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IB Trying To Compete

Happy new year!

The first post of  2020 is about a broker?  I have no affiliation with Interactive Brokers other than I use their brokerage services... sometimes reluctantly. Below is an email I received from IB introducing fractional shares, I am a long-time jaded trader, I see it as another attempt at getting more money from underfunded retail traders. IB knows they have to shake things up to stay relevant with retail traders, the past decade has seen the rise of FINTECH. 

Dear Client:

We would like you to know that you can now trade fractional shares and indicate the amount you want to buy or sell in dollars, rather than the number of shares. In fact, you can buy as little as one dollar's worth of almost any U.S. stock, even expensive ones like Apple, Google or Amazon.

This has become necessary as individual stock prices have risen and it has become more expensive to buy round lots. As a result, when money managers on our platform want to create precisely balanced portfolios they must be able to trade fractional shares.

But why is this relevant for you? With fractional share trading you have more opportunities to do things such as:
  • Experiment with trading and investing without committing substantial sums of money.
  • Practice and hone your trading skills without risking much of your capital.
  • Learn how to operate the platform and see how your trades make their way through our back-office systems, all the way to showing up on your statements.
  • See how moment to moment price fluctuations are reflected in your account.
  • Learn how to build extensive portfolios, holding many different stocks and periodically rebalance these portfolios while investing just a few dollars before you would make a more serious commitment.
If you want to accumulate some trading and investing experience using the same platform that is used by experienced investors and billion-dollar hedge funds, here is your opportunity to do so.

What about commissions?
IBKR Lite customers pay zero commissions on US listed stock trades.1 IBKR Pro customers pay a minimum commission of one dollar per trade, but in no event do you pay more than 1% of the trade value. On a one-dollar trade you would have to pay a commission of 1 cent.2
... end.

What do you think, a great service, or a brokerage money grab?