Interactive Brokers 5% commission for VTI?

Investing / Brokers
1

Dear Mustachians,
I wonder if you had similar issue. I have been looking through the forum but couldn’t find the answer.
When I place the order on IB to buy VTI, the system adds 5% commission to my order.
I tried to place order on smaller or bigger quantities of shares to buy, but the result is the same, +5% commission.
I find it very strange, as VTI usually is extremely cheap with only 0.03% commission.
Has anyone experienced the same issue? Is there a bug in their system?

Please help… I have also raised the ticket directly at IB support center, but got no reply at the moment from them.

Many thanks for your help!
Peter

2

Commissions should be pretty low($0.35 per order with tiered), how did you determine the commission before executing the order?

3

Luckily I did not have enough cash on my account. Else I would not know about it.
So, I wanted to by 53 shares of VTI ; 53 x 220 = 11660. My cash is 11677
And the transaction preview screenshot

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image776×308 33.9 KB

Surprise surprise: where does this extra 426USD come from?
Note: there is no other pending orders. And commission is tiered.

4

I think if you place a market order, it reserves a buffer for the trade to go through. Try with a limit order.

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5

I assume that this is a market order with a cash account?

This is just a margin of safety that it won’t cost more than the available cash in your account. Try a limit order with a limit that is slightly above the current price.

6

Yes, indeed it was a market order. Will give a try with a limit order.
Thanks for the tip.
Will update later.

7

You realize that markets are closed right now and liquidity of the ETF is limited?

8

What does this mean exactly?

9

I’m not an expert, but what should it mean that the “liquidity is limited”? If the markets are closed, there simply is no liquidity?

Liquidity means how easy it is to make a trade, how small the difference is between the highest buy and lowest sell offer. When you submit an order and the markets are closed, your order will wait until monday. Market orders are dangerous on assets with small liquidity, because you’re saying “I’m fine with whatever the price is, I just want to buy anything that’s available”. And that’s fine when we go to the local grocery shop, but not when we’re buying a new bicycle or TV.

10

With advanced brokers like IB, you can buy/sell during pre-market and after market (when liquidity is limited, so spreads are usually higher).

3 Likes
11

Thanks for all responses.
I tried to buy VTI yesterday during market opening hours.

12

Well, the good news is that you can now buy it at a lower price than Friday.

If you don’t have other open trades, assuming you have a cash account, the system is probably not allowing to get too near 0. Assuming a buy price of 220*53 you are left with $17 (so you are able to pay the fees each month if you are under 100k).

Still $400 seems a lot to me.

1 Like
13

Limit order did work without any issue.
It was a good learning.

Thanks all!

5 Likes