In this video, we will review how an Introducing Broker on IBKR’s platform can configure fees and commission markups to be charged to their clients based on specified parameters.
Introducing Brokers are able to charge a fee-per-trade unit for each asset class, markup (or markdown) interest rates, or manually invoice the client for services rendered. This video will focus on how to create and apply fee schedules and later videos will discuss the available fee methods more in depth.
Caps and Limitations
Prior to reviewing how markups and fees can be configured, it is important to first discuss the caps and limitations.
- Broker client markups are generally limited to 15 times IBKR’s standard commissions.
- Auto liquidation trades are not subject to broker markups.
- No markups will be applied if a client contacts IBKR to place a closing trade.
Configuring Client Fees
Client Fees and Fee Templates can all be managed from the Fee Administration tab within the home screen. To edit or add a fee schedule to a client account or multiple accounts, select the Configure Client Fees button. The Account Selector opens on the right-hand side of the screen allowing the broker to select which account(s) to be configured.
After the account is selected, the current fee schedule will populate and can be edited by selecting the Pencil edit icon in the upper right corner.
Changes to the fee schedule that are submitted prior to the cutoff time of 4pm (16:00) EST will be effective for the following business day. For example, if a new commission markup schedule is submitted today before the cutoff time, any trades executed today will still use the old fee schedule, but the new fee schedule will be applied to trades executed the next business day.
Client Fee Templates
Client fee schedules can be applied to accounts individually or can be stored in templates which may then be assigned to client accounts. The use of templates allows brokers to easily maintain different fee schedules for multiple client accounts.
New introducing brokers on the platform will have access to a blank default client fee template, which brokers can then configure with their own fee schedule. If created, the default fee template will be automatically assigned to new accounts unless a different fee schedule is selected by the broker.
If no default fee template has been configured and the broker did not specify any other fee schedule for the account, then IBKR’s standard commissions will be applied with no markup for the broker.
To manage or configure client fee templates within Broker Portal, select the Fee Administration tab from the home screen and click Configure Fee Templates.
View an existing template by clicking the blue “i” Information icon to the left of the template name. An existing template can be modified by selecting the Pencil edit icon to the right or it can be deleted by clicking the blue “X”.
To apply an existing template to an account, click the blue arrow icon and select Add/Edit Accounts. The Account Selector will open from the right side of your screen and click the box to select which accounts the template will be applied to. Click Continue on the Account Selector and click Continue on the bottom right of the screen until the confirmation page is reached. As mentioned earlier, changes submitted prior to the cutoff time of 4pm (16:00) EST will be effective for the following business day.
To create an entirely new fee template, click the plus sign in the top right corner of the Client Fee Templates page. Enter a name for the template and click Continue.
On the following page, select either Fixed or Tiered Pricing in the Fee Strategy drop down. For commission markups, the base of the calculation is IBKR’s commission schedule. This drop down indicates whether IBKR’s fixed or tiered pricing structure is used as the base of the calculation. Further information on IBKR’s pricing structures can be found on the IBKR website.
Underneath, there are the three main methods for configuring fees for broker clients: Invoicing, Fee Per Trade Unit and Interest Rates.
Invoicing is a more manual option that allows Brokers to specify a maximum dollar amount that can be invoiced on a monthly or quarterly basis. Once configured, the broker can submit invoices for each client account at any time, up to the specified limit.
Fee Per Trade Unit allows brokers to charge their clients a fee per share, per contract or a percentage of trade value. Fee Per Trade Unit can be configured for each asset class (e.g. stocks, options, etc.), exchange and currency.
Interest Rates allows brokers to mark down credit and short proceeds credit interest and mark- up debit interest.
When Fee Per Trade Unit or Interest Rates are selected, the section will expand with the asset classes or currencies the broker is able to configure.
When an asset class is selected in the Fee Per Trade Unit section, a popup will open with further selections for currency and exchange. For example, if Stocks is selected, the broker can select the boxes for USD and CAD indicating that they intend to configure markups on stocks domiciled in USD or CAD.
Brokers can also specify markups for stocks listed on a particular exchange. For example, if PINK is selected as well, USD stocks listed on the PINK exchange can have an entirely different markup schedule from all other USD domiciled stocks.
Once all the desired asset classes and currencies are selected, click Continue to advance to the appropriate configuration pages.
In the following videos, we will review these different fee and markup methods in depth and review how to further configure them.
Disclosure: Interactive Brokers
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