Interactive Brokers – The world’s best online broker – is now available to South Africans – With two key caveats

Sign up link to Interactive Broker (If you decide to sign-up, please use my referral link to support this blog and my journey) 


I’ll start with the two key caveats, to save you time. You need to be able to declare that:

  • Caveat 1 – You have experience trading in markets such as North America and/or Europe if you wish to trade there (which is kind of the point of opening the account).
  • Caveat 2 – Have $20k (R400k’ish) in liquid net worth – full requirements here.

If you are comfortable with those caveats, you can either get the free account (which has some restrictions) or the paid for account (which I think is about $10 per month, waived if you have a certain balance).

To be honest, I am still getting my head around the fees as they are contingent on where your account is domiciled, what types of trades you do and what value add services you have enabled.

To be safe, you probably want to be trading at least $1,500 per month (assuming $10 maintenance fee per month + 0.00221% on ETFs and 0.5% on shares) to make the switch from Easy Equities (0.64% transaction fee – on both buy and sell) worthwhile. The $10 is waived once you have over $100k with them, until then you are are not likely going to be saving money going this route. It is more about the options that are available.

If you are looking for the cheapest option, then perhaps eToro is the way to go.

Regardless of the fees, I am confident that they are great value. Broker Chooser ranks them as best online broker and I actually think the are one of the cheapest (now) after competition from elsewhere has caused them to shift their pricing structure.

They have an extensive access to the world markets and you can even fund it in Rands, then convert it to whatever the currency is of the exchange you are looking at.

I signed up for them using my UK details when I was evaluating my Investment Strategy. That is when I noticed that it has an option for South African’s to sign up, so I got a mate to use his South African details to test the process with me.

The process:

Using the referral link you will be taken to this page-

An email invite looks like the below, with additional details – this is what was sent to my mate:

There are some really odd user name requirements:

Then a confirmation email is sent.

Then taken to a details enter screen:

Then you will be asked to choose an account type:

It takes about 5 minutes to fill out the “about me” details and includes SA tax number input.

For most, chose Individual and Cash for account type. You can change the account type later.

The Regulatory process also takes about 5 minutes

This is not for beginners and could be overwhelming. If you are overwhelmed, I suggest you stop.

It only has Europe and North America so you cant select any SA experience (even if it is extensive). You can of course get some experience through using Easy Equities, which I think covers the needs of 99% of people looking to invest.

It may be worth building a bit more experience on a simpler platform before signing up (you can transfer your holdings later to Interactive Brokers without a taxable event occurring).

If an Easy Equities account is like driving a car, then Interactive Brokers is like flying a plane.

The Caveats

Caveat 1 – Without the right experience, it will block you. The platform is complex.

Caveat 2 -Y ou will also need to declare that you have a liquid net worth needs to be at least US$20 000 to be able to trade in stocks.

My mate stopped there as he didn’t feel he could answer that he has US$20k in liquid net worth at the moment, as he had focused on property for his FIRE journey.

Switching to my user experience – Platform, Margins and Forex

It is not the most intuitive platform and it took me a few goes to begin to understand. For example the currency conversion was only available on the app, not the web portal.

Additionally because of the restrictions on my account (free 🙂 ), the prices are delayed by 15 minutes. It is worried that in 15 minutes the price could have moved so much that it would affect my investing decision, which may be true for traders.

When I tried to buy at the market price, the platform made me keep a relatively big margin reserve, with loads of notifications and warnings. Once I was comfortable what each warning meant, I began to switch them off. They are there for a reason so worth reading and understanding.

This was evident as I was testing the platform, I funded it with £250 initially to play with it. I converted it to US$ (on the app). I now had about $300 to trade in cash, but I could only buy for about $200 at the market price

I couldn’t quite work out if it limited me to 25% on top of what I was trying to buy or if it was 50% on top of what I was buying.

For my test, I bought some shares in BIONDVAX. This share is very much a punt (and not part of my investment strategy, it comes from my disposable income), but the point of having this account is to have access to things I wouldn’t normally have access to. So it wouldn’t make sense to buy my favourite ETF (Vanguard FTSE Global All Cap). I wanted something a bit more “exotic”.

After buying BIONDVAX without a limit (and a significantly margin required in reserve), I then had about ~$100 in reserve.

So I put that towards another punt stock – RDS B on the NYSE. The below order told me I needed $130 to execute. With the limited it allowed me to execute on $80.

Trading with a limit

Enhancing your returns

You also have the option to increase returns (with a small risk) by “loaning” your shares to those who want to trade options. This risk and return is shared with Interactive Brokers, they certainly don’t want to lose their money, so they take sufficient steps to mitigate the risk – at least I consider them sufficient for my risk tolerance. Your’s will be different.

Forex

The currency conversion rates look really good. I used Revolut to fund my account, but I could send Rands directly.

Currency conversion in the App
Interactive Broker – Conversion

I compared the exchange to Revolut, which is my default benchmark. I did this over a week-end, which means Revolut adds a comfort margin.

Revolut conversion

From US$ to Rands Interactive Brokers was actually more favourable than Revolut (with the week-end buffer of 0.5%-1%). I couldn’t compare the reverse conversion without executing a conversion to Rands first. So it could be that they have more favourable Rand exchanges, but basically I’m not getting rinsed. Which is what I was checking.

Overall, I think Interactive Brokers is a win for those wanting to expand their trading horizons. I don’t think it is necessary for 99% of investors, but it’s always nice to have options and Interactive Brokers certainly give us that.


Sign up link to Interactive Broker (If you decide to sign-up, please use my referral link to support this blog and my journey) 


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