Low-cost leader versus an industry powerhouse
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After blazing trails for nearly 40 years, E*TRADE has grown into a financial powerhouse with a huge customer base and a broad product lineup. It provides comprehensive trading, investment, and research services aimed at active traders and investors. Morgan Stanley announced its intent to acquire E*TRADE in Feb. 2020.
- Account Minimum: $0
- Fees: Maximum $0.005 per share for Pro platform or 1% of trade value, $0 for IBKR Lite
- Account Minimum: $0
- Fees: No commission for stock/ETF trades. Options are $0.50-$0.65 per contract, depending on trading volume.
Founded in 1993, Interactive Brokers has a streamlined approach to brokerage services that focuses on broad market access, low costs, and superior trade execution. Clients can trade stocks, options, futures, Forex, bonds, and funds on more than 100 markets worldwide from a single integrated account.
In our 2020 Best Online Broker reviews, E*TRADE topped Interactive Brokers in the Best for Options and Best for ETFs categories. Meanwhile, Interactive Brokers outdid E*TRADE in Best for Beginners, Best for Day Trading, Best for International Trading, and Best for Low Cost. The two brokers tied in the Best for Stock Trading Apps division.
Overall, Investopedia found that E*TRADE is an excellent choice for individual investors and traders, while Interactive Brokers is better suited for institutional traders and sophisticated, active traders.
E*TRADE has been in the business for nearly four decades, and this experience has paid off in terms of offering very intuitive and easy-to-navigate platforms. There are two main web-based platforms—E*TRADE and Power E*TRADE—and two mobile apps that mirror the web platforms’ functionality. There’s also a downloadable platform, E*TRADE Pro, that can be customized extensively and is intended for advanced traders. It’s easy to open and fund an E*TRADE account, whether you’re on a mobile device or computer.
Like E*TRADE, Interactive Brokers supports multiple trading platforms, including desktop, web, and mobile versions (IBKR Mobile). The app has nearly the same functionality as the web platform, though it’s not as robust as Trader Workstation (TWS), the company’s flagship trading platform. The onboarding process has recently gotten easier, and you can open an account without funding it (but it will be closed if you don’t make a deposit within 90 days).
Both brokers offer robust web and mobile platforms designed for active traders and investors, with streaming real-time quotes and news, watchlists, research, and advanced charting. However, Interactive Brokers’ TWS has a steeper learning curve, and you have to spend a bit more time to customize your trading experience. You’ll find intuitive order entry interfaces on all platforms with either broker.
The standard E*TRADE web platform provides the basic tools that individual traders and investors need to research investments, track the markets, and place trades. Power E*TRADE is a more advanced option that offers feature-rich charting, drawing tools, and technical indicators. It’s possible to stage orders and send a batch, and you can place orders directly from a chart and track them visually.
Interactive Brokers’ Client Portal is a good place to check on positions, place trades, and get a real-time view of your accounts. Trader Workstation offers a lot more and is designed for active traders and investors who trade multiple products and need flexibility. You can define hotkeys (a.k.a. Hot Buttons) for rapid order transmission and stage orders for later execution, either one at a time or in a batch. You can place, modify, and manage orders directly from the chart.
E*TRADE and Interactive Brokers offer well-designed mobile apps that are easy to use and navigate. With either broker, you can trade the same asset classes on mobile as offered on the web platforms (except for single name bonds for E*TRADE).
You’ll find streaming real-time quotes, charting, and news on both, but there’s a quirk with Interactive Brokers. Data streams in real-time, but only on one platform at a time, which means you can’t get streaming quotes on your computer and smartphone at the same time.
Interactive Brokers comes out ahead in terms of order types supported on mobile. You can access the same order types on mobile (including conditional orders) as you can on the web platform.
Range of Offerings
A notable difference between E*TRADE and Interactive Brokers’ offerings is that the latter offers access to Forex and 125 exchanges in 31 countries worldwide. Otherwise, they both offer all the usual suspects you’d expect from a large broker.
E*TRADE clients have access to a wide variety of order types on the website and E*TRADE Pro platforms, including conditional orders. While mobile users can enter a limited number of conditional orders, you can stage orders for later entry on all platforms. Interactive Brokers is a bit more versatile. It supports a flexible array of order types on the Client Portal and mobile app, plus more than 100 order types and algorithms on Trader Workstation.
E*TRADE’s order routing technology uses both spray and sequential routing, and it sends most orders to market makers. About 95% of orders for S&P 500 stocks receive price improvement. The router looks for a combination of execution speed and quality, and the company states it takes measures to get the best execution available in the market. E*TRADE publishes its order routing report on its website and updates it quarterly.
Interactive Brokers’ order execution engine reroutes all or parts of your order to achieve optimal execution, attain price improvement, and maximize any potential rebates. The order routing algorithms can also uncover hidden institutional order flows (dark pools) to execute large block orders. Any payment for order flow is given back to the client for IBKR Pro clients but not to those using the Lite pricing plan.
Both companies offer backtesting capabilities, a feature that’s essential if you want to develop your trading systems or test an idea before you trade.
E*TRADE doesn’t charge commissions for online equity, options, and ETF trades for U.S.-based customers (there’s a per-contract option fee of $0.65). You’ll pay $19.99 to trade mutual funds outside the No Transaction Fee program, and its live broker fee is $25 per trade across asset classes.
Overall, Interactive Brokers’ pricing scheme is complicated. It includes fixed per-share pricing ($0.005 per share traded a $1 minimum), tiered per-share pricing based on monthly order activity, and the IBKR Lite program, which offers free trades for U.S.-listed equities and ETFs (via the Client Portal and IBKR Mobile only).
Both E*TRADE and Interactive Brokers generate interest income from the difference between what you’re paid on your idle cash and what they earn on customer balances. Both brokers have stock loan programs in which you can share the revenue generated from lending the stocks held in your account to other traders or hedge funds (usually for short sales).
E*TRADE and Interactive Brokers both have robust stock, ETF, mutual fund, fixed-income, and options screeners to help you find your next trade. And both have numerous (equally useful) tools, calculators, idea generators, and professional research. Interactive Brokers comes out ahead in terms of news offerings, with dozens of real-time news sources available on all platforms.
E*TRADE and Interactive Broker clients have access to real-time buying power and margin information, plus real-time unrealized and realized gains and losses. You can calculate your internal rate of return (IRR) and the tax impact of future trades. You can also view tax reports and combined holdings from outside your account.
Interactive Brokers has enhanced its portfolio analysis tools to appeal to more casual investors and traders (instead of just the pros). A feature called Portfolio Checkup lets you assess your portfolio’s health by comparing its performance to one of about 200 global benchmarks.
E*TRADE’s Learning Center offers a decent variety of educational content, including articles, videos, and webinars. New traders can check out the Getting Started section and move on from there as they get more comfortable with investing concepts. There’s a daily product webinar with tips for using the trading platforms, and the company holds about 30 live events a year.
Interactive Brokers’ educational offerings tend to be more advanced. Its Traders Academy is a structured, rigorous curriculum—complete with quizzes and tests—designed for students, investors, and financial professionals. There are daily webinars hosted by Interactive Brokers and various industry experts that cover a variety of topics.
E*TRADE wins in customer service. It offers 24/7 phone line support with access to brokers as well as to retirement specialists, financial consultants, active trader consultants, and product specialists. You can chat online with a human representative, and mobile users can access customer service via chat. There’s limited chatbot capability, but the company plans to expand this feature in 2020.
Interactive Brokers has 24-hour weekday phone support with callback service, a secure message center, 24-hour weekday online chat, and IBot, an AI engine that can answer your questions.
E*TRADE and Interactive Brokers’ security are up to industry standards. You can log into any app using biometric (face or fingerprint) recognition, and both brokers protect against account losses due to unauthorized or fraudulent activity. Interactive Brokers offers an extra layer of security with its optional Secure Login System security device. E*TRADE carries excess Securities Investor Protection Corporation (SIPC) insurance provided by London insurers with an aggregate limit of $600 million. Interactive Brokers’ excess SIPC insurance, also provided by London insurers, provides each client with $30 million worth of protection (including $900,000 for cash), up to an aggregate limit of $150 million.
Through Nov. 2019, neither brokerage had any significant data breaches reported by the Identity Theft Research Center.
E*TRADE and Interactive Brokers are powerhouses in the industry that offer full menus of trading products, customizable platforms, functional trading apps, and low costs. When we compare the two, E*TRADE is our top pick for individual investors and traders. At the same time, Interactive Brokers is tops for professionals, high-volume traders, and anyone who wants access to international markets.
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In addition, every broker we surveyed was required to fill out an extensive survey about all aspects of its platform that we used in our testing. Many of the online brokers we evaluated provided us with in-person demonstrations of its platforms at our offices.
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