ETrade vs. Interactive Brokers

Having to choose between two of, arguably, the best brokers in the online brokerage industry isn’t too bad of a complaint, right?

During such uncertain times—in the era of COVID-19, and political unrest—finding the most suitable broker will be vital in helping you get the most out of your money.

When it comes to ETrade, we know that it recently experienced a record 1.01 million daily active revenue trades, a 267% increase from its daily trades last year. This growth is likely a positive sign. The firm’s recent merger with Morgan Stanley is also likely to switch things up. How exactly will this affect ETrade clients?

Interactive Brokers, on the other hand, is renowned for its low cost service, and robust trading platform. The firm’s recent addition to its Trader Workstation will also no doubt delight sustainable investors.

The next questions to ask are: What level trader are you? Are you focused on low cost trades, or maybe education is a priority? Which assets do you plan on trading?

In this review, we dive into the assets offered by both Interactive Brokers and ETrade, along with their fee structure. We will also outline exactly what you can expect from each platform, and which broker is more dependable.

Sound good? Let’s get started!

General Overview 🕵️‍♂️

Interactive Brokers has grown into a leading brokerage since its inception in 1993. Today, the firm has grown and honed its range of services to cater to traders of all levels, with a wide range of needs. Attractive services offered by the broker include a broad range of assets, low commissions and fees, and top level trade execution—three key priorities for most traders when hunting for a broker.

Tradable assets include stocks, options, Forex, futures, bonds, and funds on over 100 global markets from an integrated account.

ETrade, another world class broker founded in 1982, is known for its range of options and ETFs. Interactive Brokers, another global giant, is renowned for its low costs, international trading, and offerings to suit all levels. Traders will enjoy the stock trading apps offered by both brokers, which are intuitive, innovative, and easy to use. So, no matter which broker you choose, you will have this part locked down.

Looking at the bigger picture, ETrade is a common choice for individual traders and investors, while Interactive brokers attracts more advanced, institutional, and active traders.

What is ETrade? 📗

ETrade has grown since it planted its roots in the discount brokerage sector. The firm now offers investors a full-service investment offering, with a variety of tools for all levels.

Beginner and more active traders will benefit from ETrade’s range of impressive services. Beneficial services include ETrade’s bottomless library of educational resources, effective tools to help establish a solid strategy and mitigate risk, and professional-level trading platforms. Active traders are drawn to the firm’s $0 commission on stock, options, and ETF trades. 

In October 2020, Morgan Stanley merged with ETrade in a $13 billion deal. This isn’t surprising considering an increased market share and wider customer base are two key aspects that most large corporations seek, and the world of investment is no different. But the real question is: How will this impact ETrade customers? 

At the end of the day, when bigger corporations merge, it brings with it both benefits and drawbacks for the average investor. Though these changes may not be apparent for several years. Here are some changes you can expect to see when leading corporations like ETrade merge:

• ☑️ Potential for more investment choices: Giant brokerage firm Morgan Stanley has traditionally targeted high net worth families, and corporate investors, whereas ETrade aims its services towards the everyday trader looking for low fees, and helpful online tools and features. Some experts believe that mergers between bigger companies can bring more choices to the customer
• ☑️ Opportunity for enhanced features: More traditional brokers like Morgan Stanley tend to move towards providing better online services. Because ETrade’s service is digital, Morgan Stanley will likely be influenced to offer more digitization when both combine.
• ☑️ No sudden changes: When mergers take place, companies are conscious of making sure any changes that take place are implemented slowly and in due time.

When TD Ameritrade and Schwab first announced their merge, for example, the whole process was extremely transparent. It was made known that no changes were to take effect for 18 to 36 months.

Though the merger is expected to bring some positive changes, ETrade already offers many benefits. These include ETrade’s impressive fee structure, with $0 transaction fees, no minimum account balances, an integrated checking account, and over 1,300 no-load mutual funds.

ETrade is regulated by the Securities and Exchange Commission (SEC), and is a member of the National Futures Association (NFA) and FINRA. ETrade members’ accounts are insured by the SIPC while ETrade Bank is insured by the FDIC.

What is Interactive Brokers? 📕

Interactive Brokers was founded in 1978 by Thomas Peterffy. Since its beginnings, the company has amassed a cool $8.1 billion in equity capital, and sits at the top of the broker chain for active traders.

Bacon the 70s and 80s, Interactive Brokers was a securities dealer that took a more traditional approach. However, Peterffy who was CEO at the time, implemented the first fully automatic algorithmic system for submitting and creating market order as early as 1985.

In 1993, less than a decade later, Interactive Brokers (IBKR) had transferred into a fully-automated e-trading platform. The broker is most known for its enormous investment selection, which accomodates

Today, IBKR helps traders make around 1.4 million trades a day. The firm’s international headquarters in Greenwich, CT, operates in over 135 markets, and holds offices in 14 countries: the U.S., the U.K., Canada, Australia, China, Hong Kong, India, Japan, Switzerland, Singapore, Russia, Hungary, Luxembourg, and Estonia.

Interactive Brokers is regulated by FINRA, the FCA, the SEC, and several international agencies.

E*Trade vs. IBRK: Investment Selections ⚖️

A key difference between powerhouses ETrade and Interactive Brokers’ offerings is that IBKR gives traders access to Forex and 125 exchanges in 31 countries around the world. Aside from this, their offerings are pretty similar; traders will find all the usual suspects expected of a leading broker.

ETrade: Stocks and Options ✔

ETrade offers stocks and options, simple options, and complex options, all at a low cost.

Complex Options ✔

Interactive Brokers: Stocks, ETFs, Warrants ✔

Interactive Brokers offers a wide range of stocks, making it one of the most popular stock brokers available. Here’s why:

Additionally, Interactive Brokers offers traders IBKR Lite. This offers less active traders commission-free trading on all US exchange-listed stocks and ETFs, access to global markets at a low cost, and no inactivity fees, or account minimums.

Without a doubt, Interactive Brokers has an impressive offering with competitive fees. Many traders consider the platform a top broker for day trading considering its investment selection and powerful technology.

Interactive Brokers’ Options ✔

Interactive Brokers and CFDs ✔

Interactive Brokers offers low commissions starting at 0.05% on its share CFDs. Active traders can benefit from lower rates. The broker charges an overnight finance at +/-1.5%, and lower spreads are available for bigger balances. Here’s a quick rundown:

Forex: Interactive Brokers 💱

A key difference between ETrade and Interactive Brokers is the latter offers access to the Forex market. If you get a solid forex trading strategy locked down, there is potential for big returns. Although Interactive Brokers does not publish its spreads, its fees are low – especially for high-volume traders.

Customers are offered prices that aggregate from 17 global banks dealing in the Forex market. While you won’t need to pay for spreads, the broker does charge a commission of between $16 to $40 million round turn. Below are some stats on its Forex offering.

E*Trade vs. IBRK: Fees & Commissions 💰 

ETrade has a transparent commission structure. U.S. based traders won’t be charged commission for online equity, ETF, or options (you will be charged a per-contract option fee of $0.65). Those looking to trade mutual funds will be charged a fee of $19.99 outside the No Transaction Fee program. There’s also a $25 per trade fee across asset classes.

On the other hand, Interactive Broker’s has a more complicated pricing scheme. It includes fixed per-share pricing ($0.005 per share traded at a minimum of $1), the IBKR Lite program, where traders can access free trades on all U.S.-listed ETFs and equities (only though IBKR mobile and the Client Portal), and the tiered per-share pricing based on the monthly volume of trades.

Both Interactive Brokers and ETrade generate interest income from the difference between the amount you’re paid on your idle cash and the amount earned on customer balances. You can access a stock loan program. These allow you to share the revenue generated from lending stocks in your account to other hedge funds or traders.

Who Has the Better Trading Platform? 💻

ETrade has been around for a while, almost four decades to be exact, and its experience is reflected in its intuitive and easy-to-navigate platforms: ETrade and Power ETrade, as well as intuitive mobile apps that mirror the web platforms’ functionality.

There’s also a downloadable platform, ETRADE Pro, that can be customized extensively and is intended for advanced traders. Now you’re probably wondering how exactly do you open and fund a brokerage account? Well, truth be told, it can be more difficult than people realize. Opening an account with ETrade, though? Couldn’t be easier. Whether you want to trade straight from your mobile, or computer, opening an ETrade account is quick and hassle free.

Similarly, Interactive Brokers offers multiple trading platforms, including its web and desktop version, along with IBKR mobile. Its app is just about the same as the web platform, with most of the same functions, though it’s hard to beat the robust TraderWorkstation (TWS), the company’s key prize.

Onboarding with Interactive Brokers is simple, an account can be opened without the need to fund it (though you will need to make a deposit within 90 days or it will close automatically). Nonetheless, this offers traders more flexibility when opening an account, and provides some time to check everything out.

No matter which you choose, you will gain access to robust web and mobile platforms suited to active and advanced traders. Both brokers offer platforms with watchlists, real-time quotes and news, advanced charting, and research.

That said, Interactive Brokers’ TWS can be complex for new users, and will take some time to reap the full benefits of its abilities. Both brokers’ platforms have intuitive order entry interfaces, an added bonus.

Desktop Platforms Compared 🖥

ETrade’s standard web platform comes with all the basic tools that traders need to do their research and make the most ideal investments, stay on top of the markets, and place trades. Unfortunately, when Apple and Tesla split their stock, ETrade clients reported glitches in its platform, leaving investors fuming.

ETrade’s second platform, Power ETrade is the more advanced option, and offers drawing tools, charting, and technical indicators packed with features to optimize your trading. Power ETrade allows traders to send a batch and stage orders, as well as placing orders from a chart and being able to visually track them.

Interactive Brokers’ Client Portal is ideal for placing trades, checking on positions, and viewing your account in real-time. TWS is more feature-rich though, and is designed specifically for active traders and investors trading several products, who require more flexibility. 

Traders can utilize Hot Buttons for speedy order transmission, and stage order to be executed at a later date, either in a batch or one at a time. All orders can be placed, modified, and managed directly through the chart.

A recent addition to TWS is Interactive Brokers Impact Dashboard, an innovative sustainable investing tool. The Trader Workstation platform also lets you identify and invest in companies that align with your personal values. An ideal option for socially responsible investors, to help in deciding whether a company is a worthy prospect.

ETrade vs. Interactive Brokers on Apps 📱

Luckily, traders on-the-go will enjoy a positive mobile trading experience no matter the broker chosen. Both apps are well-designed, and user friendly. With both apps, you can trade the same assets that are offered on the web version (apart from ETrade’s single name bonds).

You will have access to real-time quotes, news, and charting features on both, but Interactive Brokers has a quirk: The data is streamed in real-time, but it can only be done from one platform at a time. This means that you won’t be able to get streaming quotes from both your smartphone and computer at once.

Interactive Brokers comes out just ahead of ETrade in terms of the order types its mobile version supports. The same order types can be accessed on mobile and the web platform (including conditional orders).

Are E*Trade and IBRK Safe? 🛡

ETrade’s Security 🔒

Let’s begin with the security ETrade offers. With this broker, your money will be highly secure because the brokerage boasts strong regulatory licenses. Brokers that want to operate in the United States are subject to some of the toughest regulations in the world, and any firm offering access to financial markets in the U.S. must fully comply.

To start, ETrade registered with the Financial Industry Regulatory Authority (FINRA). The firm enforces regulations to maintain the integrity of the New York Stock Exchange. The brokerage also carries protection provided by the Securities Investor Protection Corporation (SIPC). The SIPC protects investors’ money up to $500,000 in case of fraud or bankruptcy.

Further, ETrade Financial Corporation is listed on Nasdaq, and is publicly traded, yet another sign your money will be safe with ETrade.

Interactive Brokers Security 🔐

Taking a look at Interactive Brokers security we can see the firm is a member of FINRA too, and is also registered with the U.S. Securities Exchange Commission (SEC). Under the SIPC, Interactive Brokers guarantees the safety of your funds up to $250,000 in the case of bankruptcy or fraud.

In addition, Interactive Brokers provides an Insured Bank Deposit Sweep Program. This FDIC insurance protects your money up to $2.5 million. The broker is publicly traded and is listed on the Investors Exchange (IEX).

Verdict: E*Trade vs. Interactive Brokers 🏁

ETrade is for you if you’re looking for quality resources and banking. In terms of trader types, it is suitable for all levels, from beginners, to more advanced traders. ETraders offers detailed and clear market research on an easy-to-use, robust trading platform. If these are priorities for you, ETrade could be your best option.

Interactive Brokers offers a robust platform with comprehensive tools, not so suitable for beginners or intermediate traders. Rather, these tools are directed at helping advanced traders flourish. If you are a beginner and want to give it a try, just keep in mind there will be a learning curve. Despite its complex platform, Interactive Brokers is a leading solution for traders, and every aspect of this firm is sophisticated.