Author Topic: IBKR - Interactive Brokers  (Read 172610 times)

Jurgis

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Re: IBKR - Interactive Brokers
« Reply #300 on: February 28, 2017, 08:01:18 AM »
But IB makes the vast majority of their money off active, professional traders who (should) care a lot more about pricing than customer service.

Not sure what you call active, professional traders. Day traders? People with 200-400% annual turnover?

In any case, as much as I can call myself "active" trader, I do care much more about customer service than I do about pricing.
The only reason I would consider IB at all is their access to markets Fido does not provide.

And yeah IB is probably the only viable smallish SMA platform. But the fact that most SMA advisors use it, doesn't mean I should fall in love with it. IB is crap.

But you are right: I was on Fido before and I will only be happier on Fido now.
If I decide to have someone manage my money, I'll weigh whether I want to endure the account on IB.
« Last Edit: February 28, 2017, 08:06:41 AM by Jurgis »
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KCLarkin

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Re: IBKR - Interactive Brokers
« Reply #301 on: February 28, 2017, 08:07:50 AM »
I can't understand why everyone thinks price cuts is good for IB.  If your main advantage starts to disappear, that's is not good for your competitive position.

Commission prices aren't the main advantage for IBKR. Lowest cost is. Commissions are only a small part of the price paid. For example, Interactive Brokers pays interest on deposits. When interest rates rise, IBKRs interest rate spreads remain constant. Schwab's spreads widen. So when interest rates rise, IBKR is actually more competitive.

Schwab (and presumably Fidelity) do not make much revenue from trading. They are asset managers. Schwab only makes 11% of revenue from trading. Rising interest rates allow Schwab to use commissions as a loss leader.

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But the theory is that the lower prices will force sub-scale brokers out of the business (and many will outsource to IBKR). Certainly, that is Peterffy's expectation.

So you could potentially see the market shakeout as follows:
- Retail investors and RIAs -> Schwab and Fido (free trading)
- Active Traders -> IBKR

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If the other brokers are going to maintain their customer service and simply accept structurally lower margins, how does that help IB? 

As mentioned above, the other brokers aren't lowering margins. Higher interest rates are creating higher margins. Given the higher interest rates, they are competing more aggressively for assets.

benhacker

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Re: IBKR - Interactive Brokers
« Reply #302 on: February 28, 2017, 08:11:55 AM »
Huh, I posted, but I guess it was lost to the 404 gods...

Count me as one who views this as moderately good long term for IB, but near term it will clearly lower growth / customer acquisition. I don't view it as a major change though, just a continuation of what has been happening for a long time.  Fido and SCHW have both been lowering commissions for years, just stealthily through negotiations with big customers.  Most I know were already at $5 commission if they had big accounts.

I think you will see the US brokerages have less $$ now to compete / invest both in the US, and critically, overseas.  Long term, I think IB's cost advantage will trend toward more consolidation, and more brokerages using them directly for infrastructure, and just focusing on support.

I still think long term, this is an oligopoly business globally with a few differentiated competitors, but mostly a commodity business.

I think IB's price advantage is getting lower today, I think their cost advantage remains intact and less profitable brokerage competitors will begin evaluating business plans soon given the trend of the industry.

My 2 cents.
Ben Hacker
Beaverton, Oregon - USA

KCLarkin

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Re: IBKR - Interactive Brokers
« Reply #303 on: February 28, 2017, 08:15:47 AM »
professional traders who (should) care a lot more about pricing than customer service.

And "customer service" for professional traders is very different. Professional traders should care much more about the quality of trade execution than the quality of a 1-800 number. Or the ability to trade internationally. Or the ability to easily get pricing for shorts.

We can all agree that IBKRs marketing, user interfaces, and customer service are terrible. The fact that they are growing accounts 15% despite these obvious weaknesses, proves how compelling the overall product offering is.

racemize

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Re: IBKR - Interactive Brokers
« Reply #304 on: February 28, 2017, 08:17:44 AM »
It seems like it is growing because there is virtually no choice other than IB for small funds.  Do they split out retail vs professional growth?

Note: I don't know too much about this investment other than I'm essentially a forced user of IB for the reason above.

CorpRaider

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Re: IBKR - Interactive Brokers
« Reply #305 on: February 28, 2017, 08:28:56 AM »
professional traders who (should) care a lot more about pricing than customer service.

We can all agree that IBKRs marketing, user interfaces, and customer service are terrible.

Oh I dunno, I like the one where the guy tries to make out with the other guys date at the end of the night.  I also like the one where the lady needs to "do some hedging trades" before ordering wine. 

You can see why I decided to cut off my cable subscription.  haha.

Travis Wiedower

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Re: IBKR - Interactive Brokers
« Reply #306 on: February 28, 2017, 08:33:53 AM »
It seems like it is growing because there is virtually no choice other than IB for small funds.  Do they split out retail vs professional growth?

Not that I've seen. On the Q4 2016 call Peterffy broke down accounts by type--56% are individual accounts that make up 37% of equity and 51% of commissions. The problem is the vast majority of that is professional traders so it's hard to know how much is retail. The other account types (other brokers, hedge funds, prop firms, and financial advisors) don't have any retail investors in them. Peterffy has said many times that he has no desire to market to or service retail clients so unless there's a major shift I don't expect that'll change (at least while he's alive).

Frankly, if you're a retail investor who makes a handful of trades per year I have no idea why you'd be on IB.
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Hielko

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Re: IBKR - Interactive Brokers
« Reply #307 on: February 28, 2017, 08:58:39 AM »
Easy. Some retail investors care about prices, and in some countries the competition isn't like in the US where TD Ameritrade, Schwab and Fidelity are actually already pretty cheap. My parents who don't do more than a handful of trades have an IB account for that reason. At the same time, I do some of my trades at TD Ameritrade because IB is a lot more expensive for certain transactions...

Astrea

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Re: IBKR - Interactive Brokers
« Reply #308 on: February 28, 2017, 09:02:02 AM »
Charles Schwab Corp says it will reduce its standard online equity and ETF trade commissions from $6.95 to $4.95 effective March 3, 2017



rb

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Re: IBKR - Interactive Brokers
« Reply #309 on: February 28, 2017, 09:13:10 AM »
Easy. Some retail investors care about prices, and in some countries the competition isn't like in the US where TD Ameritrade, Schwab and Fidelity are actually already pretty cheap. My parents who don't do more than a handful of trades have an IB account for that reason. At the same time, I do some of my trades at TD Ameritrade because IB is a lot more expensive for certain transactions...
+1. Also the international side at IB and the FX. Savings on one FX trade at IB will pay the minimums for a whole year. Also low margin interest that smart retail investors can integrate into a larger strategy.