Is Interactive Brokers the best broker for pro traders in Canada?

By   |   Verified by Nikita Sheth   |   Updated 27th September 2021

Finty review Interactive Brokers
  • Interactive Brokers have one of the most complete trading platforms out there.
  • Trade assets including stocks, options, and ETFs across global markets.
  • Not designed for the faint of heart, is Interactive Brokers the broker for you?

Interactive Brokers Canada is the Canadian arm of this global brokerage — otherwise known as IBKR — offering access to the US and global markets. IBKR has top-level trading tools, affordable fees, and low commissions on trades.

However, while IBKR looks like a good deal for Canadian traders, is this the right broker for executing your strategy? This review looks at using Interactive Brokers Canada as your preferred brokerage and covers everything from features, fees, and alternatives.

Who is Interactive Brokers suitable for?

IBKR Canada is a suitable broker for advanced Canadian day traders. IBKR offers you two options when choosing your account: the Lite or Pro package.

IBKR Lite offering comes with zero-commission trades and a user-friendly trading platform but is unfortunately not available outside the US. Therefore, Canadians only have access to a Pro account, which might not be suitable for new traders who don't have a deep understanding of trading platforms. You'll also need to pay commissions on your trades and fees for managing your account.

Overall, IBKR Pro is a fantastic platform, but not the best choice for beginners. If you're a new trader and you need a user-friendly way to navigate the markets, you're better off going with Wealthsimple Trade or Questrade. However, if you're an intermediate or experienced trader, IBKR Pro provides excellent value for your trading.

What can you trade with Interactive Brokers?

IBKR is one of the world's largest brokerages. As a result, you get access to a wide variety of assets, including the following:

  • Stocks: Trade in 135 markets with a variety of order types and trading tools.
  • Options: Experience innovative trading technology for your strategy.
  • Futures/FOP: Trade commodities, futures options on over 35 global markets.
  • Spot Currencies: Get access to 23 currency pairs with no markups or hidden spreads.
  • Metals: Trade IBKR spot gold and silver, with access to the international OTC markets.
  • Bonds: Low commissions with no markups and transparent pricing.
  • ETFs: Enjoy the diversification of mutual funds and the flexibility of stock trading.
  • Mutual Funds: Gain access to over 40,000 mutual funds worldwide.

Trading tools

IBKR Trader Workstation is an innovative trading platform offered by IBKR for Pro accounts. This market-maker designed platform lets you trade a range of financial assets from your computer, as well as providing research, news, and live market data (for an additional cost). The Trader Workstation software offers you real-time monitoring of price action and quotes.

It also offers a choice of order types, as well as algorithmic trading strategies. IBKR offers traders risk management tools and optimal order management, functional charts, watchlists, and research tools, all in a customizable virtual workspace.

Fractional shares

Interactive Brokers Canada offers traders the option of purchasing fractional shares. If you don't have the capital to trade large-caps like Tesla or Amazon, fractional shares can provide exposure to the market without spending millions of dollars.

Create your portfolio and diversify into several large caps using fractional shares. IBKR also offers the shorting of fractional shares if you have a margin account and approved trading permissions for "United States (Trade in Fractions) stocks".

Lending shares for passive income

IBKR also offers traders the option of earning interest on shares they lend out. The IBKR Stock Yield Enhancement Program allows traders to earn income on fully-paid shares of stock they hold.

Lend the stock to IBKR and receive cash collateral for your service. You lend your shares to other traders that want to sell them short. In return, you'll receive interest for the carry trade. Every day your stock remains out on loan, you'll receive interest on the collateral posted to your IBKR account at market rates.

Trading on margin

IBKR Canada offers trading on margin. With margin rates as low as 0.75%, IKBR's fees are some of the lowest in the industry. Margin models will determine what type of accounts you can open and which financial assets you can trade. Trading on margin with IBKR requires the use of two methodologies: risk-based and rules-based margin.

  • With rules-based margin, a defined formula determines your margin requirements. It's the most common type of margin used by day traders.
  • With risk-based margin, margin requirements depend on portfolio risk. IBKR evaluates the risk in your account, including hedged positions that may mitigate potential downside risk.

Trading fees

Since the IBKR Lite package is not available in Canada, you'll have to go with the Pro account. The trading fees and account fees are expensive, but you receive a top-of-the-line platform perfect for sophisticated investors. Additionally, the fees are in line with most American brokers and cheaper than high-speed brokers like LightSpeed and Centerpoint Securities.

Monthly account fees for IBKR Pro are $10 to $20. However, you can avoid this fee if you have more than $100,000 in your account, or trade more than $30 in commissions during the month.

You have two options for pricing models with Interactive Brokers Canada.

  • Tiered – The better choice for active day traders.
  • Fixed – Suited for investors taking swing trades.

If you're using the tiered fee structure, you'll pay the following trading fees in accordance with how many shares you trade each month.

  • Up to 300,000 shares/month = $0.008 per share.
  • 300,001 – 3,000,000 shares/month = $0.005 per share.
  • 3,000,001 – 20,000,000 shares/month = $0.004 per share.
  • 20,000,001 – 100,000,000 shares/month = $0.003 per share.

If you decide on the fixed pricing model, you pay $0.01 per share with a $1 minimum. You'll also pay 0.5% of the total trade value as your maximum.

IBKR has some of the lowest options trading fees. The broker charges you $1 min per order for trading US-based options, as well as a fee of $0.60 per contract.

IBKR Lite or Pro?

Unfortunately, IBKR doesn't offer the IBKR Lite package to Canadians. You only have the option of opening an IBKR Pro account, and that might not suit new traders.

IBKR Pro is a complicated trading system, and it suits desktop trading more than mobile trading. If you're an experienced trader, IBKR Pro offers you plenty of opportunity. However, if you're a newcomer to trading, it would be better to start with another broker offering you a trading platform with easier navigation and a user-friendly interface.

Pros and cons

Pros

  • Low exchange rates for CAD deposits.
  • Trader access to US and international markets.
  • A wide variety of financial assets available, including ETFs, stock, forex, futures, options, and more.
  • Suitable for experienced day traders.

Cons

  • Tax liability implications for Canadians.
  • IBKR Lite is not available for Canadians.
  • Poor mobile app interface.
  • The advanced trading platform may confuse beginners.
  • Expensive monthly fees.
  • Almost non-existent customer service for Canadians.

Alternatives

  • Wealthsimple Trade: Canada’s only commission-free broker. The company targets millennial and zoomer investors, providing access to international and US markets. Not to be confused with the Wealthsimple Invest robo-advisor.
  • Qtrade Investor: Based in Vancouver, British Columbia, Qtrade Investor offers you an account to trade the US and international markets. Trading fees are low.
  • Questrade: This Canadian broker launched in 1999, offering Canadians access to US and international financial markets. Questrade is Canada’s largest discount broker service.
  • TD Direct: A division of TD Waterhouse Canada Inc., TD Direct is a Canadian financial services firm with headquarters in Toronto, providing access to US and international markets for Canadian traders.
  • Scotia iTRADE: The brokerage division of Scotia Bank, one of the "Big 5" Canadian banks, Scotia iTRADE has low trading fees and commissions, with access to US markets and innovative trading technology.

Comparisons

Get the key differences between IKBR and competitors across tradable assets, market access, order types, trading fees, and more with these helpful side-by-side comparison tables.

FAQs

Is there a demo account to try out before signing up?

Yes, you can paper trade your strategy without exposing yourself to real risk.

Does Interactive Brokers have a Tax-Free Savings Account (TFSA) and Retirement Savings Plan (RRSP)?

Yes, IB Canada offers you options for Tax-Free Savings Account (TFSA) and Retirement Savings Plan (RRSP).

How old do you need to be to sign up for Interactive Brokers?

Interactive Brokers Canada requires clients to 18 years or older to open an account.

What is the minimum deposit required?

Interactive Brokers Canada requires a minimum deposit of $100 when funding your account. If you want to day trade, you'll need a minimum deposit of $10,000 for a cash account and $25,000 for a margin account if you want to remain above the PDT rule and avoid the locking of your account under the Pattern Day Trader rule.

Do Interactive Brokers have real-time stock pricing quotes?

Yes, Interactive brokers offer you real-time market data for level 1 & 2 market depth for an additional fee.

How do I deposit funds into my account?

To fund your IBKR Canada account, follow this procedure.

  1. Log into your account management profile.
  2. Select deposit from the transaction list.
  3. Select CAD from the currency list.
  4. On the method list, select your payment method (bank write, check, etc.).
  5. Type in your deposit amount.
  6. Follow the on-screen instructions for completing your deposit.

How long does it take to withdraw funds from Interactive Brokers?

The average withdrawal period with Interactive Brokers Canada is three working days for the funds to reflect in your nominated bank account.

Verdict

Interactive Brokers is best for experienced brokers who trade a variety of assets using different trading strategies.

IBKR Pro’s platform was designed by market-makers and offers real-time price monitoring, in-depth analysis, and research. Their tiered commission structure, with declining fees based on volume are perfect for active traders. IBKR also allows for stock lending and margin purchases, allowing you to leverage your returns.