Is Interactive Brokers a Legitimate Firm?
Do you have questions about the legitimacy of Interactive Brokers? Are you worried about the safety of the company? If so, then you have definitely come to the right place. We have performed a lot of research, and here are the results:
Is Interactive Brokers a Scam?
There are two primary securities regulators in the United States at the federal level: FINRA (http://www.finra.org/) and the SEC. Interactive Brokers is a member of both, and these memberships provide a great deal of protection for the company’s clients.
Interactive Brokers’ FINRA membership number is 36418. The company’s BrokerCheck profile reveals that it has been registered since 1994, which is a sizable amount of time compared to a lot of new entrants into the investment space these days.
On IB’s profile, there are 80 disclosures. Typically, the brokerage firm doesn’t admit or deny any wrongdoing and settles with a fine. One example is a $5.5 million fine paid in 2018 for failing to establish an internal supervisory system with written procedures.
Interactive Brokers’ SEC membership number is 8-47257. Like FINRA, the SEC enforces a variety of rules and regulations and imposes fines when broker-dealers make mistakes.
Because Interactive Brokers is registered with these federal-level organizations, it does not need to be
registered with any of the state securities regulators. However, FINRA only regulates securities, and
because IBKR provides trading in futures and forex, it needs to be registered with the National Futures
Association. The firm’s NFA membership number is 0258600.
Is Interactive Brokers SIPC/FDIC Insured?
The United States Congress has also made sure that insurance is available on U.S.-based securities accounts. Notice that we said, “securities accounts.” Positions of futures, forex, and other assets that aren’t securities are not insured by SIPC (the Securities Investor Protection Corporation, http://www.sipc.org), which insures stocks, bonds, and other securities inside accounts at Interactive Brokers.
SIPC provides insurance up to $500,000 per customer at Interactive Brokers. Half of this amount can be applied to uninvested cash.
IBKR Pro customers who elect to participate in Interactive Brokers’ FDIC-sweep program are also eligible for insurance on free cash balances from the FDIC. The total coverage per customer is $2.75 million.
Large accounts at Interactive Brokers have another layer of insurance, thanks to a supplemental policy with Lloyd's of London. As with SIPC coverage, futures and options on futures are not covered. Each customer is eligible for $30 million of insurance. Of this amount, $900,000 can be applied to a free cash balance. There is a house limit of $150 million. The Lloyd’s policy kicks in only if SIPC coverage is exhausted.
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Interactive Brokers Better Business Bureau
Besides the FINRA profile for Interactive Brokers, there is another one at the Better Business Bureau. BBB grades companies (financial and non-financial) operating in North America, so this is another way to see how Interactive Brokers is performing in the eyes of its customers.
We found a grade of A+ on Interactive Brokers’ BBB profile. This is the highest grade the agency gives out, so obviously it’s a good sign. There are several factors BBB looks at when issuing grades. The number of complaints filed and how quickly a business is able to resolve complaints are two examples.
There are currently 20 customer reviews on BBB’s profile for Interactive Brokers, and these 20 customers give the investment firm a rating of 1.2 out of 5. While this is very low, this small sample probably represents upset customers only.
Is Interactive Brokers Safe Verdict
Interactive Brokers is definitely a reliable, trustworthy, and legitimate investment firm. There are several layers of government oversight for all forms of trading, and insurance is available on positions of securities and cash. Unfortunately, investing always involves some level of risk, and no insurance available today protects against market loss. This is valid at all brokerage firms, so we judge Interactive Brokers to be as good as any.
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Interactive Brokers Review
We have confirmed that Interactive Brokers is a trustworthy investment firm. Now, let's review how the company performs in various important areas.
Investments Choices
Interactive Brokers is designed for self-directed, experienced investors. They do not offer robo-advising or managed accounts. Instead, they provide brokerage services to institutions like hedge funds but do not manage these accounts themselves.
Both retail and institutional clients can choose from a wide range of assets:
- ETFs
- Closed-end funds
- Mutual funds
- Stocks
- Option contracts
- Forex
- Fixed-income securities
- Precious metals
- Warrants
- Structured products
- Cryptocurrencies
- Futures and options on futures
Interactive Brokers provides access to a global market, allowing trading on multiple exchanges worldwide.
Website
Their website is equipped for trading and researching all asset classes offered, requiring two-factor authentication to access, which enhances security.
Inside, you'll find TradingView charting tools with eleven plot styles like Kagi and Renko, around a hundred technical studies, and many customization options.
The trade ticket on the site includes various order types and a price management algorithm.
The security screener under the Research tab helps find trading options on both American and foreign markets.
Security profiles provide extensive data, accessible through the Research icon in the top-right corner of an asset’s profile.
Mobile App
The mobile app allows trading from almost anywhere in the world and is compatible with both Android and Apple devices.
It features two trade tickets: a horizontal wheel order-entry system and a standard vertical ticket with pre-set values and swipeable price charts.
Charts can display up to 5 years of price data in horizontal mode and include several features and indicators.
Unlike the website, the app also has a demo mode for practice.
Desktop Platform
Trader Workstation, the desktop platform, is suited for advanced trading with professional-grade features.
It offers extensive charting capabilities, multiple technical studies, drawing tools, and right-click trading.
The platform allows trading of foreign securities with a variety of order types and direct-access routing.
Bloomberg TV is also streamable on the platform, which includes a practice mode similar to the mobile app.
Customer Service
Customer support is available 24/5 via phone, often from overseas, but there are U.S.-based representatives too.
For around-the-clock assistance, the website offers an AI chatbot, iBot, which is moderately helpful. Real human support is available through internal messaging found under the Help icon.
There are no physical branch locations for Interactive Brokers.
Pricing
There are no fees or minimums for accounts, and most assets have low commissions. For instance, U.S.-based stock and ETF trades on American exchanges are free.
Other assets and international trades have variable commissions, such as a fixed percentage on trades in Euronext Paris.
Options and cryptocurrency trading costs vary, with specific details provided on their comparative schedules.
See IBKR Lite vs Pro comparison.
Margin Service
Interactive Brokers offers competitive rates for its margin service. Details of these rates for Lite and Pro clients are specified on their settings page.
Margin requirements can be checked through the trade ticket under the advanced tab by selecting Check Margin.
Additional Services
Cash Management Features: Limited banking tools but includes a free debit Mastercard.
Initial Public Offerings: Accessible for accounts in Hong Kong but not for U.S.-based accounts.
Extended Hours Trading: Available for U.S.-listed securities, with different hours for other exchanges and assets.
DRIP Availability: Stock dividends can be reinvested, but not ETF dividends.
Recurring Mutual Fund Purchases: Not available.
Individual Retirement Accounts: Several types are available without ongoing fees.
Fractional Shares: Available for stocks, ETFs, cryptocurrencies, and mutual funds.
Recommendations
Small Accounts: IBKR Lite is recommended for small accounts.
Retirement Savers and Long-Term Investors: While IRAs are available, Interactive Brokers does not focus on long-term investment products like annuities or target-date funds. Charles Schwab might be a better option.
Beginners: Interactive Brokers is geared towards experienced traders. Beginners might find Charles Schwab more suitable.
Mutual Funds: Interactive Brokers offers mutual funds but lacks comprehensive fund resources. Firstrade offers better options.
ETF and Stock Trading: For advanced traders, Interactive Brokers provides a top-tier trading experience with its powerful platforms.
Interactive Brokers Review Judgement
Interactive Brokers is a legitimate brokerage that excels in several areas, particularly for experienced stock and options traders. However, it may not be the best fit for all types of investors.
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Updated on 10/7/2024.
Chad Morris is a financial writer with more than 20 years experience
as both an English teacher and an avid trader. When he isn’t writing
expert content for Brokerage-Review.com, Chad can usually be found
managing his portfolio or building a new home computer.
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