Interactive Brokers - question about commission/fee/exchange rates for LSE purchases

[fizzypop]

I've recently signed up to IKBR and was just playing around with it so see how it works compared to offerings like Davy.

My base currency is Euro and there is €10,400 in cash. There are no other cash balances or shares.

I was doing a preview for purchases for on the LSE and picked Aviva as a test to preview.

In IBKR you can request a Buy preview specifying either 'shares' or 'GBP' cash value.

I did a market order preview (image 1) for 1775 shares which came out at £8,118.85.
It show 'Commission & Fees estimate' range of £46.88 to £47.16 - I assume this is mainly 0.5% UK stamp duty.
So a total estimate of £8165.87.
All fine so far.

I then did another preview (image 2)
I took that last (rounded) total of £8165 and asked for a 'number of shares' quote.
It came back with an estimate of about 1785 shares. There is about 10 shares in the difference which would be approx £46 difference.
Again this is all fine and expected.
Note that the 'Commission & Fees estimate' this time is £4.08..£45.18. I'm not sure why its so different buts its only about £40ish anyway so no big deal.

My question is related the the EUR preview balances below the estimates.
In the first example the EUR cash balances seems to be saying that it will cost about EUR 10350 and I'll have a remaining balance of EUR 50.

In the second example it seems to be saying that the (more or less) same transaction will cost EUR 9915 and I'll have a remaining balance of EUR 485. Over €400 for the 'same' transaction.

By this logic I should only buy shares by specifying a GBP amount. I should not request Y number of shares.

Perhaps I am simply reading all this incorrectly. I've love to be corrected if I am making incorrect assumptions.

I opened a ticket on IBKR last Friday with the same question - still waiting on an answer.

 

[basilbrush]

Maybe it would be helpful to play with the paper trading account first so that you can make sure that things work out the way you think before trying it with real money.

 

[SlugBreath]

I would love if someone could offer a simple course on how to trade with Interactive brokers or similar. I am really getting tired of the commission I am paying Davy on buys and sells. (.5%).

 

[Airgunster]

I would love if someone could offer a simple course on how to trade with Interactive brokers or similar. I am really getting tired of the commission I am paying Davy on buys and sells. (.5%).

Why Interactive Brokers specifically btw? There are plenty of brokers with very low / no commission at all which are very very easy to use.

 

[SlugBreath]

Why Interactive Brokers specifically btw?

......I said......."or similar".....

 

[S class]

Trading courses here

Trading using IBKR Mobile on the Android

IBKR clients have access to over 150 markets worldwide on the IBKR mobile app to trade stocks, options, futures, currencies, bonds, and more.

www.interactivebrokers.com

You don't need to study anything in depth.
Buying and selling shares is simple enough.
The hardest part is finding the trading area.

Just put in your trade options and click buy or sell.

Other than that the statements and tax information are easy enough to find.

The big advantages are very low trading fees.
No standing charges.
No spread on buy and sell rates for foreign exchange. Just a $2 flat fee no matter how much you convert. This is way better than Revolut or Wise.
You can deposit and withdraw foreign currency directly into and out of your account.
You can hold multiple foreign currencoes in the account.
You can convert these currencies in the account.
You can make one free withdrawal per month. Extra withdrawals are 1 euro.

 

[S class]

I've recently signed up to IKBR and was just playing around with it so see how it works compared to offerings like Davy.

My base currency is Euro and there is €10,400 in cash. There are no other cash balances or shares.

I was doing a preview for purchases for on the LSE and picked Aviva as a test to preview.

In IBKR you can request a Buy preview specifying either 'shares' or 'GBP' cash value.

I did a market order preview (image 1) for 1775 shares which came out at £8,118.85.
It show 'Commission & Fees estimate' range of £46.88 to £47.16 - I assume this is mainly 0.5% UK stamp duty.
So a total estimate of £8165.87.
All fine so far.

I then did another preview (image 2)
I took that last (rounded) total of £8165 and asked for a 'number of shares' quote.
It came back with an estimate of about 1785 shares. There is about 10 shares in the difference which would be approx £46 difference.
Again this is all fine and expected.
Note that the 'Commission & Fees estimate' this time is £4.08..£45.18. I'm not sure why its so different buts its only about £40ish anyway so no big deal.

My question is related the the EUR preview balances below the estimates.
In the first example the EUR cash balances seems to be saying that it will cost about EUR 10350 and I'll have a remaining balance of EUR 50.

In the second example it seems to be saying that the (more or less) same transaction will cost EUR 9915 and I'll have a remaining balance of EUR 485. Over €400 for the 'same' transaction.

By this logic I should only buy shares by specifying a GBP amount. I should not request Y number of shares.

Perhaps I am simply reading all this incorrectly. I've love to be corrected if I am making incorrect assumptions.

I opened a ticket on IBKR last Friday with the same question - still waiting on an answer.

You are doing a market order.

There will be leeway put into the details to allow for a sudden increase in the share price at the time you submit.

This can increase to cost to buy the set number of shares
It would also change the number of shares you could buy for a certain sum of money.

I know from trading that if you put in a market order buy trade near the total value of your cash amount the trade will be rejected because the surplus cash amount in the account is to small.

You would probably get a better idea if you put limit orders in when you are trying to check out how everything works.

 

[fizzypop]

Thank you all for your suggestions - much appreciated.

To report back:

@basilbrush
I tried the 'paper' option but all it does is give me a virtual million euro but no option to do any simulated trades (see attached image 1).

@S class
I have tested trying to buy 'too many' shares and it immediately give a popup essentially telling me I don't have enough money - which is what I would expect.
I then did your suggestion with a limit order of 1700 shares at a limit of 450p. In this case it doesn't even give me estimated balances - they are all blank which is less information compared to market order (see attached image 2)


So I'm kinda back to square one with IBKR.
I don't want to convert EUR to GBP for any potential GBP trades as it gets unnecessarily complicated.

I tried again this morning with previewing the cost of 1700 shares vs the approximate same number based in GBP (see attached image 3) and again there is an approx €500 difference in the predicted euro balance.
I also previewed for 1000 shares (and its GBP equivalent) and its end up with an approx €300 difference.

Am I being naive here? Is this just 'how it works' with IBKR? Do other people find this strange?
It just seems odd to have such uncertainty when it comes to the foreign exchange part.
If there is going to be hundreds of euro difference in the final price then I cannot compare them and their costs against other brokers.

They also still haven't replied to my support ticket asking for clarification which also a bit worrying.

 

[S class]

Deleted

 

[boomshine]

I was going to write you have to convert to the appropriate currency before you buy but apparently it changed a few months ago to allow a new auto conversion option.

This may help you decide which method to use: https://www.reddit.com/r/interactivebrokers/comments/1d9c9hu/currency_exchange_fees/

TL;DR: "For manual conversions the fees are 0.002% with a minimum of 2 USD. For auto conversions, the fee is 0.03% with no minimum. In light of this, for conversions below 6500 USD auto conversion is more cost-effective, for amounts above 6500 USD manual conversion is the way to go. So next time you are buying equities below 6500 USD, let IBKR automatically convert the money for you."

 

[fizzypop]

Thank you @boomshine .
Funnily enough I had seen that reddit post before and was going to reference it but couldn't find it. I remember it was about people doing their own currency conversion first and getting unwelcome surprises. So for that reason I was happy to allow auto-convert to 'do its thing'.

However if you look at that same reddit post someone else asks for the IBKR page which references these charges which sends them to:
(edit: I originally had the URL from that reddit page to the IBKR spot currency page but I'm not allowed post it - prob cos I'm a new member)

On that IBKR page I still see nothing clearly explaining how they get their conversion estimates from.
I do see the part where they say "IB will typically add or subtract 0.03% to the exchange rate that would otherwise apply" which all sounds perfectly reasonable.


Lets look again at the preview order I did earlier today (2 posts up the page)
I asked for 1700 shares and was quoted GBP 7865 (this included UK stamp duty I believe) - all good so far.
Checked xe.com today the exchange rate is 1 GBP = 1.2 EUR
Obviously we never get these exact rates but they should be close enough to what we'd be charged.
So I'd expect (before commission) a final EUR cost of about GBP 7865 * 1.2 = EUR 9438... lets round it to EUR 9500 to be generous.

Any 0.03% on top would be (worse case) €9500 * 0.03% = €2.85.... Say EUR 3 commission. So total EUR 9503
What IBKR appears to be tell me is that the final euro amount would be EUR 10,082. A difference of EUR 579.

Or if we take GBP 7908 example (where I asked for a preview using GBP) it converts that to EUR 9556.
This represents an exchange rate of 1 GBP = 1.2 EUR which is closer to my expectations.

tldr;
When I request a quote for an exact number of shares I get a quote which I can't make sense of.
When I request a quote using an exact GBP price I get a quote which is more in line with my expectations.

If you are wondering why I don't just buy using the exact price method - its because I want a whole number of shares.
If you look at the number of shares I would be buying for a fixed GBP price - its 1710.1544 shares.

I don't want fractional shares. I have already disabled the "Global (Trade in Fractions)" option in the
Settings / Trading Permissions / Stocks Trading Permissions menu.
But I still get a preview quote with a non-integer number.

Again maybe I'm just not qualified enough to be using IBKR and everything I am seeing is correct.
It just quite a baptism of fire compared to the interfaces of Trade Republic / Davy / DeGiro / Trading212.
The lack of response from their helpdesk is a bit worrying but I've not done any trades with them yet so I've not lost anything.
I don't mind fees or commissions so long as I know them in advance. I just don't want 'surprises'.

 

[basilbrush]

I tried the 'paper' option but all it does is give me a virtual million euro but no option to do any simulated trades

You may not be able to use the paper trading account using "client portal" (their browser-based interface). If you try it with either their Trader Workstation (TWS) software or the IBKR Mobile app then I think it should work.

 

[fizzypop]

Thanks @basilbrush. I'll try that when I get back from holidays in December. Much appreciated.

 

[Itchy]

Long time user of IB. Never really have had any "surprises" with IB that weren't of my own doing!

A few points, the projection is caveated by a *, the figure is a projection only and that's clearly stated. The market data is delayed, not live so IB will build in a contingency. You have placed a market order, so there is a 5% cushion built in for cash accounts, and further, there will be an automatic currency conversion. The post trade position may also have something to do with settlement.

I don't really know how they have arrived at the € figure but I have just replicated a GBP order I did on Monday, and I can see a similar ~€500 buffer in their estimate of the post trade equity. Looking at the trade report, there was £3 commission and the FX rate for the auto conversion was 0.8348 @06:25, Yahoo Finance has the rate at 0.8344 at that time.

Why don't you trade 100 shares and see how you get on?

 

[fizzypop]

Hi @Itchy. Thanks for the info.

So if I understand you correctly you are saying that when you did a trade on Monday you also did a preview by specifying X number of shares (as opposed to GBP's worth) and it also had an approx €500 'buffer' ... but once you executed the trade the end result was in line with expectations. ie 'normal' exchange rates and commission and no unexpected surprise €500 fees.
If that is the case may I ask if this was just something you hadn't really noticed before or does this buffer feel 'new' (I'm still brand new to IB)

btw IB still have not responded to my support ticket from over 2 weeks ago so I guess customer support is effectively non-existent? After reading a lot of threads about poor support in Trade Republic and T212 I assumed IB was a more mature setup. Say what you want about Davy, at least you can pick up the phone and quickly talk to someone.

 

[Itchy]

Hi @Itchy. Thanks for the info.

So if I understand you correctly you are saying that when you did a trade on Monday you also did a preview by specifying X number of shares (as opposed to GBP's worth) and it also had an approx €500 'buffer' ... but once you executed the trade the end result was in line with expectations. ie 'normal' exchange rates and commission and no unexpected surprise €500 fees.
If that is the case may I ask if this was just something you hadn't really noticed before or does this buffer feel 'new' (I'm still brand new to IB)

No, I only did that today after reading your post. I hadn't noticed it before. I use limit orders mainly, so I never really paid attention to that.

btw IB still have not responded to my support ticket from over 2 weeks ago so I guess customer support is effectively non-existent? After reading a lot of threads about poor support in Trade Republic and T212 I assumed IB was a more mature setup. Say what you want about Davy, at least you can pick up the phone and quickly talk to someone.

Not an unfair comment.