IBKR - Interactive Brokers

[Jurgis]

Honestly I'm wondering what is so bad about the interface, because this is a relatively common complaint from others. The only thing I found annoying about IB is the security card thing, which is a pain to have to look up / enter everytime I log in. Otherwise, things may not be as colorful as other brokers, but functionally I haven't had any real issues. And regardless of anything, bought 75 shares this morning for a grand total commission of $0.25, so screw the interface 

Maybe I am looking at wrong places. This is based on their web browser interface:
- Seeing the trade history requires contortions to generate a report instead of just clicking a single button. Even then the report is almost incomprehensible.
- Going between positions and lots requires contortions.
- Exporting trades to Quicken is the same.
- Do they even support TurboTax online version? Will I have to type in all trades at tax time?

I'd mention more but I try to avoid going to IB as much as I can, so I'm sure I forgot some other atrocities.

Perhaps I should say that this is adviser managed account. I assume the interface is the same as with regular IB account, but perhaps not.

[Jurgis]

I am probably the company's target user.  But after using their demo for a few days I decided it wasn't worth the time to learn the UI.  I'm satisfied with Fidelity and have no desire to learn some warped system.  I want to switch and IB offers a lot of features I want.  But the UI holds me back.  It's like handing someone an iPhone with a rotary dial attached.  Why limit yourself like that?

Great post Oddball. +1 all the way.

[Jurgis]

I think the big things for IB over Fido are real easy to quantify:
1) If you trade internationally (online, not by phone)
2) If you short
3) If you borrow on margin
4) If you trade options
5) If you trade futures
6) If you trade foreign exchange
7) If you are an RIA / HF

Out of these, I only use 1. And Fido has it somewhat covered (not all markets, expensive commissions, no IRA support). I'd love if Fido lowered commissions on international trades and offered them in IRA, but I guess I have to keep pushing them, threatening that I will leave for IB. 

Edit: I wonder how IB handled TESB.BE rights release. I had to talk to couple Fido reps to get this through. I might have jumped the gun by calling them before things were settled. This may have worked better or much worse in IB.

Anyway, the branch and live person support is a great perk to have sometimes.

[benhacker]

Oh, Writser, to your question.

"Again, I would be quite interested in hearing anyone's opinion on a IBKR / ETFC pair trade. Seems like a decent idea at first glance."

The problem for me with this pair trade is that it's pretty dirty.  I think you have a lot of basis risk because IB succeeds and fails in different ways than other brokers.  Long term, I think it's an interesting bet, and both should have similar macro themes which they will correlate with (say, rising rates are good for both), but for example if we have a retail driven stock bubble, I would think ETFC would do well, and IB, maybe just ok...  The most difficult part of this kind of pair trade is that I think ETFC / SCWH etc are in good businesses, so if all goes well, IBKR goes up 12-15%, and ETFC goes up 6-10%... basically, the gross size of this position will start to suck regardless eventually, right?  But maybe you just reduce the position in the next down market? (just talking about loud).

But, I do hear you on wanting to participate in the goodness of IBKR, but not knowing how / wanting to swallow the valuation.  I've owned for a long time, and the position is too big, and I have begun paring it back.  I don't have a good answer, but I still like the company, and think they have a clear competitive advantage that will lead to high incremental ROIC, so I don't want to lighten up too much due to valuation alone.

The other thing about IB alluded to above, which is nearly completely left out of this discussion is that their story in the US is IMO quite amazing, but it looks like a sick dog compared to the story they have in the rest of the world.  In Asia and Europe, IB is like SCHW was in the US in 1992... it's just comical to see the "competition" they are up against.  Eventually, the world will get more in gear like Fidelity, but Fidelity in the US vs. Fidelity for a resident of Spain is a totally different bag (just as an example); I think IB has a huge runway.

I think this also addresses (kind of?) the note above by KC about how big IBKR can get, and comparing to SCHW... SCHW is primarily US domiciled investors only (last I checked), I think IB's runway overseas makes the comparison not as directly relevant.

[Jurgis]

with $1m+ you are a fool if you park the majority of your assets at a different broker.

Let's not start hurling insults

[benhacker]

One last thing, a few have noted that for certain transactions (high share count buys/sells) a fixed commission is better... well IB has a solution for that as well.  You can set accounts up to be able to trade awat at a different broker (this is an institutional, fund only service now I think), so you transact penny stocks or high volume blocks at ETFC, and then just bring them back to IB as your Prime broker.

A great thing for IB as they get to let you take advantage of other broker's loss leader pricing, and it's seamless to you.

Ok, enough from me today ...

[Packer16]

Fido offers the only international Roth IRA platform I could find.   In addition it has markets IB does not like S. Korea.  I think you cannot hold foreign currency in an IRA so the FX fees are required no matter what.

Packer

[philly value]

On valuation, depending on your assumptions about how to treat the market making business and corporate overhead, if you assume $600M after-tax 2015 net income from the brokerage business I get it trading at a low-20s forward multiple of brokerage net income. The stock is up more than 40% over the past 6 months, which never feels good, but the valuation still does not seem that expensive for a business with the growth trajectory, runway, and competitive advantages.

[benhacker]

Packer,

it's true that certain markets IB doesn't support (yet), but their IRAs are fully international, and I can (and have) held currency other than USD in them.

[Jurgis]

Fido offers the only international Roth IRA platform I could find.   In addition it has markets IB does not like S. Korea.  I think you cannot hold foreign currency in an IRA so the FX fees are required no matter what.

Packer

Yeah, I think you mentioned this before. I have talked with Fido reps couple of times and they always say that you cannot do international trades in IRAs... I guess I just don't feel the need for it enough to push them to acknowledge that it's possible. I'd hate to call for trades anyway and they don't support online IRA international trades I believe (I think you said it too).