Interactive Brokers Commission Structures and Regulatory Fees

[Uncle B 0]

Lee W,

 

Thanks for sharing the information about your Journal. I like the approach you've taken with regard to trending your commission costs in different tabs. Two questions,

 

1. Have you begun yet to notice any trends or arrived at any conclusions by comparing your tabs #2 and #3, regarding the two pricing models at IB? I think it's cool that you broke these out separately to see if any one particular trading style lends itself better to either billing model, and would be really interested to hear about your findings so far. Even if it's still kinda preliminary. Some things I've been wondering about lately are: Do trades with smaller or larger position size favor either model? Does scaling in/out vs. single entry/exit favor either model, etc.

 

2. Would you be willing to share a sanitized copy of your journal, with formulas intact?

 

Uncle B

[Lee W 82]

Uncle B, I am currently on the fixed commission plan with IB and I've noticed that the commissions are less expensive than what my original calculations showed. Soon, I'll switch to the tiered plan so I can get a better comparison.

 

My original calculation for the fixed plan calculated $.005/share and added the ECN fees as shown in the DAS Account Report. I've had difficulty determining whether or not the ECN fee is included in the fixed tier. Some say yes, some say no. When I look at an IB activity report, it doesn't break down the commission. It shows the total commission for each trade; no breakdown of ECN, regulatory, commission. IB told me they don't normally show a breakdown of the commission. If you want it, they can get it for you, but it is only given upon request.

 

Allow me to track this a bit more and then I'll be happy to share. At this point, it isn't conclusive.

 

Thanks!!

[Robert H 453]

Please allow me to chime in here.

 

I am on the tiered commission plan and am trading with 100 share sizes. What I failed to realize was that there is a minimum charge of 0.35 per order. So when I scale out of my 100 shares in thirds, it typically looks like this:

-sell 33 shares, charged ~0.35 + regulatory fees

-sell 22 shares, charged ~0.35 + fees

-sell 14 shares, charged ~0.35 + fees

-sell 10 shares, charged ~0.35 + fees

-sell remaining 21 shares, charged ~0.35 + fees

 

For the above trade example, I paid roughly $1.75 in commissions on 100 shares. That works out to $0.0175/share. Definitely not the 0.0035 I was expecting!

 

With the fixed plan, the minimum charge is $1 per order. So in my above example, commissions could be as high as $5, or 0.05/share.

 

Given this structure, it makes sense to use the tiered plan when first starting out with small sizes. Lee and I plan to compare our results once the sample size is large enough.

 

Here's the IB page which shows order minimums for fixed vs tiered.

[Lee W 82]

When I look at an IB activity report, it doesn’t break down the commission. It shows the total commission for each trade; no breakdown of ECN, regulatory, commission. IB told me they don’t normally show a breakdown of the commission. If you want it, they can get it for you, but it is only given upon request.

 

Good news... I was able to figure out how to see the commission breakdown from IB. If you create a custom activity statement, choose "commission details" in the Sections (you select whichever Sections you want in your report), and then run that statement, you'll see the breakdown, including Broker Charges (execution, clearing) and Third Party Charges (execution, clearing, transaction fee), and Other.

 

 

 

 

 

[nikdobri 4]

Lee, I am still in SIM and trying to figure out IB fees. In particular, I think something you were also trying to understand, is whether the fixed rate of 0.005/share includes ECN. On their website it says that it includes everything except 'transaction fees'. Then they show in a table what the transaction fees are and those don't look like ECN level, but much smaller. So what is your experience with the fixed fee? Do you get charged ECN in addition to the 0.005/share?

I am assuming the tiered structure adds the ECN separately for sure, correct?

Thanks

nik

[Jason W 17]

Here. 

Lee helped me a year ago about the same question. 

Thanks again boo

 

[nikdobri 4]

Thanks Jason. Have you figured out the answer to this question?

"The question now is when do they occur ? and under what conditions you will be charged a third party fee ?"

I wonder if some routes are lower cost, and what is optimal? From the pure economics of it, the cheaper routes are probably the slowest or the lowest chance to execute when you need it. In any case, is there are thread in the forum that you know of that explains the different routes and some optimization on these alternatives?

The table that you derived on the tiered fees break down, have you tested a fixed fee of 0.005 and try to also see if there are third party fees and their breakdown?

This whole topic of fee structure / route alternatives / add-subtract liquidity is something I cant find very transparent information on. For example the other day i exited two separate positions the exact same way, with a set up to add liquidity (as per Andrew hotkey setup in a recent webinar), from the exact same hot key. From the exit of the first position I received a rebate, from the exit of the second position i was charged $60+ ECN fees (this was sim). 

thanks

nik

[Lee W 82]

On 4/10/2019 at 8:21 PM, nikdobri said:

Thanks Jason. Have you figured out the answer to this question?

"The question now is when do they occur ? and under what conditions you will be charged a third party fee ?"

I wonder if some routes are lower cost, and what is optimal? From the pure economics of it, the cheaper routes are probably the slowest or the lowest chance to execute when you need it. In any case, is there are thread in the forum that you know of that explains the different routes and some optimization on these alternatives?

The table that you derived on the tiered fees break down, have you tested a fixed fee of 0.005 and try to also see if there are third party fees and their breakdown?

This whole topic of fee structure / route alternatives / add-subtract liquidity is something I cant find very transparent information on. For example the other day i exited two separate positions the exact same way, with a set up to add liquidity (as per Andrew hotkey setup in a recent webinar), from the exact same hot key. From the exit of the first position I received a rebate, from the exit of the second position i was charged $60+ ECN fees (this was sim). 

thanks

nik

With IB, third party fees include: ECN, FINRA, SEC, and maybe others.  I'm not certain.  Basically, it's everything that's not IB's commission.

With the tiered structure, you'll pay them all, if applicable.  In some cases, you can get an ECN rebate and these can actually be quite substantial.  I've seen total fees for a ticket that SHOULD'VE been over $20 and ended up being in the single digit dollars.  Rebates can add up quickly.  To be eligible for an ECN rebate, you have to add liquidity.  In other words, sell on the ask and buy on the bid.  Many people use limit orders to do this.  Not ALL ECNs give rebates, though.

With the fixed structure, the ECN fee is built in.  I'm not sure what other third party fees are NOT included in the fixed $.005 commission, but it is for all intents and purposes, an ALL-IN commission.

I believe William is working on a commission explanation presentation for everyone.  This should answer many questions and give real world examples for people to see.  I think that presentation is coming soon, so let's be on the lookout for it.

[nikdobri 4]

 

Thanks Lee,

I don't know how i missed to see the examples on IB website the other day. Clearly fixed fee covers ECN and almost all other fees: