I continue exploring Interactive Brokers and today I will compare their fixed and tiered pricing models. I will also tell how to actually switch to tiered pricing.
Interactive Brokers have 2 pricing models: fixed and tiered (details on their website).
Here everything is simple. Interactive Brokers just takes some part of your money as a commission and that’s it. The exact conditions depends on what and where you buy, e.g.:
- US stocks - 0.005$ per share (min 1$, max 1%)
- ETFs on Xetra - 0.1% (min 4 EUR, max 29 EUR)
- Stock on Xetra - 0.1% (min 4 EUR, max 99 EUR)
As you can see, people who invest in ETFs from Germany will likely just pay 4 EUR per transaction (unless they buy more than 4000 EUR at a time) and if you buy ETFs for 10k EUR, the fee is 10 EUR and for 30k EUR it is 29 EUR (the upper bound).
Here it gets a bit more complex. Interactive Brokers again takes some part (smaller than above though) of your money + exchange itself takes some part as well:
US stocks - 0.0035$ per share (min 0.35$, max 1%) - this gets even cheaper if you buy more than 300k shares + exchange fees (but I am not familiar with US exchanges to comment on this)
Interactive Brokers fee on EUR denominated products (e.g. ETFs and stock on IBIS, which is just another name for Xetra exchange) - 0.08% (min 1.25 EUR, max 29 EUR), this gets better if you trade 1kk EUR per month, but I don’t.
- IBIS exchange fee for ETFs - 0.0048% (min 0.6, max 18) + 0.03 EUR + min(0.001%, 5) + 0.01
- IBIS exchange fee for stocks - same as above, but max 72 EUR instead of 18.
Ok, so the pricing description is much less simple this time, but let’s see how much we can save. If one buys ETFs for 10k EUR, the fee is 8.74 EUR = max(0.08% * 10k, 1.25) + max(0.0048% * 10k, 0.6) + 0.03 + min(0.001%*10k, 5) + 0.01 = 8 + 0.6 + 0.03 + 0.1 + 0.01. To invest 1000, one will pay 1.9 EUR and the minimal fee is 1.89. Around 33750 your tiered fee becomes larger than 29 EUR and after this you should switch back to fixed.
I’ve prepared a Google Sheets document to calculate the fees, so if you would like to play with numbers yourself, please go ahead (make a copy in File > Make a copy).
Disclaimer: the only constant thing is change and the pricing might have changed as well. Thus, check details on their website if you want to know for sure. Otherwise, IB shows the commission before submitting an order, so you could verify my calculations there.
If you buy some ETFs monthly from Germany, tiered pricing is a much better deal for you. If you transaction amount is larger than 33750 EUR, fixed fee is better for you.
How to switch to tiered?
This part is funny, because I did not manage to find any documentation anywhere about this. As a result I just randomly traversed all IB interfaces until I just found it. So to enable tiered pricing model on Interactive Brokers do the following:
- Sign in into your “Client Portal” (i.e. not a hardcore trading interface, but just general overview)
- Then click “Menu” (top left) > “Account Settings”
- Search for “Commissions Pricing Structure” and click on a gear icon
- Switch to “Tiered”
However, this does not have an immediate effect on actual prices (even though the interface shows “Tiered”). Looks like someone needs to approve the switch and for me the change took effect only the next day.