Listed on the NASDAQ since 2007, Interactive Brokers (IBKR) is a low-cost online brokerage firm that allows you to invest globally in a variety of asset classes. This includes stocks, options, futures, currencies, bonds and funds.
With over 37% of Interactive Brokers accounts now coming from Asia, and as IBKR’s Singapore client base continues to grow, IBKR made the decision to open an office here in Singapore last July 2020. Despite being relatively new to set up camp in Singapore, IBKR is already a well-known brokerage and has been used by many investors in Singapore prior to this.
Here’s what you’ll find in this review:
- Pros and cons of using IBKR
- What IBKR offers
- Reasons to use IBKR
- Who should use IBKR
- Pricing, charges and fees involved
- How do you open and fund your IBKR account?
- Close alternatives to IBKR
Overview of Interactive Brokers (IBKR)
Known for their ultra competitive fees that make it easy for investors to execute trades, particularly in the US market, the only way is up for IBKR, especially as more people are now investing and trading.
Product summary (based on IBKR Pro):
- What you can invest in: Stocks, options, futures, currencies, bonds and funds
- Minimum balance required: US$0
- Maintenance fee: None
- Fees for Singapore stocks: 0.08% of trade value (min. S$2.50 per order)
- Fees for US stocks (fixed pricing): US$0.005 per share (min. US$1 per order, max. 1.0% of trade value)
- Fees for HK stocks (fixed pricing): 0.08% of trade value (min. HK$18 per order)
Here are the pros and cons of using IBKR for your investment and trading needs.
|Pros of using IBKR||Cons of using IBKR|
|Low trading cost that is hard to beat||No sign-up promotions unlike other new digital brokerages|
|Invest globally in a multitude of products via a single account|
|No minimum balance required|
|Tools to bring your trading to the next level|
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Interactive Brokers (IBKR) offerings for your portfolio
IBKR Lite vs IBKR Pro
IBKR Lite: For US residents and those under the Employee Track
IBKR Lite offers unlimited S$0 commissions on US-listed stocks and Exchange Traded Funds (ETFs) trades, with no account minimum required and no inactivity fees. You enjoy a simplified trading experience that comes along with free access to market data from primary exchanges.
Currently, IBKR Lite is only offered to direct US clients, or clients of an Introducing Broker. If you are an employee of a company using Employee Track, then you can have an IBKR Lite account regardless of your location.
More specifically, these are the people eligible to for IBKR Lite:
- US resident individuals, joint, IRA and trust accounts.
- US Financial Advisors and Family and Friends Advisors.
- Broker clients of any residency (broker must opt into IBKR Lite for all their clients).
- Employee Track individuals, joint, IRA and trust clients of any residency.
This means that if you are an everyday investor — one who isn’t a US resident or an employee of a company that uses IBKR, you won’t be able to open an IBKR Lite account.
IBKR Pro: For everyday investors in Singapore
IBKR Pro is marketed as an account for sophisticated investors and active traders. However, contrary to the name ‘Pro’, IBKR Pro is the account for an everyday investor here in Singapore. Or rather, a Singaporean investor's only choice when using IBKR, unless you are a US resident or fall under the Employee Track.
As an IBKR Pro user, you enjoy all the offerings IBKR has available, including their advanced technology such as IBKR algorithms, APIs and tools that IBKR Lite users cannot access.
Similar to IBKR Lite, IBKR Pro does not have a minimum account balance required.
Here are the key differences between IBKR Lite vs IBKR Pro and where they stand out.
|IBKR Lite||IBKR Pro|
|Commissions: Specifically for US Exchange-Listed Stocks or ETFs, IBKR Lite clients enjoy commission-free trades while IBKR Pro offers fixed or tiered pricing.||Access to advanced technology: IBKR Pro users get access to IBKR Web Trader and IBKR APIs, allowing users to execute advanced order types and more — tools that IBKR Lite customers don’t receive.|
|Interest paid on idle cash balances: 1% lower for IBKR Lite users||Interest charged for margin loan: 1% lower for IBKR Pro users, with lower rates for higher loan values.|
To find out if you’re an IBKR Lite or IBKR Pro user, you just have to log in, and the IBKR Lite or IBKR Pro logo will be displayed on your browser. Chances are, if you're a retail investor in Singapore, you'll automatically be using IBKR Pro.
Reasons to choose Interactive Brokers (IBKR)
#1 Low trading cost that is hard to beat
IBKR makes trading affordable with charges that are competitive and amongst the lowest in the industry. These competitive fees do not only apply to stocks but also to other asset classes such as forex as well.
Trading fees begin at 0.08% of trade value for Singapore stocks or Hong Kong stocks, US$0.005 per share for US stocks, 0.11% of trade value for Singapore share CFDs, and 0.005% per share for US share CFDs.
For example, the cost to purchase a US stock is US$0.005 per share, with a minimum of US$1 per order. This is far lower than the trading commissions and a minimum of S$10 charged by other brokerages that offer similar custodian accounts.
#2 Invest globally in a multitude of products with a single account
Diversification is key to investing. Your ideal portfolio could be made up of assets such as stocks, bonds, funds and more. Through a single IBKR account, you can invest and trade globally in stocks, bonds, funds, options, futures, and currencies.
Present in 135 markets, 33 countries, and in 23 currencies, IBKR has the global reach that is necessary for today’s economy, making it easy for investors to look beyond their own shores to invest in companies listed abroad.
#3 No minimum balance required in the account
A major barrier for new investors is often the minimum capital required to get started. With IBKR, whether you’re using IBKR Pro or IBKR Lite, there’s no minimum balance and no minimum starting amount required, making it easy for all investors to start using an IBKR account.
They've also removed the monthly minimum US$10 maintenance fee (the biggest reason why some investors were hesitant to use IBKR previously), so even if you don't plan to make multiple trades each month, you can still use IBKR to enjoy low-cost trades.
#4 Tools to bring your trading to the next level
Optimise your trading strategy with various trading tools and more than 100 order types and algorithms to choose from. IBKR also offers trading APIs that allow you to do things like build custom trading applications, develop commercial trading software and automate your trading strategies.
If you’d prefer to do your own learning and research, IBKR has a campus that can help you understand and utilise its offerings. Webinars, market commentary and analysis from professionals are also available.
For whom is Interactive Brokers (IBKR) best for?
IBKR is best for those looking for an affordable and innovative online broker that provides access to stocks listed in multiple markets. With IBKR scrapping its minimum US$10 maintenance fee, it is now ideal for not just those that make multiple transactions a month but also investors looking for a cheap brokerage to make trades with.
For example, if you trade US stocks in small amounts, based on the minimum fee of USD$1 per order, you will need to make 10 orders in order to avoid paying any maintenance fee for the month.
What charges or fees should you look out for?
Low fees do not mean no fees. Here are other fees that you could incur when you trade with IBKR.
|IBKR Pro||IBKR Lite|
|Minimum balance required||US$0||US$0|
|Interest paid on idle cash balances||Benchmark minus 0.5%||Benchmark minus 1.5%|
|Interest charged for margin loan||Begins at Benchmark plus 1.5%, with lower rates for higher loan values.4||Benchmark plus 2.5%|
Tiered vs Fixed pricing
There are two types of pricing structures offered by IBKR.
Tiered pricing: With tiered pricing, your commission fee depends largely on your trading volume. It can also be affected by exchange, regulatory and clearing fees.
Fixed pricing: With fixed pricing, you are charged a fixed rate per share that includes all exchange and regulatory fees. This share could be a fixed amount per share, such as US$0.005 per share for US stocks, or a set percentage of the trade value, such as 0.08% of the trade value for Singapore stocks.
For Singapore stocks, fees are fixed at 0.08% of trade value, with a minimum of S$2.50 per order.
With the affordable rates for the fixed pricing, tiered pricing could better suit those that trade frequently and with larger volumes. For example, US stock commission per share drops from US$0.0035 for trading less than 200,000 shares per month to US$0.0005 when you trade more than 100 million shares per month.
How to open and fund your IBKR account?
Here are the steps that you’ll go through to create your IBKR account:
- Step 1: Create a username and password, confirm your email address and select the country/region.
- Step 2: Verify your email account.
- Step 3: The application will require your personal information, income, tax residency information and more. To speed up your application, you can select the option to retrieve MyInfo from your SingPass account. This will share your personal details that will help to prefill your application.
- Step 4: Finish filling up the form.
- Step 5: Fund your account to start trading. Do note that some products, such as leveraged products, require you to meet specific eligibility criteria in order to trade the product.
To fund your account, you will have to transfer funds (or assets) via a method such as a bank wire.
This can be done in multiple currencies, including SGD, USD, HKD, CNH and GBP. When the funds are in your account, you’re good to go!
Close alternatives to IBKR
TD Ameritrade: One of the largest US online brokers, TD Ameritrade, has been making waves with its zero commission promotion. However, this $0 commission applies to US exchange-listed stocks, ETFs and options trades only. There is also no platform fee, inactivity fee, and minimum deposit required.
Tiger Brokers: A new broker that made an impact upon its launch, Tiger Brokers only entered the Singapore market in March 2020. Tiger Brokers initially made the headlines with their 0.08% commission fee per trade for Singapore stocks, which is now matched by the likes of moomoo and Saxo Markets. For US shares, Tiger Brokers charges US$0.01 per share with a minimum of US$1.99 per trade — low cost, but not quite as low as IBKR or TD Ameritrade.
However, when it comes to promotions, Tiger Brokers stands out by offering free shares, commission-free trades, stock vouchers and access to free market data for US stocks. You’re also encouraged to refer friends to earn yourself more rewards!
moomoo: Like Tiger Brokers, moomoo launched in Singapore with a bang by offering a free Apple share when you open an account and deposit a minimum of S$2,000. Currently, trading US shares costs US$0.0049 per share, with a minimum of US$0.99 per order. Trading Singapore shares are also highly affordable, at 0.03% of the transaction amount, with a minimum of S$0.99.
mooomoo's promotions are also second to none, offering free shares depending on the criteria you meet.
Lastly, if you’re still unsure if IBKR is for you, check out this article for the best brokerage accounts in Singapore.
Disclaimer: do not be fooled by zero-commission free trades that might convince users that trading is absolutely free. Do beware of other fees like a per-share settlement fee that some brokerage accounts charge, especially those without a cap. This could potentially put you in a deficit if the price of each share is low. A recent article by The Business Times highlighted a trader who sold his shares for a total of US$5,000, only to realise that he found himself in a US$11,000 deficit because of the high settlement fee that he was charged.
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