Extremely Convenient Interactive Brokers

Dec 11, 2018, 9:30 AM

about11mins to read

If you frequently trade US stocks and options, having a US brokerage account is almost a necessity.
There are several options to choose from, but Interactive Brokers (hereinafter referred to as IB) is an extremely user-friendly online brokerage firm.

In this article, we will summarize the benefits of IB.

By the way, this article is also based on a document from about four years ago, just like the previous article.

Advantages of Interactive Brokers

The advantages of IB lie in its "products," "fees," "security," and "tools."

Products

IB offers a wide range of investment products, including stocks, futures, options, FX, and bonds from around the world. Moreover, you can trade these products on the same platform with the same account funds, which is extremely convenient.

In contrast, domestic brokerage firms in Japan often require separate accounts and funds for different products, which can be cumbersome.

Fees

As an online brokerage firm, IB's fees are relatively low.

The fee for trading stocks and options is around $1 per trade. Although it's already low, the fee is calculated based on the trade quantity, so it's even more cost-effective for high-volume traders.

In contrast, domestic brokerage firms in Japan often charge fees based on the trade value, which can be higher.

Security

Although it's an overseas account, IB is a highly reliable company.

Firstly, your assets are protected. According to the information available, IB has a robust system in place to protect its customers' assets.

Secondly, two-factor authentication is mandatory for logging in and trading. Although it's a bit inconvenient, it's a necessary measure to ensure security.

Additionally, customer support is also excellent. You can contact them via email, and they will respond within a day. You can also contact them in Japanese if needed.

Furthermore, IB takes customer asset protection seriously and even offers a simulation test before you start trading options.

Tools

As an online brokerage firm, IB's tools are highly advanced.

The Trading Work Station (TWS) is a powerful tool that allows you to trade on the platform. Although it's a bit overwhelming, it's a professional-grade tool that offers a wide range of features.

Moreover, API is also available, which allows you to create your own tools freely.

You can also create a paper trading account to test the API without affecting your actual account.

Note that some data required for the tools is available for a fee, but it's relatively inexpensive, around a few dollars per month.

Disadvantages

Although IB is an excellent online brokerage firm, there are some drawbacks.

Monthly Maintenance Fee

The monthly maintenance fee is $10, although it's free for the first three months after opening an account.

Data Fees

Some market data requires a subscription, which can be a additional cost.

Overseas Account

As a non-US citizen, there are transfer fees when sending and receiving funds.

Initial Deposit Limit

The initial deposit limit is 100,000 yen for those over 25 years old, and 30,000 yen for those under 25.

Opening an Account

Here are some tips for opening an IB account.

Choosing an Account

IB has two types of accounts: one for Japan and one for overseas. Make sure to choose the overseas account (IB LLC) to trade US stocks and options.

Required Documents

Utility bills (within the last three months)
Photo ID (valid)

That's it. If you've opened an overseas account before, you know how easy it is.

Notes on Opening an Account

Basically, you just need to follow the online application process, but there are a few things to note.

Experience Required

To trade options and other products, you'll need two years of trading experience and a certain amount of assets.

Account Type

Choose the Reg. T Margin account to enable margin trading.

Ignore Japanese Instructions

The Japanese instructions may not be accurate, so make sure to read the English version.

After Opening an Account

After opening an account, you'll receive a confirmation email, and your account will be activated shortly.

You'll need to deposit funds within 45 days, so it's a good idea to apply for SMBC Direct's international money transfer service at the same time.

Conclusion

IB is an excellent online brokerage firm that offers a wide range of investment products, low fees, high security, and advanced tools. Although there are some drawbacks, IB is an excellent choice for those who want to trade US stocks and options frequently.