IB Fixed vs Tiered
Dec 14, 2018
I only trade small positions at the moment so this is just my opinion.
Interactive Brokers has two commission options available: fixed and tiered.
Fixed
Fixed is exactly what it sounds like, you pay a fixed rate of 0.005/share with a $1 minimum (plus a few pennies for FINRA fees and whatnot). This means you can trade up to 200 shares for $1. IB will keep the rebates for themselves if there are any.
Tiered
Tiered is 0.0035/share (depending on your volume) with a 0.35 minimum but you pay ECN fees and keep rebates if there are any. You also have the option to direct route.
So which is better? Anything over 200 shares it is better to use fixed unless you always add liquidity and can take advantage of ECN rebates. However, 100 shares and under it’s better to use tiered. We’re only talking about a few cents difference per trade and obviously if you’re that worried about a few cents on commissions your strategy probably isn’t valid.
In my case, with testing algorithms, I’ve always been on tiered with their paper trading account. Fees end up being between 0.20 and 0.60 which is essentially free. My algorithm has a max loss of $10 and it sizes in according to the stop price. So every trade it takes is going to be 100 shares or less for the most part.
When I go live I will most likely switch to tiered so even if I get stopped out for a tiny $1 win I won’t lose because of commissions. This should make testing less stressful.
Disclaimer
I am not a registered financial adviser/broker/anything. Use this information for entertainment/informational purposes only. Any tickers mentioned are not recommendations to buy/sell/or sell short. They are used as examples only.