I am confused. I hear from a lot of people here that IB has very cheap rates, but I must be missing something. If I trade 10,000 shares of Bank Of America that would be $50 correct? (.005/share) Currently I am paying only $8/trade with Fidelity. Am I wrong?
Yep. But if you only buy 500 shares, then you only pay $2.50. Obviously if you are making trades over 1500 shares, its cheaper with scottrade or fidelity. Dont forget that IB probably passes on SEC fees to you too so its actually more expensive than .005 per share.
they arnt cheaper in any way, i dont see why they are so popular. i guess if u trade a bunch different stuff and only want 1 account. or you use their data to dump into some kinda of charting tool. other than that no point. thats why i dropped them for futures.
first off, if you break up your order for 50K shares of BOA, you'll get charged the $8 fee for each trade. second, the bigger picture here that often gets overlooked is the quality of execution. I can't speak for Fidelity but if you are to save 1 penny on 50K shares by obtaining a better fill, you'll save $500. On average IB's executions are .53 cents better than the industry average for 100 shares. * (per independent audit, see link below). http://www.interactivebrokers.com/en/p.php?f=smartRouting&ib_entity=llc You also should look at other fees such as margin. I haven't seen another firm come close to IB's low margin charges which currently range between .62% and 1.62%. If you'll use those 50K shares to finance other trades or invest in a higher yielding instrument - say at 2% you're net interest earnings would be > $1000 annualized. The previous poster also is wrong: for bundled pricing IB does not pass on SEC fees. There are also other alternatives, you can choose unbundled pricing and route your order to an exchange that provide liquidity rebates and possibly get paid a fee for your order as IB passes back the liquidity rebates to clients. http://www.interactivebrokers.com/en/accounts/fees/commission.php In short, there is much more you should look at beside the headline fee.
def is right that on US stocks/futures IB is hardly beatable. but there are many other areas where it pays off to have a different broker. for instance canadian stock are one of the most expensive to trade in the industry when you use IB - and you get the same execution. i used to trade hundreds of thousand canadian shares with IB but do not anymore - at least not before they lower they flat fee of CAD1 for 100 shares. the next problem appeared after the crisis - many stocks are still margined 100%. i believe there are better ways to improve on their risk management...
If you look at it that way, SOGO would cost you only $3 for those 10,000 shares. If you are trading large blocks, look at the bundled/unbundled comparison. the rebates will make it much cheaper.