3 ms·

Why IBKR over, say Schwab or Vanguard?

kasey_junk 6y ago
https://www.schwab.com/legal/order-routing-1 https://www.schwab.com/legal/order-routing-1
brobinson 6y ago
Crispier fills. And you can choose which exchange you route your orders to so you can get rebates (maker/taker model). Getting paid to open/close options positions is genius.
arcticbull 6y ago
Depends on the size of your account and how you trade, and what you're looking to get out of it. If you have an account value of over $110,000 IBKR will offer you the industry's lowest margin rates (as low as 0.75%, tax deductible) and very competitive order pricing, without PFOF. Of course with a substantial account you can ask any of them to match IBKR margin rates and they likely will. I sell a lot of margin-secured put options for passive income, and having a 15% portfolio margin maintenance requirement gives me a lot of headroom -- not that I'd ever max it out, I just don't want to be anywhere close. Further the margin impact of out of the money options is also calculated generously. They also offer access to basically any product in any market anywhere in the world. I sell index futures options in the US for instance, but if you want to trade on Canadian, European, Australian or Asian exchanges, it's just a button click away. You can also practice tax-aware borrowing and use their debit card to make purchases against your margin, and also, they offer bill pay which works against your margin balance too. My personal economy involves holding a 6-month cash buffer in my bank account, and investing anything that comes in - and borrowing against it to pay bills. Then, I use the proceeds from my short-term options trades, and dividends from my longer-term positions, to pay them off.
- tptacek 6y ago
  Just to be annoying here: You keep saying that a benefit of IBKR Pro is "no PFOF". That's true --- IBKR Pro is I think the only online retail brokerage that doesn't do that. To my understanding, the only meaningful benefit to "no PFOF" is potentially better price improvement. Which is to say, if you place orders with Ameritrade, which is doing PFOF, you're going to get price improvement over NBBO, but with IBKR Pro, which doesn't, you might get even better price improvement. In the IBKR Pro case, that's true: according to their advertised price improvement stats, you will get 1/3c of improved price improvement per share as a consequence of trading through them compared to the industry average. Your call whether a third of a penny is meaningful to you. But in the general case, it might not necessarily be true that "no PFOF" is a benefit; it's all a question of the fees you pay and the price improvement you get with a given brokerage's routing, right? Am I off here? My sort of baseline belief is that firms like Citadel and Virtu are in fact very good at executing retail orders, and that it'd be weird to have a goal of making sure your dumb retail orders were routed around them.
  - pclmulqdq 6y ago
    IBKR does some of its trading off-exchange like the PFOF types, but they do it in-house, not on a paid-for basis. If you see "SMART" in the routing of an order on IBKR pro, often that order went to one of their darkpools or was filled by them off-exchange (at a price better than the NBBO). The price improvement per share also sometimes comes from exchange rebates that they pass through to customers.
  - arcticbull 6y ago
    Not annoying at all, I appreciate you pushing for clarity. I believe you are correct, I’ll do some research too.
  - kasey_junk 6y ago
    Pedantically, Vanguard Broker Services, the equities broker for Vanguard hasn’t to my knowledge ever gotten PFOF. Their options broker has and Vanguard is on record as being pro PFOF so it’s not a moral stance and could change any quarter without notice.
- kevstev 6y ago
  I bought a house last year and long story short ended up not selling my condo, meaning to close I needed to not sell a chunk of my investments. Problem is, many had significant capital gains. I ended up just taking a margin loan for a blended rate of about 1%. I avoided capital gains, the margin interest is deductible, and my tech heavy portfolio has increased substantially in absolute terms and on a percentage return basis is crushing it. I was comfortable with margin/leverage, for a few years I was very successful with a strategy of buying blue chip dividend stocks on margin and essentially running a credit spread trade- it's not for everyone. But IB is outstanding compared to other brokers around things like this- it really excel for the "prosumer" niche.
  - arcticbull 6y ago
    That's how I made the down payment on my condo too. It's a heck of a deal! Especially when your portfolio skyrockets afterwards. YMMV ofc.
edgyquant 6y ago
Does Vanguard provide an api? I use them for my three fund portfolio but use td ameritrade for swing trading as I can automate my strategy. Would be nice to keep it all in vanguard.

https://www.schwab.com/legal/order-routing-1 https://www.schwab.com/legal/order-routing-1

Crispier fills. And you can choose which exchange you route your orders to so you can get rebates (maker/taker model). Getting paid to open/close options positions is genius.

arcticbull 6y ago

Depends on the size of your account and how you trade, and what you're looking to get out of it. If you have an account value of over $110,000 IBKR will offer you the industry's lowest margin rates (as low as 0.75%, tax deductible) and very competitive order pricing, without PFOF. Of course with a substantial account you can ask any of them to match IBKR margin rates and they likely will. I sell a lot of margin-secured put options for passive income, and having a 15% portfolio margin maintenance requirement gives me a lot of headroom -- not that I'd ever max it out, I just don't want to be anywhere close. Further the margin impact of out of the money options is also calculated generously. They also offer access to basically any product in any market anywhere in the world. I sell index futures options in the US for instance, but if you want to trade on Canadian, European, Australian or Asian exchanges, it's just a button click away. You can also practice tax-aware borrowing and use their debit card to make purchases against your margin, and also, they offer bill pay which works against your margin balance too. My personal economy involves holding a 6-month cash buffer in my bank account, and investing anything that comes in - and borrowing against it to pay bills. Then, I use the proceeds from my short-term options trades, and dividends from my longer-term positions, to pay them off.

tptacek 6y ago
Just to be annoying here: You keep saying that a benefit of IBKR Pro is "no PFOF". That's true --- IBKR Pro is I think the only online retail brokerage that doesn't do that. To my understanding, the only meaningful benefit to "no PFOF" is potentially better price improvement. Which is to say, if you place orders with Ameritrade, which is doing PFOF, you're going to get price improvement over NBBO, but with IBKR Pro, which doesn't, you might get even better price improvement. In the IBKR Pro case, that's true: according to their advertised price improvement stats, you will get 1/3c of improved price improvement per share as a consequence of trading through them compared to the industry average. Your call whether a third of a penny is meaningful to you. But in the general case, it might not necessarily be true that "no PFOF" is a benefit; it's all a question of the fees you pay and the price improvement you get with a given brokerage's routing, right? Am I off here? My sort of baseline belief is that firms like Citadel and Virtu are in fact very good at executing retail orders, and that it'd be weird to have a goal of making sure your dumb retail orders were routed around them.
- pclmulqdq 6y ago
  IBKR does some of its trading off-exchange like the PFOF types, but they do it in-house, not on a paid-for basis. If you see "SMART" in the routing of an order on IBKR pro, often that order went to one of their darkpools or was filled by them off-exchange (at a price better than the NBBO). The price improvement per share also sometimes comes from exchange rebates that they pass through to customers.
- arcticbull 6y ago
  Not annoying at all, I appreciate you pushing for clarity. I believe you are correct, I’ll do some research too.
- kasey_junk 6y ago
  Pedantically, Vanguard Broker Services, the equities broker for Vanguard hasn’t to my knowledge ever gotten PFOF. Their options broker has and Vanguard is on record as being pro PFOF so it’s not a moral stance and could change any quarter without notice.
kevstev 6y ago
I bought a house last year and long story short ended up not selling my condo, meaning to close I needed to not sell a chunk of my investments. Problem is, many had significant capital gains. I ended up just taking a margin loan for a blended rate of about 1%. I avoided capital gains, the margin interest is deductible, and my tech heavy portfolio has increased substantially in absolute terms and on a percentage return basis is crushing it. I was comfortable with margin/leverage, for a few years I was very successful with a strategy of buying blue chip dividend stocks on margin and essentially running a credit spread trade- it's not for everyone. But IB is outstanding compared to other brokers around things like this- it really excel for the "prosumer" niche.
- arcticbull 6y ago
  That's how I made the down payment on my condo too. It's a heck of a deal! Especially when your portfolio skyrockets afterwards. YMMV ofc.

edgyquant 6y ago

Does Vanguard provide an api? I use them for my three fund portfolio but use td ameritrade for swing trading as I can automate my strategy. Would be nice to keep it all in vanguard.