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Is Interactive Brokers Safe? What Beginners Should Know

Is Interactive Brokers Safe? What Beginners Should Know
Jordan
Major
1 week ago
16 mins read

In this guide, we’ll examine the security of the globally recognized brokerage and determine whether or not it’s a safe trading platform to use. In particular, we’ll focus on the security methods used by Interactive Brokers to protect the company’s multiple trading platforms and to preserve the network as a whole.

About Interactive Brokers

Incorporated in 1993 as a broker-dealer in the United States, Interactive Brokers (often referred to by its initials, “IBKR,” or “IB“) is a financial service firm that is focused on providing extensive market access, low pricing, and smooth transaction execution. 

Through IBRK, International customers may trade on global exchange marketplaces in the Americas, Europe, and the Asia Pacific, which are accessible to clients from more than 200 different countries and jurisdictions throughout the globe.

A single integrated account allows consumers to trade in stocks, options, futures, forex, cryptocurrencies, bonds, and funds on 135 different markets from a single integrated account, on a platform performing millions of trades daily. 

The company promises to “take your investing to the next level” by allowing clients from all around the globe in over 200 nations and territories to use Interactive Brokers to invest globally in a variety of assets and commodities at the most affordable rates. 

Note: Please read our comprehensive Interactive Brokers review for an in-depth study of the brokerage, covering all of its products and services, as well as a step-by-step setup guide and FAQ.


Interactive Brokers core products

Financial products and services available to customers of Interactive Brokers include a wide variety of investment options, including the following:

  • Stocks;
  • ETFs;
  • Mutual Funds;
  • Bonds;
  • Options;
  • Futures;
  • Forex;
  • International Markets;
  • Penny Stocks;
  • Cryptocurrency;
  • Fractional Shares;
  • Cash Management Services.

Investors marketplace

Customers may choose a service provider or promote their company to over 200 countries and territories using the IBKR investors marketplace, including marketplaces for Hedge Funds, Advisors & Brokers, Technology, Research, and Administrators.

No transaction Fee ETFs

Exchange-traded funds (ETFs) are a fast-increasing category of financial instruments that allow IBKR customers to invest in various ways. Clients may use ETFs to construct a core allocation, diversify existing portfolios, or develop new strategies. Similarly, the platform offers ETFs for options trading and short selling.

Bond Marketplace

Investors may find Fixed-income securities from throughout the world on the Bond Marketplace. IBKR’s policy is not to charge markups or built-in spreads, and its fees on bonds are low and openly disclosed.

Mutual Funds Marketplace

IBKR provides one of the largest Mutual Fund Marketplaces internationally, with over 40,000 funds from 400 fund families, including 7,700 with no transaction costs. The broker also offers a Mutual Fund Inventory Search Tool that lets users search for funds by region and commission, paid fund type, and fund family.

Short Securities Availability

The Securities Loan Borrow (SLB) system enables users to search for shortable securities inside IBKR’s Client Portal account management portal. Daily updates insure that the 

Trading platforms

IBKR has built four distinct trading platforms:

  1. Client Portal;
  2. Trader Workstation;
  3. IBKR Mobile;
  4. IBKR APIs.
IBKR Trading Platforms. Source: interactivebrokers.com

Each of these platforms has distinct benefits for customers for instance:

1. Client Portal

The firm’s online client portal allows users to check account balances, profit and loss statements, essential performance indicators, financing, and reporting, among other features.

IBKR Client Portal. Source: interactivebrokers.com

2. Trader Workstation (TWS) API

Trader Workstation (TWS) is a desktop platform designed for active traders and investors that trade a wide range of products and want stellar performance. 

The IB Trader Workstation allows traders, investors, and institutions to trade stocks, options, futures, currencies, bonds, and funds on over 135 global markets using a single integrated account. TWS API allows you to automate trading, obtain market data, and monitor your balance and portfolio in real-time. Build your own trading app or link it with TWS to enjoy their advanced trading tools.

IBKR Trader Workstation (TWS) API. Source: interactivebrokers.com

You’ll get instant access to TWS trading and order management tools, such as real-time quotes, technical research, and analysis, all from a single window, significantly boosting the speed and efficiency of your trading activity.

3.  IBRK mobile

The IBKR mobile application includes all the functions you need; with this app, customers may place sophisticated orders to trade stocks and futures from anywhere in the globe at any time.

IBKR mobile app. Source: interactivebrokers.com

4. IBKR APIs

The firm provides a variety of application programming interfaces (APIs), from a simple Excel API to a robust industrial-grade FIX API, to accommodate clients of various skill levels. 

You may utilize IBKR’s sophisticated REST API to trade, monitor, and administer your account. The Client Portal API enables you to access account and sub-account data, FYI messages, and other information via the Client Portal.

IBKR Key Security Measures

Many traders and investors consider IBKR as a dependable service on which you can rely and in which you can place your trust. It is worth mentioning that Interactive Brokers has 1.54 million users and produces an average of $2.26 million in revenue from trading daily. 

The firm’s strong capital position, conservative balance sheet, and automated risk controls are designed to prevent IBKR and its clients from incurring significant trading losses. It also helps that the corporation is listed on the Nasdaq under the ticker (NASDAQ: IBKR) as a publicly-traded company, which lends credibility to its products and services. 

Aside from trading on one of the world’s major stock exchanges, the broker has more than $10 billion in equity capital, with 76.5% of the business privately controlled equity firms and other investors. Furthermore, to allay any fears, the company’s extra regulatory capital exceeds the statutory reserve requirements by more than $6.2 billion, well beyond the needed reserve requirements.

IBKR security. Source: interactivebrokers.com

If you are worried about the security of your account, Interactive Brokers has a variety of measures in place to protect your account and investment, including firewalls, 128-bit encryption, two-factor authentication, and mobile security precautions, all of which are designed to keep your assets safe. 

In the following sections, we will detail the security measures that the brokerage has put in place to safeguard client funds and protect itself, including account protection, asset management, insurance, and customer support, to name a few.

Financial statements 

For any investor, it is critical to ensure that your broker is safe and can withstand not just the good but also the difficult times when you place your money with them. In this respect, IBKR is transparent and makes its financial statements accessible for scrutiny on its website. 

IBKR financial statements. Source: interactivebrokers.com

Interactive Brokers Group LLC

Interactive Brokers Group (IBG LLC) is the parent company of Interactive Brokers LLC and its affiliates. According to the company’s financial statements, IBG LLC has more than $10.01 billion in equity capital, more than $6.2 billion the required minimum.

Managing Clients assets 

IBKR client funds are kept separate in special bank or custody accounts set up only for the benefit of IBKR customers. This safeguard (referred to as “reserve” by the Securities and Exchange Commission (SEC) and “segregation” by the Commodity Futures Trading Commission (CFTC) is a fundamental premise of the securities and commodities brokerage industries. 

Segregating the client’s assets ensures that if the broker defaults or goes bankrupt, the client’s assets may be restored, providing no money or stock is borrowed and no futures positions are held by the client. Moreover, IBKR does not invest client funds in money market funds, despite the CFTC’s approval, due to credit worries over foreign sovereign debt.

Finally, in order to safeguard all customers, IBKR keeps a surplus of cash in these reserve and segregated accounts.

Insured Bank Deposit Sweep Program

In addition to the current $250,000 Securities Investor Protection Corporation (SIPC) coverage, qualifying IBKR customers may acquire up to $2,500,000 in FDIC protection under the Insured Bank Deposit Sweep Program. Additionally, cash balances over $2,750,000 are protected by the SEC’s Customer Protection Rule 15c3-3, backed by the company’s $10.01 billion in equity capital.

Investor protection

  • IBKR calculates the amount of cash and securities owing to customers on a daily basis and sets aside money for the exclusive benefit of clients, as well as a substantial buffer. This is referred to as a “segregation deficiency” in the sector and occurs often. Other broker-dealers may allow these shortfalls to remain for several days before taking the necessary steps to remedy the situation.
  • The company was the first FINRA-approved broker-dealer to compute its customer reserve requirement (under Rule 15c3-3) daily, whereas the industry usual is weekly or monthly.
  • IBKR is not associated with a bank, which is in contrast to the majority of broker-dealers with comparable capitalization. The fact that it is not linked with a bank offers Interactive Brokers a more robust foundation for its customers in the event of a market-wide financial crisis.

Account Protection Coverage

Client securities accounts at Interactive Brokers are covered up to $500,000 by SIPC (with a cash sub-limit of $250,000). Lloyd’s of London also provides $30 million in investment asset coverage (with a cash sub-limit of $900,000) subject to a total aggregate limit of $150 million. 

No provisions are made for the trading of futures or options on futures. As is the case with all securities businesses, this coverage offers protection against the collapse of a broker-dealer rather than against the loss of market value of the securities insured.

Login protection

As part of its commitment to protecting its customers’ accounts and investments, Interactive Brokers offers a variety of levels of login protection. These levels provide users with greater security and allow them to withdraw larger amounts as the account’s security is enhanced.

Secure Login System

The Secure Login System adds an additional layer of protection to your account; customers can use a free physical security device or IBKR Mobile Authentication (the broker’s smartphone security app). While it may add an additional step to signing in, inputting a randomly generated security code with your username and password helps enormously safeguard your account.

For instance, a hacker or identity thief who obtains your IBKR username and password will be unable to access your account unless they have physical possession of your Secure Login System security device or complete access to your smartphone. 

The following are some of the advantages of the Secure Login System:

  • Your IBKR account is protected by a security device that adds an extra degree of protection. 
  • Through participating in the program, the daily and weekly withdrawal restrictions are increased. 
  • Having several accounts does not require purchasing additional devices. It is possible to share a security device among numerous usernames that are registered to the same person.
Mobile Two-Factor Authentication

IBKR will use SMS mobile phone texting to provide two-factor security, so when you attempt to log into IBKR, you will get a one-time passcode. 

IBKR Mobile Authentication

IBKR Mobile Authentication enables two-factor authentication for your IBKR account via the use of our IBKR Mobile app, which you can download to your Android or iOS mobile device.

For IBKR Mobile Authentication to function, one must provide a PIN or a fingerprint; it may be used as a stand-alone device or in conjunction with your current physical security device.

IBKR IB Key mobile authentification. Source: interactivebrokers.com
Physical Security Devices

Accounts with a balance of more than $1,000,000 are eligible for the Digital Security Card, which provides an additional layer of security via the use of a PIN, a challenge code, and a large number of potential code permutations.

IBKR IB Digital security card. Source: interactivebrokers.com

The user must enter their username and password combination and the security code produced by your security device or digital security app every time you log in to Client Portal, TWS, WebTrader, or IBKR Mobile.

IBKR PIN. Source: interactivebrokers.com

After logging into your account, you’ll be protected against unauthorized access to both your money and your positions.

Withdrawal limits

Participants in the Secure Login System have increased withdrawal possibilities, while participants are subject to daily and weekly withdrawal limitations, depending on their account type. 

The table below shows the withdrawal limits for IBKR customers, the amount one may withdraw or transfer over a one or five-day period, and how the amount increases with the device’s protective value.

IBKR customer security features

2FA Two-Factor Authentication

Factor 1: Each account has its own username/password combination. 

Factor 2: Secure Login System gives participants a personal security gadget that generates a random code. When logging into a secure area, this code is used in combination with the login and password to get access.

Watch the video: This video illustrates how to download and install IBKR Mobile onto your Android phone device, as well as how to establish and use two-factor authentication to securely access your account.

Secure Socket Layer

  • IBKR uses 2048-bit Extended Validation Certificates, which authenticates that you are on a secure website.
  • TLS 128-bit or higher encryption creates a secure connection and safeguards the confidentiality and integrity of data sent between your computer and IBKR. 
  • Automated monitoring mechanisms are in place to verify that only the most secure encryption algorithms are employed. 
  • IBKR requires that all website traffic be encrypted.

Limit Login via IP Restrictions

Restriction of access to TWS to a specified IP address range. When several traders have access to a single account, these limits may be applied at the trader level.

Login Attempt Failure

IBKR disables account access after a set number of unsuccessful login attempts.

Auto-logoff

IBKR has an auto-logoff function built in that logs you out of the app after a certain length of time of inactivity.

Security monitoring

IBKR uses cutting-edge transaction monitoring tools and has a dedicated security staff to identify suspicious activities. Any transaction that seems odd or suspicious will be investigated by a member of this team, who will contact you to check the transaction’s authenticity. 

The security team person will never ask for your password, so users are encouraged to call back and request to talk with them at 1–877-442–2757 to confirm their identification or at the same number if one feels their account has been hacked.

Account verification

To verify your individual account in the United States you will need the following information:

  • Your Social Security Number (SSN) or proof of ID number if you are not a U.S. citizen;
  • Name, address, and telephone number of your employer;
  • Account numbers from a bank or third-party broker for financing reasons, as well as a routing number for check deposits.

Keep in mind that the verification procedures for IBKR vary for each country and from account to account depending on which account you wish to verify. As a result, please see this page for a complete list of the verification criteria for each account type within every region.

Interactive Brokers Customer support 

Clients who need help may usually address their problem by browsing through the FAQs; if one cannot resolve the issue after browsing through several of IBKR’s information resources, then customers can utilize any of the options indicated below to get assistance.

IBKR customer support page. Source: interactivebrokers.com

Phone

IBKR provides customer help around the clock via regional Client Services Centers located in the United States, Europe, and Asia. In addition to having a live agent accessible at all times, IBKR’s website and Knowledge Base are regularly used to find answers more quickly and without the need to make a phone call.

IBot

Aside from that, the broker offers an IBot service, which uses artificial intelligence to respond to inquiries in plain English. Customers may save time by using the IBot to quickly and easily find answers on the website and trading platforms.

Chat & Socials

Existing clients may communicate with IBKR using an online chat feature. If you are an existing or newly approved client in the Client Portal, you may access chat by selecting “Support” from the menu.

If you want to learn more about Interactive Broker’s platform, you may follow them on social media channels such as Facebook, Twitter, LinkedIn, YouTube, and Instagram.

Verdict

As a whole, Interactive Brokers is recognized as one of the most reputable brokerage services available for trading a wide range of asset classes across 135 markets. While adhering to a broad range of international regulatory requirements, the company also goes above and beyond industry standards. 

The platform has a long history and is widely regarded as one of the best in the world in terms of security, dependability, service quality, and overall usefulness. The company works under a transparent and open framework that enables both users and non-users to see the company’s financial statements. 

Additionally, the organization provides client coverage, its funds are effectively handled, account protection, mobile two-factor authentication, withdrawal limitations, and a digital security card.

In order to offer a secure connection and safeguard the confidentiality and integrity of data exchanged between your computer and IBKR, the business employs a range of encryption methods across a variety of protocols and platforms overseen by a specialized security team. 

Finally, the broker has a perfect track record regarding secure trading and integrity and adheres to tight rules and regulations, being a member of NYSE – FINRA – SIPC and regulated by the U.S. SEC and the CFTC.


FAQs About Interactive Brokers 

Is Interactive Brokers safe?

Yes, insurance covers funds, so clients can rest assured that their money is safe and secure. A digital security card and two-factor authentication on mobile devices are among the many features offered by the business to its customers. IBKR also utilizes a wide range of encryption algorithms across several protocols and platforms to ensure the confidentiality and integrity of data sent between your computer and IBKR.

Interactive Brokers suitable for professionals?

A wide range of advanced tools and platforms are available at Interactive Brokers. On the whole, IBKR is suitable for professional traders and skilled, active traders who wish to make use of a robust array of tools and worldwide access to a diverse selection of assets.

Can a beginner use Interactive Brokers?

Yes, while IBKR Pro is oriented toward more skilled traders, IBKR Lite is designed for novice and retail investors. There is also lots of instructional content accessible on the platforms, such as blogs, videos, and charts, to help you get the most out of the features available to traders.

Is the Interactive Brokers Mobile App good for trading?

Yes, the IBKR mobile app includes all the functions you need, including trading tools, to place sophisticated orders to trade stocks and futures from anywhere in the globe at any time. With over 50 data columns and access to institutional-level research, IBKR Mobile provides the same market-moving information as the broker’s robust desktop TWS trading platform.

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Jordan Major
Author

Jordan is an investor and market analyst. He's passionate about stocks, ETFs, blockchain, and digital assets. At Finbold.com, he delves into the technicalities to obtain future trends for new market traders and gives insights into user-friendly platforms for beginners.

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