the important stuff
Available: All major markets
Instruments: Stocks, Options, Margin, Shorts and more.
Brokerage fees: Between 1% to 5%.
Minimum order: Varies
Interactive Brokers is a US based share broking and investment platform that is available to New Zealanders. They offer all major markets, including Asian and European markets, and have most common instruments such as margin trading, options, short selling and more. While the fees are low and it has many features, Interactive Brokers has a complex interface that can be difficult to navigate. It is best suited to experienced investors.
Interactive Brokers is an advanced share broking and investing platform, and is available to New Zealanders.
Interestingly, it does not contain New Zealand stocks, but does offer almost every other major market, from Mexico to Hong Kong.
It offers many investing features, most of which will be too advanced for beginner investors.
Here's a quick breakdown of the good and bad:
In this article we will elaborate on these points and break down exactly how Interactive Brokers measures up when it comes to fees, value for money, ease of use and available features.
Who is Interactive Brokers?
Interactive Brokers is headquartered in Greenwich, Connecticut.
They were founded in the 1970's and are still chaired by their founder, Thomas Peterffy.
They have 2,850+ employees in its offices in the USA, Canada, the United Kingdom, Ireland, Switzerland, Hungary, India, China (Hong Kong and Shanghai), Japan, Singapore, and Australia.
IBKR is regulated by the SEC, FINRA, NYSE, FCA and other regulatory agencies around the world, and are a publicly listed company on the NASDAQ.
Interactive Brokers: What Do They Offer?
Interactive Brokers is a complete securities trading platform. They offer:
- Mutual funds
- Margin trading
- Short selling
- Share lending
For the average New Zealand investor, many of these products will be too advanced to be useful.
However, if you would like access to more overseas markets, Interactive Brokers is one of the more reliable platforms to do it.
It's also a good option for experienced investors to have all options in one place, rather than opening three or four different trading accounts with different brokers to get access to the tools you want.
Keep in mind that Interactive Brokers offers two types of account:
- IBKR Pro
- IBKR Lite
However, the IBKR Lite option is only offered to US customers.
Therefore, everything in this article will be referring to the IBKR Pro version.
What Are The Fees?
The fee structure with Interactive Brokers is complex and has many different brackets.
However, most investors in NZ will probably fall into the same bracket, which is the first tier (you would need to be trading at least six figures monthly to move to the second tier).
Some standard brokerage fees you can expect to pay are in the table below:
|US Stocks||Japan stocks||Aus stocks||UK stocks|
|Brokerage (per share)||$0.0035||0.05%||0.08%||0.05%|
|Minimum per order||$0.35||¥80||$5.00||£1.00|
|Maximum per order||1%||-||-||-|
To give you an idea of how much you might pay, these are (estimated) brokerage fees for some example US trades:
Their forex fees are also the best you will find in NZ, which is $2 USD for anything less than $1 million USD.
Again, the fee structure is complex and it would take me ten pages to explain them all to you here for all their different products.
How Do I Fund My Account?
There are two ways to fund your Interactive Brokers account from New Zealand.
- Bank deposit
- Wise transfer
Both options are easy and convenient and shouldn't cost you much in fees.
To make a deposit, just hit the Deposit button on your homepage:
You will then be taken to your deposit options:
Funding by bank deposit
You can transfer NZD to your Interactive Brokers account with just a simple bank transfer.
Select the Bank Transfer option and it will give you the bank details.
Make the transfer from your internet banking and should hit your account in a day or two:
Funding by Wise transfer
This is a recent feature addition from Interactive Brokers.
If you have a Wise account, you can now link it with your Interactive Brokers account and transfer money in seamlessly:
This is convenient because in Wise you can hold many different currencies, and this is an efficient way to get them into your brokerage account without needing to first change them into NZD to make a bank transfer.
If you don't yet have a Wise account and Wise card, I highly recommend you get one.
The product is so well-rounded, you actually don't even need an account with an NZ bank anymore if you don't want one.
How Do I Get Money Out Of My Account?
Funds can be withdrawn to your bank account at any time.
You may need to convert your cash balance into NZD first if it's held in other currencies.
Then just request a withdrawal from the Withdraw tab:
You get one free withdrawal every month.
Subsequent withdrawals have a fee of $1 NZD per withdrawal.
Are My Investments Safe?
Interactive Brokers uses a custodial system.
This means the shares you purchase are not held in your personal name, but held by Interactive Brokers on your behalf.
Obviously, there are risks to this. However, this is the method many popular sharebrokers use today, such as Sharesies and other fund managers.
One thing that makes Interactive Brokers one of the most popular platforms in the world is the fact they are publicly listed on the NASDAQ.
This means their accounts are public and audited every year, so anyone can see they are actually holding the amount of assets they say they are. Historically, Interactive Brokers has held capital well in excess of its capital requirements.
Your funds are also insured in the event that Interactive Brokers goes under.
The direct disclaimer from their website is as follows:
"Customer securities accounts at Interactive Brokers LLC are protected by the Securities Investor Protection Corporation ("SIPC") for a maximum coverage of $500,000 (with a cash sublimit of $250,000) and under Interactive Brokers LLC's excess SIPC policy with certain underwriters at Lloyd's of London for up to an additional $30 million (with a cash sublimit of $900,000) subject to an aggregate limit of $150 million. Futures and options on futures are not covered. As with all securities firms, this coverage provides protection against failure of a broker-dealer, not against loss of market value of securities."
The SIPC protects you against losses of any of your assets held with an SIPC-registered broker that gets into financial trouble up to $500,000 USD. While the SIPC is USA-based, it does not apply to only US citizens.
From their website: "There is no requirement that a customer reside in or be a citizen of the United States. A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a SIPC member brokerage firm."
So are your investments safe?
I cannot give a definitive yes or no answer, but my personal opinion is they are as safe as they would be with any other NZ broker (such as Sharesies, Hatch etc), and I personally hold most of my foreign investments with Interactive.
You should note that Interactive Brokers operates globally through subsidiaries (such as IBKR UK, IBKR Hong Kong, IBKR Australia etc).
Their New Zealand service is operated through their Australian subsidiary. This means if you need to call their support line, you will be calling to Australia (there is no listed NZ support phone number).
Do I Earn Interest On My Cash Balance?
Yes, Interactive Brokers pays interest on your idle cash balance.
However, the requirements are tiered and there is a minimum balance.
Usually the rate will be similar to a bank rate.
How To Transfer Your Stocks Into Interactive Brokers
When I opened by Interactive Brokers account I transferred all my positions in from Hatch.
The process wasn't complicated, but may have caused confusion if I wasn't as experienced with stocks.
There was no fee for an inbound transfer to Interactive Brokers, however there was a fee from the outbound side (Hatch).
I don't remember exactly what the charge was, but from memory it was around $100-$150 USD for approximately 8 positions.
The Interactive Brokers team told me exactly what information they needed, and I forwarded this request to Hatch who was helpful in getting the transfer done.
Overall the process took about a week.
How To Buy Stocks With Interactive Brokers
Let's go through an example order with your IBKR Pro account.
Click on the "Trade" tab along the top and you will taken to the Order Ticket.
As you can see this order ticket is much more complex than a basic ASB Securities or Sharesies order ticket.
You can buy in dollar amounts or shares, you can place market, limit, stop loss, or profit taker type orders, you can leave the order in force for a day or until you cancel, and you can have it executed outside RTH (regular trading hours).
Once you're happy with your order, submit it and it will get sent to market.
Verdict on Interactive Brokers
Interactive Brokers is unrivalled by any other NZ broker when it comes to features and options.
You can trade on every major market in the world in countless different instruments.
The fees are also the cheapest in New Zealand for almost everything.
However, the interface is not the most intuitive and if you're new to investing and financial markets, you will definitely find it overwhelming.
You will need a good understanding of financial jargon and the way markets work to use the platform comfortably and get the most out of it.
I would recommend Interactive Brokers to anyone in NZ who:
- Has a background in finance or is an experienced investor
- Wants to invest in foreign markets
- Has a portfolio size greater than $100k
- Wants access to more features, such as options and margin trading
For anyone else, Sharesies is probably the better choice as it's tailored for beginners and will help you feel comfortable as you start your investing journey and build your net worth.
You can always move to Interactive Brokers later when you're more comfortable!