Interactive Brokers Cuts Costs, Adds To Education, Technology And Transparency

Interactive Brokers Group Inc IBKR, a deep-discount electronic access broker for online equity, options, futures and forex trading, expanded the depth and breadth of its offer in light of an impressive retail-driven rise in trading activity.

Benzinga spoke with IBKR’s Steve Sanders, EVP of marketing and product development, and marketing director Rob Garfield to learn more.

Context: The COVID-19 pandemic was a boon for Interactive Brokers, a firm whose core mission rests on providing users the tools to compete on price, speed, size and product.

“First, a lot of people were at home, and second, probably 75% of our accounts are from outside the U.S., so there seems to be some kind of flight to safety," Sanders said.

The interest allowed IBKR to grow the number of accounts opened to just under 5 million, with users spread across the firm’s Lite and Pro offering.

Lite allows traders the ability to transact U.S. exchange-listed stocks and ETFs free. On the other hand, with Pro, users pay commissions but receive smart routing and best execution.

According to Sanders, IBKR clients on average save $0.47 per hundred shares by using smart routing. Based on average trade size, that works out to about $6 or $7 per trade.

With Lite, trades are commission-free, but order flow is routed to market makers; Lite is geared towards bringing new, lower-volume traders into the IB trading ecosystem.

A Better Experience: Brokers like Robinhood had huge success with their target audience, attracting do-it-yourself traders to act on their interests in the market with ease.

IBKR is looking to offer both newer and experienced traders a holistic gateway to markets, with capabilities in cryptocurrency, spot trading in commodities like gold, an Impact Dashboard, and a premium education offer, among other things.

Execution is above all else, Sanders added stating IBKR would rather charge a small commission rather than bake obscure costs into spreads.

“Besides being cheaper, you can trade on the same platform crypto, futures, options, forex,” and more, he said.

Differentiator: Transparency, especially when it comes to sustainable investing and education.

“We have the Impact Dashboard that allows people to invest in companies aligned with their values,” Garfield explained.

Sanders added: “Education is important and … to that end, we introduced our IBKR Campus.”

IBKR Campus is comprised of Traders’ Academy, Traders’ Insight, IBKR Quant, Webinars and StudentTradingLab.

The academy – through 40 or so courses – unpacks complex market nuances while Traders’ Insight unveils the big picture dynamics moving price.

IBKR Quant is a sister publication that focuses on API programming news and webinars offer users access to commentary from leaders in the space. StudentTradingLab is a paper trading platform available to college professors and high school teachers.

Recent Developments: Apart from technology and product enhancements, IBKR reduced costs for non-U.S. trades while cutting inactivity fees for all accounts.

“We used to charge $10 a month if you didn’t have at least $100,000 or do at least $10 worth of commissions and trades,” Sanders said.

Garfield added: “We just adjusted the commissions in Europe on stocks so that it’s a low 3 EUR/GBP for trades up to 6,000 EUR/GBP in value.”

Visions Going Forward: IBKR is honing in on customer-driven innovation.

“People are interested in learning,” Sanders said in catering to younger audiences that are more inclined to save and invest, rather than spend and borrow. “That’s why we even have something called the Impact App that’s going to be more ESG focused.”

In a nod to trends that suggest investors more so trust themselves and their embedded networks like TikTok, Reddit and Twitter, Sanders noted IBKR’s commitment to providing users a platform to communicate with each other.

“We have our own community and we plug into other communities,” he said. “It’s certainly engaging because we want to hear explanations on why things are going up and down.”