Interactive Brokers - No Margin for Aussies

[bellenuit]

I probably did (for a company) but can't remember what I ticked. That form is to be sent to to the IB office with some certified documents.

Quickest and easiest is to get onto the Chat (link inside the online application) and ask them. I think they are there 24hrs.

I set up a company account (an Australian PTY) before they withdrew margin for individuals and have been able to continue trading on margin with no problems. I also had an individual account with margin, but that had the margin facility withdrawn. I also believe you can set up a trust account to trade on margin.

 

[waterbottle]

I came across ASIC's updated media release RE: IB and FX

IB's financial services business

IB has been aware, since October 2013, that ASIC believes its financial services business in Australia involves making a market in foreign exchange (FX) products. In December 2013 ASIC extended a no-action position to IB regarding its FX business on the basis IB would obtain an Australian financial services licence with a market making authorisation for its FX business for an Australian subsidiary.

ASIC withdrew its no-action position in June 2015. This withdrawal followed a lengthy process of enquiry on ASIC’s part, attempting to clarify the FX services and products being provided by IB in Australia under the no-action position. ASIC was not satisfied that the no-action position ought to continue in light of the information provided to ASIC about IB's FX business in Australia.

ASIC notes that it has not to date been in a position to grant IB's Australian subsidiary an appropriately authorised licence.

ASIC has requested IB to cease providing all over-the-counter FX services in Australia, and has requested the provision of further information to enable ASIC to decide on an acceptable orderly exit mechanism from that part of its business in Australia.

That doesn't bode well. Am I right to assume that no matter which type of account I have - individual, trust or small business - I will no longer be offered FX as an Australian applicant?
Time to look for another broker or change residential address?

 

[jacksonmorris]

I came across ASIC's updated media release RE: IB and FX



That doesn't bode well. Am I right to assume that no matter which type of account I have - individual, trust or small business - I will no longer be offered FX as an Australian applicant?
Time to look for another broker or change residential address?

Hi Guys, I have never posted on the forum but am an IB user, turning over $50m a month in FX and with a generous portfolio of overseas shares with them and to be honest I am a bit lost and stuck , and kinda sad as well :1zhelp: :1zhelp:

I thought best to let you know that I actually called ASIC and also IB and what they said...

IB said they had provided all the information they could and are working to resolve the situation as fast as possible. They couldnt give me a time frame, however you can do FX conversions with them on an off market basis (that is, you can only put in limit orders and you cannot see any market data, so it is very risky, and very slow).

ASIC were very forthcoming. IB have not applied for an AFSL, and never have. They doubt that they will, considering that they didn't after they were warned in 2013 and fined. They said that IB are not in any discussions with ASIC, that IB had just used the grace period without progressing with an application. They said that when switching brokers always ask if they hold the appropriate licenses to operate in Australia

My question is, how do we get around this? IB is worth US$4B, and I know what I am doing when I am trading. Is there a way to get around this? Who would be the next best broker?

 

[DaveDaGr8]

Perhaps open a US company and or other offshore company for international trading and open a US IB account.

Bottom line costs are $450 for company and $500 annual fees. All up probably $1k per annum.

You may have to pay US taxes, but then you'll get a reduction in Australian taxes. Won't that upset ASIC !!!

 

[Auslad]

The optimal solution to this problem if people are making serious money is to consider moving to New Zealand and trading there. New Zealand has marvelous tax incentives for new migrants. Essentially new residents/migrants get a 4 year tax holiday on any offshore income that they derive. After arriving in NZ , just update the address details in your IB account. Alternatively consider opening up a New Zealand company with IB. If this alternative is chosen, it would be prudent to consult with an accounting firm that has expertise in international tax matters.

 

[waterbottle]

Hi Guys, I have never posted on the forum but am an IB user, turning over $50m a month in FX and with a generous portfolio of overseas shares with them and to be honest I am a bit lost and stuck , and kinda sad as well :1zhelp: :1zhelp:

I thought best to let you know that I actually called ASIC and also IB and what they said...

IB said they had provided all the information they could and are working to resolve the situation as fast as possible. They couldnt give me a time frame, however you can do FX conversions with them on an off market basis (that is, you can only put in limit orders and you cannot see any market data, so it is very risky, and very slow).

ASIC were very forthcoming. IB have not applied for an AFSL, and never have. They doubt that they will, considering that they didn't after they were warned in 2013 and fined. They said that IB are not in any discussions with ASIC, that IB had just used the grace period without progressing with an application. They said that when switching brokers always ask if they hold the appropriate licenses to operate in Australia

My question is, how do we get around this? IB is worth US$4B, and I know what I am doing when I am trading. Is there a way to get around this? Who would be the next best broker?

How can they even offer this - they are banned from any FX transactions period.
And what kind of prices are they offering? There could be a 1000 pip spread for all I know.

 

[waterbottle]

The optimal solution to this problem if people are making serious money is to consider moving to New Zealand and trading there. New Zealand has marvelous tax incentives for new migrants. Essentially new residents/migrants get a 4 year tax holiday on any offshore income that they derive. After arriving in NZ , just update the address details in your IB account. Alternatively consider opening up a New Zealand company with IB. If this alternative is chosen, it would be prudent to consult with an accounting firm that has expertise in international tax matters.

Yes I've been toying with this but I would imagine they would want an NZ residential/company address and some NZ documentation - of which I have neither. Any thoughts about this?

As for NZ companies - it costs $150NZ to register and the company tax rate is at 28%, although if there are 5 or fewer shareholders, the company can be treated as a sole trader for tax purposes.

http://www.business.govt.nz/tax-and-reporting/business-tax-levies
http://www.business.govt.nz/startin...tructures/focus-on-companies#tax-requirements

 

[Auslad]

Yes I've been toying with this but I would imagine they would want an NZ residential/company address and some NZ documentation - of which I have neither. Any thoughts about this?

As for NZ companies - it costs $150NZ to register and the company tax rate is at 28%, although if there are 5 or fewer shareholders, the company can be treated as a sole trader for tax purposes.

http://www.business.govt.nz/tax-and-reporting/business-tax-levies
http://www.business.govt.nz/startin...tructures/focus-on-companies#tax-requirements

Well if you decide to move to New Zealand to take advantages of the 4 year tax break on offshore income, you would have a NZ Residential address and then just update your IB Account with those details, and also details of your New Zealand Bank Account that you would establish.

If not moving to NZ, then setting up NZ Company would be the best option. The registered address of the NZ Company could be at a NZ Accountant's office. Open up a Company Bank Account in NZ. Afterwards then open up a new corporate account with IB.

You would also need to speak to an Australian Tax Adviser who has expertise in International tax. He/She might advise for instance to have the NZ Company be a subsidiary of an Australian Company to take advantages of the NZ and Australian Tax treaty. IE franking credits etc .

 

[pos]

Creating an offshore company just to trade with IB seems pretty complicated - in particular, I'd imagine tax would be a nightmare. I have no idea how CGT is treated for a NZ franked offshore company. And why not the Cayman Islands, etc.?

Anyway, surely it would be easier to use another broker. Does anyone have any tips for alternative brokers? I hear IB is the only one to rule them all; perhaps we could create a list of alternative brokers by product? I'm almost tempted to use Macquarie for my offshore futures trading.

It's a shame all of this has happened while there is so much market activity!

 

[apm]

IB said they had provided all the information they could and are working to resolve the situation as fast as possible. They couldnt give me a time frame, however you can do FX conversions with them on an off market basis (that is, you can only put in limit orders and you cannot see any market data, so it is very risky, and very slow).

ASIC were very forthcoming. IB have not applied for an AFSL, and never have. They doubt that they will, considering that they didn't after they were warned in 2013 and fined. They said that IB are not in any discussions with ASIC, that IB had just used the grace period without progressing with an application. They said that when switching brokers always ask if they hold the appropriate licenses to operate in Australia

Wow, if what ASIC says is true, what exactly did IB mean by "We intend to seek clarification from ASIC regarding our Australian clients' existing forex positions ..." in their initial email? Were they being deliberately misleading? One has to wonder ...

 

[hawamahal]

I am looking at making a family trust, in order to use margin trading with IB. Still doing initial research.

 

[minwa]

Wow, if what ASIC says is true, what exactly did IB mean by "We intend to seek clarification from ASIC regarding our Australian clients' existing forex positions ..." in their initial email? Were they being deliberately misleading? One has to wonder ...

Yes most likely being misleading, normal business practice though. Much like a customer complaining to management about a meal, their response will be "sorry, we will look into it" and most likely doing nothing about it.

Australia is too small of a market for them to be concerned with. Especially with ASIC. FX will just end up like margining, indefinitely broken for retail Aussies.

Shame they're the only great broker for most here, but what if still offers still makes it better than other alternatives for most purposes.

 

[bellenuit]

Yes most likely being misleading, normal business practice though. Much like a customer complaining to management about a meal, their response will be "sorry, we will look into it" and most likely doing nothing about it.

Australia is too small of a market for them to be concerned with. Especially with ASIC. FX will just end up like margining, indefinitely broken for retail Aussies.

Shame they're the only great broker for most here, but what if still offers still makes it better than other alternatives for most purposes.

Perhaps, but my great fear is they pull the plug on operations and just give us a few weeks to make alternative arrangements, much like they did when they withdrew margin.

 

[elbee]

ASIC were very forthcoming. IB have not applied for an AFSL, and never have. They doubt that they will, considering that they didn't after they were warned in 2013 and fined.

That is a bit misleading. IB do have an AFSL - it is license no. 245574. You can check this on the ASIC website.

My understanding is there is a stand-off in the interpretation of what the license allows.

 

[rx2]

I am looking at making a family trust, in order to use margin trading with IB. Still doing initial research.

I would be interested to see how you go with this. I was advised that a trust structure was not eligible for the margin loan facilities.

 

[kid hustlr]

start a pty ltd they can trade on margin

 

[CanOz]

start a pty ltd they can trade on margin

Agree, this is the advice I was given at Radges conference in Noosa as well.

 

[rx2]

Agree, this is the advice I was given at Radges conference in Noosa as well.

Thank you guys. I also just received this from IB confirming this also -

1. Could I open a Reg-T account with an Australian trust structure? Would it need to have a corporate trustee?
Answer: You can, as long as the trust is not a self managed super fund. You can apply for a margin account for your trust which has an corporate trustee Please be reminded that with recent implementation, we do not offer currency trading for all accounts with country of legal residence in Australia.

I need to do a little more research with regards to the currency restrictions. i.e. I only wish to trade in US equities, so am I unable to convert AUD to USD?

 

[hawamahal]

Thank you guys. I also just received this from IB confirming this also -

1. Could I open a Reg-T account with an Australian trust structure? Would it need to have a corporate trustee?
Answer: You can, as long as the trust is not a self managed super fund. You can apply for a margin account for your trust which has an corporate trustee Please be reminded that with recent implementation, we do not offer currency trading for all accounts with country of legal residence in Australia.

I need to do a little more research with regards to the currency restrictions. i.e. I only wish to trade in US equities, so am I unable to convert AUD to USD?

So is it only for corporate trustee and not for individual trustee.

 

[freebird54]

I am on my 4th accountant in 33 years and all the recent ones have problems with the IB FY accounts

anyone like to suggest a simpler way?

Latest one needs the following and I think I know where to look [I am a trader] he does not want to look through all the pages - just needs a summary

Pages could be different for you of course............


Share trading profit/loss $xxx (this is the Realized performance summary in Base on page 5)

Option trading profit/loss xxxx (this is the Realized performance summary in Base on page 7)

Forex profit/loss [If required] xxxxxx(this is the Cash FX gain/loss in the Cash Report on page 8)

Opening stocks on hand = $xxxxxx in AUD (page 1)

Closing stocks on hand $xxxxx (page 1)

Cost of salesxxxxxx (this is Commissions in the Cash Report on page 8)

Gross profit/loss – Mark to Market page 1 = -xxxxxx