# IG Markets - charging interest for short positions!



## sifet (24 March 2009)

Greetings team,

I've just received an email from IG stating they will now charge interest on short positions as well as long positions because LIBOR is below their 2.5% spread.

Does this seem like a reasonable change to you? I'm still trying to get my head around IG charging both ways!

I'll put up a poll to summarise.


Email from IG as follows: 

"Due to the current environment of low interest rates, we are revising our charging method on short positions on shares and daily cash indices

...
When calculating the daily adjustment made in relation to a position held overnight, IG Markets takes into account current interest rates. Under our standard terms, the amount of the adjustment is calculated as the latest London interbank offered rate (LIBOR) plus or minus 2.5% per annum, depending on whether you are long or short.
...
Conversely, if you hold a short position, the adjustment reflects LIBOR minus 2.5% per annum. Providing it equals a positive value, this appears on your account as a credit; for example, when LIBOR was 3%, you would have been credited 0.5% per annum of the value of the held CFD position (3% LIBOR - 2.5% = 0.5% per annum).

However, in the current economic climate, interbank rates are reaching historic lows on certain currencies such as USD and GBP. This is resulting in the adjustment on short positions often appearing as a negative value when exposed to instruments in currencies with low underlying rates, which becomes a debit rather than a credit for clients. For example, if LIBOR is 1.5%, the adjustment to a short position is 1.5% minus 2.5%, which equals -1% per annum:

LIBOR                       1.5%
Our rate                  - 2.5%
TOTAL:                   - 1% per annum 

In the past, IG Markets has waived this debit on short positions. However, future adjustments will reflect negative values, and clients taking short positions will be debited.  

This change will take effect from Monday 30 March 2009.
"


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## beamstas (24 March 2009)

sifet said:


> Greetings team,
> 
> I've just received an email from IG stating they will now charge interest on short positions as well as long positions because LIBOR is below their 2.5% spread.
> 
> ...





Recieved this too.


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## Wysiwyg (24 March 2009)

They have reduced as of yesterday the minimum spread on EUR/USD to 1 pip (but generally still 2 pips) and USD/JPY to 1 pip (but generally still 3 pips)


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## sinner (24 March 2009)

Also now you notice when the price moves on the forex the buy/sell spread can move in opposite directions (i.e. one can go up and one can go down so the spread widens and narrows dynamically).

Nothing wrong with charging interest on shorts, some of their clients are probably holding hugely leveraged pre-crash shorts on everything and they are not looking forward to paying out! So they'll make it as 
uncomfortable as they can to hold the position.

I had yet another profitable day with IG yesterday, nothing like a bit of quick and dirty bucket shop action.


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## beamstas (24 March 2009)

sinner said:


> Also now you notice when the price moves on the forex the buy/sell spread can move in opposite directions (i.e. one can go up and one can go down so the spread widens and narrows dynamically).
> 
> Nothing wrong with charging interest on shorts, some of their clients are probably holding hugely leveraged pre-crash shorts on everything and they are not looking forward to paying out! So they'll make it as
> uncomfortable as they can to hold the position.
> ...




Excuse my ignorance but -- what does the term "bucket shop" mean?
Thanks
Brad


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## sinner (24 March 2009)

Your ignorance is excused :

http://en.wikipedia.org/wiki/Bucket_shop_(stock_market)


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