Interactive Brokers Group has broken into the top ranks of online brokers, excelling in several categories deemed important to investors.
Interactive (IBKR) joins four other brokers in the top five for overall customer experience in Investor’s Business Daily’s annual ranking of online brokers.
The nation’s largest electronic broker in terms of daily average revenue trades, Interactive won top marks for low commissions and fees, trade reliability, site performance, equity trading tools, mobile platforms/mobile trading opportunities, options trading platform, portfolio analysis and reports, and ETF choices.
The message seems to be getting out to investors. In 2015, when the stock market ended slightly lower, the Greenwich, Conn., company saw the number of accounts grow by 18%, and 1% in December alone, to 331,100. Client equity increased 19% year over year to $67.4 billion.
Comprising two segments, a global electronic broker and a market maker, the firm processes trades in securities, futures, foreign-exchange instruments, bonds and mutual funds on more than 100 electronic exchanges around the world.
Hungarian immigrant Thomas Peterffy founded the firm in 1977 and launched the Interactive Brokers platform in 1995. Since then it has become one of the leading brokers for professional and semiprofessional investors, as well as institutions.
Biggest And Cheapest Broker
Still serving as chairman and chief executive, Peterffy said his firm is the largest and least-expensive stock broker in the world. In December 2015, the firm recorded 628,000 DARTs and an average commission per client order of $2.09 for securities and $6.33 for options. For orders of 100 shares, it charges just $1. He also said the average amount charged for a margin loan is 1.3%, which undercuts all of the firm’s competitors.
“Our philosophy is to offer the best platform at the lowest price,” Peterffy said in an interview with Investor’s Business Daily. “We don’t sell our customers orders, but seek to execute them at the best possible price. The total transaction cost on 2.5 trillion stocks, including market impact and fees, was 0.8 basis points.”
He said the firm sits in a sweet spot between investment banks and online brokers.
“The online brokers don’t need all the sophisticated stuff we provide, and the big investment banks will not take people with less than $5 million,” Peterffy said. “Our target clients are sophisticated individuals or institutional traders and investors.”
Over the past year, Interactive added a lot of research, news providers and analyst ratings to the platform. It also introduced a portfolio builder that allows clients to screen stocks based on fundamental and technical data, assemble portfolios that automatically rebalance and lets them back-test the portfolio’s performance over various time periods.
Another feature Interactive introduced last year to help set itself apart is transparency. Interactive now lets clients see the number of shortable shares available in real time without having to call the broker. It also lets clients see the lending rate at which stocks may be borrowed to be shorted. You won’t find this at the wirehouses.
In 2015, it also launched a service called the Investor’s Marketplace, which gives clients one-stop shopping access to investors and third-party service providers around the globe. It’s a place where traders, investors, financial advisors, fund managers, research analysts, technology providers and business developers can advertise, explore and do business with each other.
Part of the Investor’s Marketplace will be the Hedge Fund Marketplace, where qualified investors may view and download information posted by participating hedge funds, including private placement memoranda, subscription information and performance summaries.
As of June 2015, the Marketplace had more than 300 advisors, brokers, money managers and hedge funds, 120 research providers, 75 administrative service providers and 295 participating technology providers.
In 2016, the company planned to relaunch Covestor, an online money manager it acquired in 2015. Covestor lists money managers and traders who run investment portfolios. Clients will be able choose a money manager and set up accounts that mirror the managers’ portfolio, essentially trading along with the manager.
This was originally published in Investor’s Business Daily.