Interactive Brokers vs Composer: What are the differences?

What are the main differences between Composer and Interactive Brokers?

As much as 78% of all trades (according to the SEC) are executed by stock trading algorithms. Two of the most popular platforms to build a stock trading bot include Composer and Interactive Brokers. While both platforms have their advantages and disadvantages, I've outlined some of the key differences to help you make an informed choice if you are looking to create your own stock trading bots.

Pricing

Pricing is one of the most important factors to consider when setting up a stock trading bot. 

If you want to create your trading bot through Interactive Brokers, you’ll need their Pro plan which gives you access to their Interactive Brokers API. We’ll use the Interactive Brokers Pro Fixed Plan (as it doesn’t charge exchange, clearing and pass-through fees). 

Excluding regulatory fees and slippage, Composer Pro charges one flat fee of $24 per month (paid annually) or $30 per month (paid monthly). This allows you to invest in as many trading bots as you wish.

On the other hand, Interactive Brokers Pro charges a $0.005 fee per share (with a $1 minimum per order). This means that costs can add up (and it costs more for cheaper assets). 

Let’s take an example:

If you put $10000 into a 5 asset daily trading Parity with Leverage bot in 2022, on Composer it would cost $288 in fees for the year. And Composer let’s you trade in unlimited strategies so this is the most you’ll pay in the year. In comparison, if you put the same amount into a trading bot through the Interactive Broker API, it would cost a minimum of $749. This is because this strategy costs a minimum of $5 per trading day and in 2022, it traded 149 days.

One key advantage of Interactive Brokers is their margin rates are most competitive in the market. Composer doesn't currently offer portfolio margin above 100% of Net Liquidating Value (NLV).

User Interface & Platform Access

With a visual no-code strategy builder, Composer offers an easy way to understand the logic behind your strategy. This enables both beginners as well as advanced traders to build strategies with ease. The best way to experience Composer is via desktop as the screen size enables you to make the most of the backtesting functionality as well as the strategy creator. Note: Composer also lets you login via mobile if you wish you check in on your investments.

On the other hand, creating a trading bot with Interactive Brokers is limited to users who have strong programming skills and can code with their API. There is also the option to find a trading platform that connects with the Interactive Brokers API however costs will increase.

Brokerages & Deposit Security

Both platforms offer top-notch security. Composer automatically creates an Alpaca brokerage account for you which ensures that manual trading does not interfere with your automated stock trading bots. Composer Securities LLC is a registered broker-dealer with the SEC and a member of FINRA / SIPC, with SIPC protection of $500k. The primary custodian is tier-1 bank BMO Harris.

Interactive Brokers provides $250k in SIPC insurance plus another $2.5m for eligible accounts through the Insured Bank Deposit Sweep Scheme. Interactive Brokers also segregates funds across US treasuries and special reserve accounts in seven large US banks including BMO Harris, and Standard Chartered.

Asset Choice & Transaction Types

Composer is a long-term focussed investing platform offering access to the full range of stocks and ETFs. The structure of the platform allows you to rebalance your strategies at daily, weekly, quarterly, yearly or threshold-based intervals. However, if you're looking to trade a much wider range of assets such as Options, Futures, Spot Currencies, or Metals, Interactive Brokers may be a better choice as Composer doesn't offer this functionality. Interactive Brokers also offers margin above 100% of the Net Liquidating Value and the best margin rates (whereas Composer currently does not margin above 100% of NLV). Therefore, Interactive Broker's is strong proposition if you're looking to use margin.

Both platforms offer the choice to test the platform risk-free. While Interactive Brokers offers paper trading, Composer offers the ability to ‘follow’ strategies with a simulated $1000 that you can track over time and measure out-of-sample performance. In both cases, you can get an indicative performance of your bot without depositing funds.

AI functionality

Composer has recently introduced ChatGPT4 AI copilot to supercharge the investing process. Using ChatGPT you can ask questions about your strategies, find ways to diversify, and continue to improve your returns. Here's some examples of what you can ask: Can you create a retirement strategy with a focus on long term bonds and gold? What are the risks of this strategy? What should I add to diversify this strategy? What type of strategy would be a good complement to this one? You can check out more details here.

Interactive Brokers does not currently offer this functionality.

Customer Support

Both platforms offer extensive customer support channels.

Interactive Brokers offers phone and email support. On the other hand, Composer offers email, live chat, and zoom calls with the product team.

Final Remarks

Based on Composer's transparent pricing, easy to use no-code interface, AI tooling, Composer seems like a logical choice for many people. If you're an experience coder or are looking for asset types like options or futures, Interactive Brokers may be the more suitable choice.

Moreover, building strategies in Composer is a fun activity, and spending time doing so is a great way to get accustomed to how the no-code editor works.

As you do so, we invite you to explore the site and sign up for a free Composer account to get a first-hand impression of what our platform can do for you.

We'd be happy to have you on our side, and provide you with the best automated stock trading platform there is!