Should you use IB Fixed or Tiered pricing in 2024?
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Until recently, I thought Interactive Brokers Tiered pricing was always better for most investors. But after doing some more simulations, this may not be the case!
So, I made more tests to see exactly when we should use Fixed or Tiered pricing. This article shows the differences between these two pricing structures and whether you should use Fixed or Tiered pricing.
Interactive Brokers Pricing
The broker you need to buy stocks and ETFs reliably and at extremely affordable prices. Trade U.S. stocks for as little as 0.5 USD!
- Extremely affordable
- Wide range of investing instruments
Interactive Brokers is the broker I am using and recommending. It is a great broker with very affordable prices and excellent execution.
Contrary to many brokers, Interactive Brokers (IB) has two different pricing models:
- Fixed pricing
- Tiered pricing
And many people are asking me whether they should use fixed or tiered pricing. So, we will compare these two in detail and find out!
Fixed pricing is the simplest model, you pay a fixed percentage fee, with a minimum and maximum, and that is generally it. This model is standard with most brokers.
On the other hand, tiered pricing is made of several sub fees:
- Regulatory fees
- Exchange Fees
- Trading fees
- Clearing fees
Some of these fees are per share, while others are flat, and still, others are based on the total value. And tiered pricing is very different from one exchange to the other.
So the main difference between those two is that fixed pricing is straightforward and predictable, while tiered pricing is complex and changes heavily from one exchange to the other.
Note that when you change the pricing method, it generally takes one day to apply.
The price they will pay for each transaction matters most to each investor. So, we will compare Fixed and Tiered pricing schemes for several stock exchanges. It is important to note that the location of the investors is not relevant, the pricing is done for each stock exchange. For example, a Swiss investor will pay the same price for a US stock than a French investor.
I selected various stock exchanges: the Swiss Stock Exchange (SIX), the European Stock Exchange (Euronext Paris), and the New York Stock Exchange (NYSE). These are the most used stock exchanges for a Swiss or European investor.
In some cases, there are some slight differences between buying stocks and ETFs. When this happens, the following results will use the ETF pricing.
Swiss Stock Exchange (SIX)
We start with operations on the Swiss Stock Exchange and see if fixed or tiered pricing differs.
With fixed pricing, you will pay 0.05% of the trade value on SIX, with a minimum of 5 CHF and no maximum.
With tiered pricing, you will pay 0.05% of the trade value on SIX, with a minimum of 1.50 CHF and a maximum of 49 CHF. On top of that, you will pay a trade reporting fee of 1 CHF and a clearing fee of 0.38 CHF. Finally, you will pay an exchange fee of 0.015% of the trade value plus 1.50 CHF.
With tiered pricing, you will pay even lower fees if you have a substantial monthly volume. Indeed, starting from 50 million EUR monthly volume, the fees are going down, and several thresholds exist. But we will ignore that because this does not concern most people.
So, here are the total fees for a few order sizes:
These results are pretty interesting. We can see that for small operations, the tiered pricing is slightly cheaper than fixed pricing. But once we reach 5000 CHF orders, fixed pricing becomes cheaper. And as order sizes increase, the gap between both pricing schemes grows. When we go over 500’000, the tiered pricing becomes cheaper again. And for large operations, tiered can be very significantly cheaper.
So, to buy on SIX, you should use tiered pricing for small operations and fixed pricing once you start doing large options. And if you end up doing very massive operations, tiered pricing is great again.
European Stock Exchange (Euronext)
Next, we look at the Euronext Paris stock exchange, one of the most used stock exchanges for European investors.
With fixed pricing, you will pay 0.05% of the trade value on Euronext Paris, with a minimum of 3 EUR and no maximum.
With tiered pricing, you will pay 0.05% of the trade value on SIX, with a minimum of 1.25 EUR and a maximum of 29 EUR. After that, you must pay exchange fees of 0.006% of the trade value, with a minimum of 0.75 EUR and no maximum. You also have to pay a clearing fee of 0.10 EUR.
Once again, here are the total fees for a few order sizes:
These results are very interesting. Below 5000 EUR, the tiered pricing is cheaper than the fixed pricing. Indeed, the tiered pricing minimum is smaller. Then, between 5000 and 50’000 EUR, fixed pricing is slightly more affordable. Finally, for 100’000 EUR, tiered pricing is cheaper again. Indeed, there is a maximum for the commissions, while fixed pricing has no maximum for the commissions.
So, to buy on Euronext Paris, you should start using tiered pricing for small operations, Fixed pricing for medium operations, and, once again, tiered pricing for large operations.
New York Stock Exchange (NYSE)
Finally, we should look at the New York Stock Exchange (NYSE), the stock exchange of the best ETFs available.
Interestingly, the commissions on NYSE are expressed per share. For this, I will assume that we buy an ETF with shares worth 100 USD. So, if we buy 1000 USD, we buy ten shares.
Also interesting is that this time, the fees differ between buying and selling. So, we first cover the buying fees.
With fixed pricing, you will pay 0.005 USD per share, with a minimum fee of 1 USD and a maximum fee of 1% of the trade value.
With tiered pricing, you will pay 0.0035 USD per share on NYSE, with a minimum fee of 0.35 USD and a maximum fee of 1% of the trade value. Additionally, you have to pay a clearing fee of 0.0002 per share. You will also pay an NYSE exchange fee of 0.003 per share. Finally, you will pay some pass-through fees. For NYSE, these pass-through fees are 0.000175 times the total of the other fees.
Putting it together, this gives us these fees for buying on NYSE:
Interestingly, Interactive Brokers’ tiered pricing is cheaper for all operations below 50’000 USD but start to be slightly more expensive for larger operations. For small operations, tiered pricing is almost three times cheaper. However, it is worth mentioning that both pricing models are extremely cheap for US ETFs.
For sale operations, there are two additional regulatory fees:
- The SEC regulatory fee of 0.0000229 per share
- The FINRA regulatory fee of 0.00013 per share, with a maximum of 6.49 USD
These two regulatory fees apply to both fixed and tiered pricing. So, this will not change which model is cheaper, but it is still interesting to realize the prices.
So, here is how this translates to selling on NYSE:
The tiered pricing model is generally the cheapest, up to very large operations. The gap is slightly smaller than for buy operations. However, the selling fees weigh heavily on large operations that are now several times more expensive.
For most passive investors, having more expensive sales should not be an issue. Indeed, we should buy more often than we sell.
For a small conclusion on US stock exchanges: Tiered pricing is cheaper than fixed pricing to buy US ETFs on NYSE.
Conclusion
The broker you need to buy stocks and ETFs reliably and at extremely affordable prices. Trade U.S. stocks for as little as 0.5 USD!
- Extremely affordable
- Wide range of investing instruments
We can see that neither fixed nor tiered pricing is always the cheapest option. It depends on which stock exchange you use and on the size of your transactions.
If you mainly buy US ETFs, you should use tiered pricing to save money. If you do small operations, tiered pricing is also great. Fixed pricing is excellent for medium to large operations on Swiss and European stock exchanges.
We must mention one more thing: fixed and tiered pricing models are affordable. Interactive Brokers has excellent pricing! Given these results, I plan to keep tiered pricing because I mostly use US ETFs.
What about you? Are you using Fixed or Tiered pricing?
Recommended reading
- More articles about Best Brokers
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- Can Robo-advisors be cheaper than brokers?
- Saxo vs Interactive Brokers 2024
- Swissquote vs Interactive Brokers 2024
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Hi Baptiste,
Thanks for your blog and the knowledge you share !
I have a question regarding fees on IB, I have purchased several times small amounts of VT ETF in USD (so by converting CHF->USD), each time around 1K. The last 3 transactions I made, my available funds in CHF disappeared..(sums between 10-15 CHF but it still matters)…
Has anything similar happened to you or to anyone reading the blog? Could it be because I set the limit order to buy lower than ask price ?
Many thanks,
Hi Suzy
Money will not disappear on IB. However, small amounts of currency in other currencies than your base currency will automatically be converted into your base currency.
You can generate a full activity statement and you will see where the money went.
Hi Baptiste,
Thanks so much for your reply :)!
I just checked, my base currency is CHF. Here’s the message I get, but I don’t understand what it means
“This is to inform you that Interactive Brokers executed a currency conversion in your account either because a negative cash position is not allowed in this account type or the negative cash position was cause by a recurring investment trade”.
Have you ever received this type of message from IB?
Thanks again for your help, I really appreciate it :)
No, I have not gotten such messages. Are you sure your converted enough money for the trade? If you did not, IB would convert automatically to do the trade.
Other than that, I don’t see why, but an activity statement should tell you why.
Hi Baptiste,
Turns out it was because of the new feature rolled out by IB, here’s their response, in case this might be helpful for your readers (who are new to the world of investing, just like me):
“IBKR has recently rolled out a new feature for auto currency conversion for Cash accounts wherein, you are no longer required to convert manually, the system will convert positive cash balance to the required currency to support trading stocks denominated in the latter currency. This auto-fx conversion provision shorter trade settlement period.
Going forward, you are not required to manually convert currencies in a cash account, this will be done automatically by system when the stock trade executes. These trades will show FX liquidation trades. Costs and charges IBKR applies for automatic currency conversion trades are detailed on the Commissions and Fees page on the IBKR website. LINK../commissions-spot-currencies.php
What you tried to do would have worked if it were before 28 May when US stock settlement was T+2. If you want to convert yourself and use that USD cash to buy US stocks, you will need to wait for T+1 to submit stock order.”
Thanks again Baptiste,
Thanks for sharing the details, Suzy, this makes sense now!
Today I wanted to buy VT for 270.000 USD and after reading this article, I of course changed my pricing to Fixed. To my chock i saw that I would need 2783 more USD to my balance to cover the fees! 2783 USD! That’s more than 1 % of Fees! Am I doing something wrong or why is IBKR charging so much in fees?
Hi Sven,
Could you share a picture of the preview so that we can understand it better? (maybe on the forum) It sounds insane indeed. Are you sure you did not add an extra 0 to your order?
Hi. In IB, which pricing is cheaper to sell 1 lot of Put option for TQQQ to own the underlying?
Hi Seng,
I do not know, I have never done for the math for options since I do not use them.
Hi,
Given the complexity of fee calc [fee = function(size, exchange, plan, sellORbuy) ], can you see the fee BEFORE the trade? I.e. I would like to see the fee amount with both plans (tiered vs fixes) and decide myself (in case of a large trade, where the diff may matter). Unfortunately, I believe IBKR does not show you the fee before the trade.
Hi,
Yes, you can see the fee before. You can open the Preview window on any trade and you will see how much fees you will pay.
Hi Baptiste,
Thank you, thank you for your information-rich, clear explanations and researched articles.
Question re: IB
How well do they present the end of year material required for a Swiss tay return?
The financial advisor I am currently using does not provide the information easily, unlike the Swiss banks, who do.
Thanks as always!
Jane
Sorry, that should be ‘Swiss tax return’
Hi Jane,
You can generate an activity statement with all movements (transactions and dividends are what matters most). I have never heard of anybody having issue with taxes and IB.
That’s reassuring, Baptiste, thank you!
Hi Baptiste,
Can you please check your statement that for large orders on SIX the fixed pricing is better than the tiered one. I am not sure this holds true for orders larger than, say, CHF 200’000. Just run the calc. The tiered pricing will definitely produce lower trading costs for such orders than the fixed pricing simply because the largest variable (commissions) has no upper limit in fixed pricing, but “enjoys” a cap of CHF 49 in tiered pricing. An order of about CHF 100’000 is close to the inflection point where tiered pricing is still (marginally) more expensive, but this changes soon above CHF 100’000.
Hi Papillom,
The 49 CHF maximum is only for one part of the pricing (IB fees). But the exchange fee itself is not bound by any maximum, which can make it more expensive.
But you are right that somewhere above 150’000 CHF, tiered becomes again cheaper than fixed. I have just never ran my calculation for such high numbers because the likelihood of any of my readers investing that much at once is close to zero.
The inflection point is about 150’000 CHF in my calculations.
Hi Baptiste,
Fair assumption about the amount your readers will invest as a part of day to day life.
But as your reader demographic continues to age, their parents do too… and there’s always the chance of people finding themselves inheriting lump sums unexpectedly if life doesn’t shine favourably on their parents. And this could even be the first time that new readers find you because they’re thinking about what to do with the money!
If it’s not too much work, might help to adapt existing articles to consider some of those higher thresholds… or perhaps even to have a dedicated article covering some suggestions on what to do if suddenly coming under a large lump sum.
Of course, it’s possible that some of my readers would some day invest more than 100k at once. But I have to consider the likelihood of that. There is no upper bound to investment, but I have to put one on my graphs. I can definitely increase my graphs to go to 500k, but then why not 1M or 10M or 100M?
I will upgrade the upper bound on my next update of this article, but that may be in a while.
hello Baptiste,
Thanks for your blog, much apprieciated. I keep reading it for 2 month already, you introduce me in this world of investment with very easy explaining.
I have few uncertainties if you can help me with the answer :
When we buy VT or CHSPI is easy to undersand, buy VT index found at NYSE(available only at NYSE) in USD, trade in USD; trade CHSPI CHF found (available only at SIX) at SIX exchange in CHF.
I’m looking now at HSBC stoxx 50, fund in EURO available at many european exchanges : Paris – Euro, London – GBP, Deutsche – Euro, SIX – USD, SIX – EURo etc.
1. Which exchange is more reasonable to buy HSBC STOXX 50 shares at ?
2. When we get dividends is it matter at which exchange stock did we buy ?
3. Strange question : if I buy shares at London in GBP can I trade them at Pris or Six or Milan ?
Thank you in advance
KR
Constantin
Hi Constantin
Thanks, I am glad you find it easy read!
Unfortunately, EU ETFs are a mess in that regard.
1) In most cases, it matters little. You should try to use the largest exchange to have the highest volume of trading (and therefore the lowest spread).
2) No
3) Do you mean buying on one exchange and selling in another? You can’t.
If you already have VT, why invest in STOXX 50? Keep it simple :)