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Interactive Brokers’ launch of IBKR GlobalTrading: what does this say about current broker trends?


Interactive Brokers recently launched IBKR GlobalTrading, the broker’s new global stock trading app. What does this mean for investors and the future of the global broker industry?

Interactive Brokers’ move highlights interesting trends in retail investors’ behaviour. Established players are targeting millennials and mobile-first trading is becoming popular. Established brokers, like Charles Schwab or Interactive Brokers, have significantly older, more professional, and wealthier customers on average compared to the customers at newcomer brokers, like Robinhood.

These established brokers have, however, started focusing more on younger generations. The launch of this new app by Interactive Brokers clearly indicates a shift in emphasis.

Newcomer brokers usually have a significantly bigger customer base than some established brokers. Robinhood has around 23 million users, while Webull has more than 7 million users. Interactive Brokers and most European brokers have less than 2 million users.

Retail investors focus on stock and crypto trading

According to BrokerChooser’s 2021 data, 59% of US retail investors selected stock as the most important product for their trading activities, while 9% of investors identified crypto as the main priority. Cryptocurrencies’ popularity jumped significantly recently as, in 2020, only 4% of US investors said that crypto is their most important asset.

Bear in mind that many investors still continue to dabble in crypto, versus much more substantial crypto portfolios – while many UK investors own around £500 of cryptocurrency, the numbers shrink when that value exceeds £2000.

The competition of stock and crypto trading is also getting more intense not just between brokers, but between brokers and crypto exchanges. Brokers have started widening their crypto offering, e.g. Robinhood launched its beta version of a crypto wallet, while crypto exchanges also plan to offer real stock trading. Interactive Brokers’ launch of the IBKR GlobalTrading App also highlights this trend as US customers can trade spot crypto on this new app.

Investors use mainly mobile platforms, as gamification is increasing

Mobile trading is also becoming really important for users: again based on a survey from BrokerChooser, 64% of users use mainly mobile apps for trading, while 28% of users use mainly desktop trading platforms. This is a trend that is beginning to also take root in the hedge funds space. According to the developer of portfolio management software for hedge funds The Armchair Trader spoke to this week, more hedge fund portfolio managers want an app to help them to manage their funds, and some are currently using jury-rigged solutions on WhatsApp rather than the clunkier Bloomberg Messenger facility. Currently only 9% of retail traders choose web trading platforms.

An emerging trend with the spread of mobile trading is the problem around incentives and gamification. Brokers, especially newcomer brokers, use UX elements to incentivise users to trade more, which statistically can result in worse returns than long-term investments. In addition, complex products and processes can be oversimplified, making people believe investing is easy.

Commission-free stock trading

Like most other US brokers, Interactive Brokers’ new app provides commission-free trading for US customers, but it earns revenue from payment for order flow (PFOF). PFOF is a practice when brokers are compensated by market makers, like Citadel or Virtu, for selling customer order flow.

Customers should be aware that commission-free trading does not equal zero costs. US brokers that rely on payment for order flow provide less price improvement for the customers, the price between the executed price and national best bid-offer (NBBO). BrokerChooser considers this missed price improvement as an implicit cost because customers would usually be better off if they chose a broker that doesn’t rely on PFOF over a broker that relies on it.

Payment for order flow and other market structure-related topics are on the agenda of the SEC for possible regulation. Gary Gensler, SEC chair, said that the ban of PFOF is on the table. A ban on PFOF would force most commission-free brokers in the US to change their business model.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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