Is Interactive Brokers Regulated? Is it safe? - TU Expert review
License is the most important document you have to consider when choosing a broker. Many traders, who would like to start working with Interactive Brokers try to check whether it is regulated. Traders Union experts have already done that. In this article, you will learn whether Interactive Brokers is regulated, what regulatory authorities supervise the broker and whether it is safe to work with the company in general.
Short summary about the broker Interactive Brokers
Interactive Brokers is among the best-known US investment companies, operating since 1977. The broker offers to trade currency pairs, but its basic instruments are stocks, CFD, indices, metals, ETF, futures, and other exchange market assets. You can also trade cryptocurrencies on Interactive Brokers. The company is regulated by the US Securities and Exchange Commission (SEC), the US Financial Industry Regulatory Authority (FINRA), the UK Financial Regulatory Authority (FCA), and other international financial regulation commissions. In 2020, the broker was awarded the "Best Online Broker” (Barron's) and "Best Broker for Economical Investments" (NerdWallet) titles and got five stars in the Online Stock Trading for Traders category (Canstar). Also, the broker is popular in other countries. Here you can read reviews of Interactive Brokers in Canada, Singapore, Australia, Hong Kong, Ireland.
| 💰 Account currency: | USD, EUR, GBP, AUD, CAD, CZK, DKK, HKD, HUF, ILS, JPY, MXN, NZD, NOK, PLN, SGD, SEK, CHF, CNH |
|---|---|
| 🚀 Minimum deposit: | No |
| ⚖️ Leverage: | Depending on the asset |
| 💱 Spread: | From 0 pips |
| 🔧 Instruments: | Stocks, options, futures, currency, metals, bonds, ETF, mutual funds, CFD, EPF, Robo-portfolios, hedge funds |
| 💹 Margin Call / Stop Out: | Depending on the asset |
Pros and cons of Interactive Brokers
👍 Advantages of trading with Interactive Brokers:
•wide range of training materials;
•access to 135 markets in 33 countries;
•a huge subset of trading instruments.
👎 Disadvantages of Interactive Brokers:
•website interface is only partially translated into other languages;
•you have to pay for an inactive account;
•Support service does not work on Saturday and Sunday;
•long and complex registration procedure;
•no cent accounts for novice traders.
Why is it important to work with a regulated broker?
License is a document that certifies that a broker operates legally and guarantees fulfillment of its obligations to the traders. A financial license is issued by a financial regulatory authority of a country (the National Bank) or a specialized authority (for example, Securities Commission, Futures Trading Commission, etc.). It is important to choose licensed brokers for the following reasons:
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A license guarantees that the broker operates in compliance with the rules of the financial regulator that issued the document.
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In order to obtain the license, a broker must comply with certain requirements, for example, the size of the authorized capital or personnel qualification. It is simply not lucrative for scammers to comply with such requirements.
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A broker’s license provides access to real markets, and you can be sure that the quotes are real and up-to-date.
The best option is to work with a broker that holds the license of the jurisdiction, where the trader resides. You can also choose a company with a financial license of another reliable jurisdiction, for example, the U.S. or the European Union.
Is Interactive Brokers Regulated? Broker’s license
Security (Protection for Investors)
Interactive Brokers is regulated by a variety of international commissions, such as US SEC, FINRA (CRD#: 36418/SEC#: 8-47257), SIPC, UK FCA (208159), Australian AFSL (453554), Indian NSE, BSE (3285), SEBI (INZ000217730), Hong Kong SEHK, HKFE (01590), and Japan, Luxembourg, and Canadian financial supervisory authorities (IIROC).
The licensing to operate is only possible if the broker meets all the requirements of the regulatory authorities. Otherwise, the license shall be denied or canceled.
Clients’ funds are protected by using segregated accounts.
👍 Advantages
- A large number of regulatory authorities
- Clients' capital is protected
- A deposit insurance program
- The documentation is on the broker's website and in the public domain
👎 Disadvantages
-
A large number of regulatory documents to study
A large number of regulatory documents to study
Brokerage fees
Broker’s regulation is the most important choice criterion. However, before you start working with the broker, it is also important to analyze its commissions and fees. TU analysts have studied the commissions and fees charged by Interactive Brokers, which you can see below.
Traders Union analysts have verified Interactive Brokers for hidden fees and assessed the commission level in the company. The company charges $20 for an inactive account if there is less than $2,000 on the account and $10 if there is more than $2,000. You can withdraw funds for free once a month; if you withdraw funds more often, you’ll have to pay a commission, the amount of which varies depending on the base currency of the account and the payment system.
| Account type | Spread (minimum value) | Withdrawal commission |
| Real | From $2 | Depending on the currency and withdrawal method |
Brokers that are similar to Interactive Brokers
Many brokers operate legally, obtaining relevant licenses and permissions. However, when choosing a broker, it is important to compare their trading conditions. TU experts have prepared a comparative analysis of Interactive Brokers conditions with its closest competitors.
Comparison of Interactive Brokers with other Brokers
| Interactive Brokers | RoboForex | Pocket Option | Exness | FBS | Deriv | |
|---|---|---|---|---|---|---|
Trading platform |
Trader Workstation, IBKR Mobile, APIs |
MT4, MT5, R MobileTrader, R StocksTrader, R WebTrader |
Pocket Option, MT5, MT4 |
Exness Trade App (mobile), Exness Terminal (web), MetaTrader5, MetaTrader4 |
MT4, MobileTrading |
Deriv bot, Deriv MT5, Derivix, Deriv Trader, SmartTrader |
Min deposit |
No |
$10 |
$5 |
$10 |
$1 |
$5 |
Leverage |
From 1:1 |
From 1:1 |
From 1:1 |
From 1:1 |
From 1:1 |
From 1:1 |
Trust management |
No |
No |
No |
No |
No |
No |
Accrual of % on the balance |
No |
No |
No |
No |
No |
1.00%% |
Spread |
From 0 points |
From 0 points |
From 1.2 point |
From 1 point |
From 0.2 points |
From 0 points |
Level of margin call / stop out |
No |
No |
No |
No |
No |
No |
Execution of orders |
Market Execution |
Market Execution, Instant Execution |
Market Execution |
Market Execution, Instant Execution |
Market Execution |
Market Execution |
No deposit bonus |
No |
No |
No |
No |
$5 |
No |
Cent accounts |
No |
Yes |
No |
No |
Yes |
No |
Interactive Brokers offers more profitable conditions to professionals and is not focused on novice traders.
The minimum deposit in RoboForex is $10. Leverage up to 1:2000. Traders choose RoboForex for reliability, favorable trading conditions, minimum spreads, and commission fees. The company is recommended for beginner traders and experienced investors.
Pocket Option offers a wide range of trading instruments and copy trading services. It constantly improves its service quality and expands the list of assets and trading platforms. The broker is suitable even for novice traders without significant capital due to the low initial deposit. Experienced traders who work with CFDs and binary options can also use Pocket Option’s services.
Exness broker is a trusted broker partner that is compliant with all relevant terms. Exness complies with all payment obligations and pays money earned.
FBS is a broker for those who appreciate a variety of trading instruments and prompt support. The company is suitable for both beginners and experienced traders working on PCs and smartphones.
Deriv is a broker for beginners and professional traders who prefer to make trades on their own, as well as use auxiliary programs for more efficient trading.
Conclusions
Interactive Brokers is a quite reliable broker for trading. Interactive Brokers operates on the license of a reliable jurisdiction and its operation is regularly monitored. However, the company does not offer the best trading conditions compared to competitors. You can choose this broker and not worry about the safety of your funds, but there are better options in terms of trading conditions.
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FAQ
How difficult is it to obtain a brokerage license?
The procedure for obtaining a license differs depending on the jurisdiction, but it is very difficult and expensive to get the document in a reliable jurisdiction. This is why only reliable brokers obtain licenses.
Why is it not recommended to work with offshore brokers?
Offshore brokers have to meet minimum requirements for obtaining a license and reporting, which is why often scammers get such licenses.
Can an offshore broker be reliable?
Yes, although there are not many of such brokers. There are brokers with a good reputation, but with an offshore license. You still need to be very cautious when working with such companies.
How do I check a broker’s reputation?
In order to check a broker’s reputation, you need to read user reviews. However, it is recommended to only use independent websites for that.
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Team that worked on the article
Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.
Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.