Lightspeed vs Interactive Brokers

August 17, 2018 — 3:19 PM EDT

Interactive Brokers has revolutionized the trading game since industry disruptor Thomas Peterfly founded the brokerage in 1993. Built from the ground up as an electronic network and trade execution service, it wasn’t weighed down by traditional operating costs that included branch offices, wealth management services, and a paper-stuffed backroom. It used this advantage to offer ultra-low commissions and now generates the highest daily trading revenue of all U.S. brokers. 

A Quick Look

 
 
 
 
 
 
 

 Products & Fees

  • Stock trade fees: $4.50 per trade
  • Account minimum: $10,000
  • Stock trade fees: $0.005 per share
  • Account minimum: $0

 Fast Facts

  • Competitive standard commissions
  • Routing options
  • Specialized platforms
  • Access a variety of products
  • $121.6 billion in client assets
  • Industry-leading low commissions

 User Experience

  • Customizable routing options
  • Web-based platform offers plenty of tools
  • Downloadable apps for iOS and Android
  • Highly flexible platforms 
  • Easy to navigate for both mobile and desktop
  • Lightening fast trade execution
  • Trade anywhere across PCs, web pages, and mobile apps
  • IB Key technology for more security

 Education

  • Glossary
  • Videos to help brush up on topics
  • Impressive education section
  • Trader's University with free webinars and courses

 Research & Insights

  • Peer-to-peer forum
  • Active trader blog
  • Stock screener
  • Watchlists and alerts
  • Strong research
  • Social sentiment
  • Portfolio Analyst
  • Probability lab

 Customer Support

  • Average customer support 
  • Solid phone support during market hours but no online chat
  • Decent customer support
  • 24-hour phone service during market days

 

The brokerage took off at the turn of the century, attracting a broad clientele frustrated with high commissions and expensive software that characterized the 1990s day trading boom. It was the first broker to offer pricing based on 100-share units, unlike rivals like E*TRADE who still charge flat rates. This lowered transaction costs for both small traders and market professionals, generating intense loyalty despite an odd trading platform that’s triggered years of debate. 

Lightspeed clearly had its rival in mind when the company was founded in 2006. Mergers and acquisitions since that time have focused squarely on the retail and professional trading community, releasing a variety of trading platforms while offering highly competitive commissions. The broker merged with Lime Brokerage and efutures in May 2018, marking the latest expansion intended to build market share and product offerings. 

Still, Lightspeed has a long way to go to compete with Interactive Brokers’ worldwide coverage and product depth. IB traders can access European, Asian-Pacific and African markets in addition to North American coverage while its rival focuses primarily on U.S. markets. IB now offers a broad variety of stocks, options, futures, mutual funds, commission-free ETFs, bonds and forex. Lightspeed account holders can’t trade mutual funds or commission-free ETFs while forex and bond trading is limited to futures contracts. 

Trading Platforms

Lightspeed shines with an impressive roster of proprietary and third party trading platforms. However, account minimums and fees differ from platform to platform, limiting usefulness while adding confusion about final transaction costs. Third party providers manage the most advanced software, adding an administrative layer compared to IB’s standalone and web-based Trader Workstation, which hooks up to third parties through their highly-regarded API (application programming interface). 

Account holders of $25,000 or more can use the standalone Lightspeed Trader platform while $10,000 is required for bare-boned Web Trader. Both charge monthly fees offset by commissions, discouraging low turnover. Lightspeed Trader is full-featured, with integrated charting, complex options chains, advanced scanners and API capacity. Oddly, Web Trader includes the same limited feature set as their Mobile Trader app, with no Level 2 quotes, futures access or customizable order routing. 

Third party platforms include Sterling Trader, several versions of RealTick and Livevol X. All require $25,000 accounts, expect for Livevol’s $35,000 requirement. Sterling carries a non-refundable fee between $140 and $170 per month, unlike RealTick which offers rebates for trading volume. The broker also offers sophisticated risk management software for hedge funds as well as specialized futures and derivatives software.

IB has added features to Trader Workstation (TWS) continuously in the last two decades but the platform still confuses new and intermediate traders because it’s Java-based and doesn’t follow typical software conventions. However, the steep learning curve is worth the effort because execution is lightning-fast while more recent enhancements provide the majority of resources needed by retail and professional traders. 

TWS charting remains a weak link in the platform, with limited historical data and confusing customization features. It’s nearly impossible to build a chart template that won’t need to be changed weekly and many account holders just give up and use a third party technical analysis solution. Unfortunately, that can trigger additional frustration because the TWS API throttles the download speed of historical data, citing pacing and bar size limitations.

Commissions and Margins

Interactive Brokers offers fixed and tiered pricing for equities, based on volume. The fixed rate for U.S. stocks is $.005 per share with a $1.00 minimum and 1.0% of trade size maximum.  Tier pricing starts at $.0035 per share for monthly volume less than 300,000 shares, dropping to $.0015 per share above 2-million shares per month. Minimum order is 35-cents with the tiered program while keeping the maximum at 1.0% of trade value. Options cost $.70 per contract, dropping to $.25 above 50,000 contracts per month while e-mini futures start at $.50 per contract, dropping to $.15 per contract for monthly volume greater than 20,000 contracts. 

Lightspeed utilizes fixed and tiered pricing as well. The fixed program charges $.0045 per share with a $1.00 minimum or a $4.50 per trade flat rate. However, Web Trader doesn’t permit per-share pricing, instead charging the flat rate. The tiered program starts at $.0045 per share for monthly volume under 250,000 shares, dropping to $.00200 over 3-million shares. Options and futures charge $.60 per contract under the fixed program, with a $1.00 minimum. Both start at $.60 under the tiered program, dropping after a 500 contract monthly threshold. 

Interactive Brokers currently charges account holders trading in US Dollars an industry low 3.41% margin rate for loans up to $100,000, dropping to 2.41% above $1-million.  Lightspeed margin fees are much higher, starting at 8.25% up to $24,999 and dropping to 5.75% above $1-million.

Research and Education

Both brokers offer extensive education and research at their web sites. Lightspeed materials are better-organized, with easy-to-find information on trading strategies and software platforms. Options education is especially noteworthy, providing in-depth tutorials that cover all sorts of market opportunities. A full-featured trading glossary includes hundreds of basic and advanced topics while platform-based resources come up short, with the standard Lightspeed Trader offering limited research that includes a screener and social sentiment.

Interactive Brokers Traders’ Academy features a variety of free courses but materials don’t follow clearly-defined themes. The Trader’s Insight section is useful, with dozens of articles written by market experts but is also thematically confusing. Fortunately, drop down menus and search functions help to locate needed information in both sections. News and market sentiment is well covered through Market Pulse while an impressive variety of free and subscription research is available through the TWS platform. 

Customer Service

IB FAQs and a search function find needed information quickly. They offer 24-hour weekday phone contact through regional centers as well as live chat through TWS. There’s no chat function at the web site and prospective clients need to download an application to access chat, raising a barrier. Non-security issues can be handled through e mail. Lightspeed offers U.S. and international phone numbers as well as an e mail address and form entry. No phone hours are listed at the web site, there’s no chat functionality and their FAQ has no search box.

The Bottom Line

Lightspeed is best suited for active traders who require specialized platforms or order routing flexibility. Their web-based trading platform offers few features and is likely to frustrate novice traders. Interactive Brokers charges lower commissions and offers greater resources than its rival but the TWS platform may be insufficient, requiring third party charting software. However, the steep learning curve is worth the effort, with best of class trade execution and fewer hidden costs.