Interactive Brokers (IBKR)- All your questions answered

Last Updated on February 15, 2024

Disclaimer: Nothing in this article should be considered legal, tax, or investment advice. Interactive Brokers may not be the right platform for you and we always recommend conducting independent research before making any financial decisions. I do not work for or have any affiliation with IBKR.

Interactive Brokers (IBKR) is one of the largest online trading platforms in the world with over 170 billion in assets currently held on the platform. Using IBKR, investors can gain access to 135 markets in 33 countries and can trade in 24 different currencies. As a major US/global brokerage and member SPIC/FSCS, funds and securities held in IBKR are heavily protected and insured (read more here).

Important note: all the information in this article refers to the brokerage platform – Interactive Brokers. The “Hebrew version” (אינטראקטיב ישראל) is a completely separate company based in Cyprus, with much higher fees and no advantage for english speakers.

This article will highlight why Interactive Brokers is an increasingly popular option for investing and transferring money across borders – and cover some of the most asked questions about getting your account up and running.

Why do many Olim use IBKR to invest and exchange currency?

Quite simply, it is extremely low-cost and one of the cheapest options available. Their trading commissions for investing are much lower then any Israeli brokerage or bank and it doesn’t get much lower than their currency conversion fees. For example, you can exchange up to a hundred thousand dollars at the market rate for just $2. Basically, they charge 0.2 bps or 0.002% of the amount you are converting for all conversions up to 1 million dollars.  As an example: converting $20,000 would incur the $2 minimum fee, while converting $500,000 would incur a $10 fee.

Additionally, while many US brokerages require a US address to open an account, you can open an IBKR account with an Israeli address alone and use an Israeli phone number (or mobile app) for two-factor authentication. Lastly and maybe most importantly, your Interactive Brokers account connects to bank accounts in multiple countries including Israel and the US allowing it to serve as “financial bridge” for various savings and income streams.

For someone looking to invest a portion of their monthly Israeli income, they can do so easily by transferring directly from their Israeli bank account to their Interactive Brokers account in a quick and cost effective manner (regular bank transfer) – and transfer money back to their Israeli bank account in shekels. There is no other international brokerage that offers all of this. If you need additional assistance with the practical implementation of any of the features outline here, our step-by-step online course will walk you through everything, at your own pace for just 75 NIS.

What is the catch?

As a heavily regulated global investing platform built for professionals, many find both the application process to open an account and using the platform itself to be intimidating at first. That being said, I have found that many people find the process pretty straightforward after they have successfully opened their accounts and completed their first currency exchange or made their first investment.

Hopefully, this article will help you make it through these initial steps. You can also register at anytime for our self-paced mini course which will walk you through everything.

In addition, IBKR is not meant to be used for currency conversion alone – see the next question.

Can I use my IBKR account for currency conversion alone?

IBKR’s policies require that the account primarily be used for investing. It seems that Interactive Brokers is now increasingly enforcing this policy and accounts that are primarily being used for currency conversion and transferring money will be flagged for review and restricted. If you have no intention of using the account for investing, it is best to consider one of the other currency exchange methods.

If you intend to be regularly investing or stock trading, consider making IBKR your primary investment account. This may help ensure that your account stays in complete compliance with IBKR’s rules and policies.

In addition, you can always consolidate existing investment accounts using the ACATS transfer process. This can help ensure that your account stays in compliance and that you have easier access to your investments in Israel. See IBKR’s complete instructions on how to transfer your assets from a different US brokerage, here.

How do I get started?

Simply go to interactivebrokers.com and click on “open account”. I recommend filling out your application on a computer, some have had trouble with the account application when using a mobile device. Brace yourself for a long and detailed application.

To keep your account secure, IBKR requires you to use 2-factor authentication to access your account. This will be set up as part of the process of opening your account. Download their mobile app from the app store so you are ready to set this up when prompted. For those who don’t wish to use their app, you can elect to receive text messages instead – this does work with Israeli phone numbers.

Important note: all the information in this article refers to the brokerage platform – Interactive Brokers. The Hebrew “version” (אינטראקטיב ישראל) is a completely separate company based in Cyprus, with much higher fees and no advantage for english speakers. We therefore recommend opening an account at Interactive Brokers and not Interactive Israel.

What type of account should I open?

IBKR offers 2 types of accounts – IBKR lite and IBKR pro.

IBKR lite is only available to users who can prove US residency. IBKR pro is available to all. Both offer the same price for currency exchange. IBKR lite offers commission-free trading for US stocks/ETFs and the ability to buy fractional shares – but as noted above,  you will need to upload proof of a US address to proceed with this account type. Recently, some users who claimed to be both US and Israeli residents were rejected from using IBKR lite, especially in cases where you list an Israeli address as your working address.

There are no longer any monthly maintenance fees or minimum balances required for either account option. IBKR pro does charge commissions but the commissions are relatively low when compared to Israeli brokerages. IBKR offers Tiered and Fixed pricing plans – Tired is almost always the best options unless you are trading (stocks, bonds, etfs, etc.) in massive quantities. You can read more about the difference between the account types, here. 

What should I select as my “Base Currency”?

Your base currency is the currency you will use to pay fees when you make a currency exchange. This is also the currency that will be used to display the total value of your account on account statements and on the online portal. You can always change your base currency in your account settings.

The main reason for changing your base currency to ILS is in order to withdraw shekels. If you open a IBKR account as a US resident without listing Israel as a second residency, you will likely need to change your ‘base currency’ to ILS in order to withdraw shekels from your IBRK account and transfer them to your Israeli bank. Once changed, it can take 5 business days before you will be able to make an ILS withdrawal.

In general, the currency that you will first be sending to your IBKR account is also the base currency that you should use when you first open the account.

Once I have transferred money to my new IBKR account, how do I convert currency to the currency I want?

Once your funds have arrived in your IBKR account, exchanging them for the funds you want is just a matter of clicking a few buttons. For their step-by-step video presentation on how to convert currency, click here and then click on the desktop or mobile links for a demonstration based on the device you are using. Trades usually complete seconds after they are submitted. 

Many consider the best time for trading currency to be when both the NY and London currency exchanges are open, generally between 3 pm to 7 pm Israel time, Monday through Thursday. It is never recommended that you make any currency trades on the weekends or on US/Israeli holidays. 

For most people looking to convert currency, using this “convert currency” tool is the most simple and easy way to do it. If you are looking to make a more advanced limit order to try and lock in a specific exchange rate, see the next question.

What is the best way to transfer Shekels from my Israeli account into my IBKR account?

The good news is that Interactive Brokers has direct partnerships with Israeli banks and is therefore setup o receive regular bank transfers directly from your Israeli bank account – the only US based brokerage that offers this. No need to make SWIFT transfer or העברת זהב.

The bad news is that they only give you can IBAN number (International account number) which can make it a bit confusing to set up a transfer for the first time. Wise provides some helpful resources for breaking down an IBAN in to regular bank transfer details. If you need additional guidance with this, our comprehensive crash course offers step-by-step videos and downloadable guides for exactly how to transfer money from both an Israeli and US bank account in the cheapest and most efficient way possible.

What is the best way to transfer USD from my US bank account into my IBKR account?

Generally, the cheapest and simplest option is linking your US bank account to IBKR and initiating a “direct ACH transfer from your bank”. Login into your bank and follow the procedure for linking a new account. Generally, it takes 1-2 business days to connect your account and requires verification of micro/trial deposits before you can transfer funds using this method.

For large transfers (generally more than $50,000), most US banks will require you to wire the money instead of using direct deposit or bill pay. This is also the quickest way of transfering money. US banks generally charge between $20-$50 for outgoing domestic wire transfers. IBRK does not charge any fees for receiving a wire transfer. 

For direct deposits and wire transfers from US banks to IBRK, you will be able to invest or convert the funds to shekels immediately once they arrive in IBKR. You will only be able to withdraw those shekels to your Israeli account after 3 business days.

To avoid long holding periods (45 days!!), make sure all transfers to IBKR are initiated from the bank you are transferring money out of and not from within the IBKR portal – do not use the “(ACH) Transfer Initiated at IBKR” option listed on your IBKR account. For a full breakdown of the different deposit options and required holding periods, click here.

How do I set a limit order?

A limit order allows you to set a specific exchange rate that is above the current market rate. If this rate is reached by the market, your funds will automatically be converted at or above the rate you set. The closer you set the limit exchange rate to the live market rate, the more likely the trade will go through. (These types of orders can be confusing for some – make sure you understand the trades you are making before placing any order and that you are not accidentally submitting a buy order instead of a sale order)

To submit a limit order: click “trade” at the top and then “order ticket” – then click on “Forex” (see picture below). Once in the forex order ticket, assuming you are looking to exchange dollars into shekels – type in the symbol USD.ILS and select “Forex” – click “sell order” and then type in the amount of dollars you want to exchange in to the “quantity” field. Make sure the order type is set to limit (not market) and type in the exchange rate you are looking to convert at into the “limit” field.

How do I use my IBKR account to Invest?

As Interactive Brokers is a global trading platform offering access to many different stock exchanges, some users get confused by the terminology when they try and buy a stock or ETF. When searching for a US listed ETF, expect to see ARCA next to it – most ETFs are listed on the New York Stock Exchange Arca. When searching for a US listed stock, expect to see either NASDAQ.NMS, NASDAQ or NYSE.

If you are not an American citizen it may be advisable for you to avoid US based stocks and ETFs and purchase Irish domiciled ETFs via the London exchange instead. For more info please read Schwab International’s guide to US taxes and Bogleheads Non-US investor’s guide to navigating US tax traps

If you are looking to learn how to confidently invest on your own, join our guided investment program for step-by-step support on how to get your money out of the bank.