Option Brokers Critiqued in Barron’s 17th annual ranking of online brokers

Interactive Brokers got the highest marks in Barron’s 17th annual ranking of online brokers, but be aware that they have a $10,000 minimum to open an account.  They are focused on hedge funds and very active traders.  It’s a great article if you’re in the market for a new broker.  They list the pros and cons of each broker they critique.

Interactive Brokers (interactivebrokers.com) claimed its victory on points over some tough competition. But let’s get the caveats out of the way quickly: This is not a broker for the casual buy-and-hold investor; as a matter of fact, the firm is clearly aimed at hedge funds and very frequent traders. There is a minimum monthly fee of $10, which can be disposed of with a few trades. In addition, some of the data feeds are not free, but if you have multiple accounts at IB, you only have to pay for them once. A $10,000 minimum is required to open an account, and it’s clear from online-discussion groups that the customer service available to small account holders is not exactly warm and fuzzy.

What Interactive Brokers is doing right more than compensates for its social awkwardness. The recently launched update to the Trader Workstation features a new interface called Mosaic, which can be customized to your heart’s content. It’s much easier to use than its previous incarnation, and the customization features are terrific. We also found Interactive Broker’s portfolio analysis and reporting and tax-accounting features superior.


The Tax Optimizer allows you to select a specific tax lot, but it goes well beyond that. It allows customers to run real-time “what-if” scenarios to choose the best tax lot and profit-and-loss impact methodology for a particular transaction for all asset classes except futures.

Frequent traders will find this a great way to figure out the tax impact of multiple trades, and the paperwork doesn’t have to be submitted the moment the trade is placed. You have until 8 p.m. eastern time the day of the trade to decide what lots you sold so you can examine the tax ramifications of each.

The Portfolio Analyst lets a client assess his performance at any time, using up to 150 industry benchmarks. One particularly interesting report covers Performance Attribution, which compares your account’s return to a chosen index, such as the S&P 500, and explains the difference in return due to variations in sector weighting. In other words, how much of your portfolio change was due to market moves, and how much was due to your investing expertise? Reports can be saved and edited; advisers can set up a batch of their client reports to review.

IB has a terrific iPad app, mobileTWS, that takes full advantage of the device’s expansive real estate. The layout puts the controls along the right and left margins of the app, keeping the main central viewing area from being blocked by your hands when you want to change views. Streaming quotes and graphs are clearly displayed, as well as the full life cycle of a trade, from creation to fill. Very well done.

The firm’s customer-service reputation, or lack thereof, is hard to dispute. For those who are bringing $100,000 or more to a new account, however, IB offers an ambassador who is your single contact through the transition. In addition, the firm’s customer-service group has been expanded and there are now reps around the globe, allowing customers to reach someone in support around the clock.

Commissions and fees are very low, though there are some extras you’ll find in data fees for international exchanges, and fees for streaming news in the IB Information Systems research platform. You can get a lot done without paying extra, though.

MB Trading (mbtrading.com) merits the 4½-star mark again, with many improvements to its flagship platform as well as the launch of terrific mobile apps…

Go to Barron’s for the rest of the story

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