Interactive brokers allow clients to trade financial products online, but services and fees vary between companies. Traders should consider order speed and accuracy, software suitability, fees and commissions, support availability, and language and currency considerations.
The term interactive broker refers to a broker of financial products such as stocks, commodity futures, or currency trading that interacts with clients over the Internet. Many different financial companies offer interactive brokerage services through their websites. The order submission process, data rates and commissions, as well as support services differ between the companies that offer these services.
A potential client might consider several points before choosing a specific online brokerage service. The first query should be whether the orders are being shipped quickly and accurately to the relevant exchange. Most online brokers use a software system through which the customer submits their own order, eliminating broker error. The actual speed at which the order is shipped can only be judged when the trader submits an order and looks at their Depth of Market screen, which tracks overall interest in a particular product at a specific price, to see that the number of offers or offers at the price that presented the changes. A second question might be whether the software provided by the interactive broker is suitable for the merchants’ needs, and if not, the merchant will need to find out if the broker has an interface available to allow him to use other software.
Data fees and commissions are always worth investigating because they can have a significant impact on a merchant’s profit margin. Commissions vary a bit and should be checked carefully because some interactive brokers have applied multiple commissions in a non-transparent manner. Some brokerages are known to charge for data streams, while other brokers will provide data streams for free. A prospective Forex trader will want to do some research to see if they are better off using a fee based broker or a spread based broker. Another item to check is if and when dial-up is available because the merchant may need a backup method for contingency operations if their Internet connection goes down.
Help desks, tech support, and banking support should be available both online and by phone for any interactive broker a trader is considering. Non-US merchants may have language and currency considerations. If a merchant is skilled enough to withdraw money on a monthly basis, he should ask if Automated Clearing House (ACH) processing is available or if the broker will mail paper checks. Wire transfers should be available, but it is usually expensive unless the merchant is moving large sums of money.
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