent regulations by regulatory bodies in the US, EU, and other countries regarding the financial markets have created multi-layered protection systems to safeguard investors' assets. Essentially, there are numerous rules.

Most importantly, brokers like IB are required to keep client assets separate from broker assets in a special bank account, known as a custodial or securities depository account. When you purchase stocks, they are held electronically with the custodian you've registered as the beneficial owner. In fact, these 'accounts' are digital ledger entries with names and numbers. In the event of your broker's bankruptcy, the creditors of that bankrupt broker cannot claim your funds because they are held by separate legal entities. This means ultimately your capital will be returned to you, although it may take several years.

Overall, Interactive Brokers is a transparent and reliable broker, suitable for experienced traders who execute multiple trades per month rather than novice traders. What's your take? How do you evaluate Interactive Brokers? Additionally, you can also explore a review of Forex4you if you're interested in investing in this trading platform.

Explore more: Review of Forex4you