Hidden Fees in IB

JackR · Jan 28, 2007

Quote from TradingBillions:

I'm not sure I understand what you mean. Can you please give me an example? Just say I want to buy 2000 shares of a 5 dollar stock. How much would I pay for commish?

Price of stock does not matter.
100 shares = $1.00
200 shares = $1.00
500 shares = $2.50
1000 shares = $5.00
2000 shares = $10.00

There are no other fees added such as the SEC fee.

I'd look at what I traded for the last six months. If you traded 10 times or more per month ( 5 round trips) there would be no data fee from IB ($10/m). Set up a simple spread sheet and compute IB's fees against whatever broker you are using.

Do a comparison. Add all commissions and fees from your current broker. Subtract what you earned in interest at your current broker. Add what you paid in margin interest to your current broker. Since you have a small account assume no interest from IB. Compute the margin interest you will pay IB.
Consider the advantages of a direct access platform. Also bear in mind that you will be limited to 100 quotes at any one time. That is, 100 max symbols be they indices, stock, option, futures, etc, in any combination. The only way to get more is to produce more than $800 in commissions per month.
Make a decision.

A caveat - IPO is not exactly quick in doing account transfers and money receipting so be prepared to stop trading for 10 to 14 days.

Further, IB is going public and began advertising heavily over the last year. They never seem to hire and train support staff early/fast enough to keep up with demand. However, it will make their books look better for the IPO. So be prepared to suffer a bit during the transfer if it looks as though it will be to your benefit to open an IB account.

Jack

jimrockford · Jan 28, 2007

Quote from JackR:

Price of stock does not matter.
100 shares = $1.00
200 shares = $1.00
500 shares = $2.50
1000 shares = $5.00
2000 shares = $10.00

There are no other fees added such as the SEC fee.

I'd look at what I traded for the last six months. If you traded 10 times or more per month ( 5 round trips) there would be no data fee from IB ($10/m). Set up a simple spread sheet and compute IB's fees against whatever broker you are using.

Do a comparison. Add all commissions and fees from your current broker. Subtract what you earned in interest at your current broker. Add what you paid in margin interest to your current broker. Since you have a small account assume no interest from IB. Compute the margin interest you will pay IB.
Consider the advantages of a direct access platform. Also bear in mind that you will be limited to 100 quotes at any one time. That is, 100 max symbols be they indices, stock, option, futures, etc, in any combination. The only way to get more is to produce more than $800 in commissions per month.
Make a decision.

A caveat - IPO is not exactly quick in doing account transfers and money receipting so be prepared to stop trading for 10 to 14 days.

Further, IB is going public and began advertising heavily over the last year. They never seem to hire and train support staff early/fast enough to keep up with demand. However, it will make their books look better for the IPO. So be prepared to suffer a bit during the transfer if it looks as though it will be to your benefit to open an IB account.

Jack

JackR,

Your comparison formula omits the effect of IB's superior order execution quality.

JackR · Jan 28, 2007

Quote from jimrockford:
JackR,
Your comparison formula omits the effect of IB's superior order execution quality.

Jim:

You and I would agree. But that is rather subjective. I tried to stick to the objective things that could be "measured/quantified".

Jack

dpt · Jan 28, 2007

Quote from JackR:

Price of stock does not matter.
100 shares = $1.00
200 shares = $1.00
500 shares = $2.50
1000 shares = $5.00
2000 shares = $10.00

There are no other fees added such as the SEC fee.

[...]

And don't forget that commissions are capped at a maximum of 0.2% of trade value, so that stock price does begin to matter when the price is low. For example, the commission for trading 1,000 shares of a $2 stock is $4 = 0.002 * $2000 instead of $5.

OldTrader · Jan 28, 2007

Quote from JackR:

If you traded 10 times or more per month ( 5 round trips) there would be no data fee from IB ($10/m).
Jack

As I understand it, you don't need to trade 10 times. You need to generate $10 in commission. Obviously, you could generate that in one trade if you traded 2000 shares. Or, one trade if you traded 3 futures contracts.

OldTrader

Catoosa · Jan 28, 2007

Quote from OldTrader:

As I understand it, you don't need to trade 10 times. You need to generate $10 in commission. Obviously, you could generate that in one trade if you traded 2000 shares. Or, one trade if you traded 3 futures contracts.

OldTrader

I have been under the impression that the following statement from IB's web site applied:

US Securities & Commodities Non-Professional Bundle (Includes all Stock, Options, Futures and Bond markets) United States Free (USD 10.00 market data fee if less than USD 30.00 in commissions per month)

Trader KGB · Jan 28, 2007

Quote from Catoosa:

I have been under the impression that the following statement from IB's web site applied:

US Securities & Commodities Non-Professional Bundle (Includes all Stock, Options, Futures and Bond markets) United States Free (USD 10.00 market data fee if less than USD 30.00 in commissions per month)

They were referring to the minimum monthly $10 activity fee. The market data bundle is a separate charge, though the first $10 in commissions works to offset both fees.

OldTrader · Jan 28, 2007

Quote from Catoosa:

I have been under the impression that the following statement from IB's web site applied:

US Securities & Commodities Non-Professional Bundle (Includes all Stock, Options, Futures and Bond markets) United States Free (USD 10.00 market data fee if less than USD 30.00 in commissions per month)

Now that you mention it, that's what I thought too...although I couldn't find it on the site. Either way, 7 futures contracts does it, or 6000 shares traded over the course of a month.

OldTrader

jimrockford · Jan 29, 2007

Quote from JackR:

Jim:

You and I would agree. But that is rather subjective. I tried to stick to the objective things that could be "measured/quantified".

Jack

The flaw in such a comparison is that IB's superior execution quality might matter far more than the commission savings for large orders at other brokers. So your comparison is inherently biased against IB.

JackR · Jan 29, 2007

Whoops -

I messed up. It is $30 per month in commissions to have the $10 monthly fee waived.

However, since almost every variation of how to get to $10 a month known to man has been posted after my simple explanation I'm not going to repost the examples for $30. If a potential IB customer can't figure it out I really think they should reconsider trading altogether.

As to execution excellence - We'd have to know what broker we were comparing against. I'm an IB customer so I have no complaint. But my statements were basically objective, not subjective.

Jack