Interactive Brokers

[yonobarn]

A bit more colour to those following the Reg T Margin account issue:

IMPORTANT NOTICE TO ADVISORS/BROKERS OF AUSTRALIAN MARGIN TRADING CLIENTS

As you know, Interactive Brokers is one of the fastest growing online brokers in the world. In the first half of 2013, our worldwide clients daily trades average over 300 million shares, 1 million options, 400,000 futures contracts and $11 billion of forex.

Although we are a U.S. based company, we are committed to the Australian market and as part of that commitment, we have been reviewing our compliance with local regulations in Australia.

Effective 1 July 2010, Australia amended the Corporations Act 2001 to require providers of “margin lending facilities” to hold an Australian financial services licence (AFSL) authorisation specifically for the provision of such facilities. At that time, IB was advised that its margin trading accounts were not “margin lending facilities” under Australian law and that its existing AFSL did not require amendment. IB has recently further been advised that some features of IB margin accounts might be regarded as a standard margin lending facility. IB therefore has applied to modify its AFSL to include margin lending.

First, we ask that you review the Corporations Act provisions and guidance from the Australian Securities & Investments Commission (ASIC) in order to ensure that you have the proper AFSL authorization to advise clients who trade on margin. More information can be found at the ASIC website at www.asic.gov.au.

Second, we are providing a Notice (via the Account Management section of the IB website) to our Australian margin trading clients that IB is currently in the process of seeking the AFSL authorisation to provide a margin lending facility but is not currently so authorized. Clients will be required to acknowledge this fact using an online form we are providing, or if they wish to discontinue margin trading through IB, they may close their accounts.

Third, ASIC has asked that IB restrict its Australian clients from conducting any new, additional margin trading until ASIC issues a modification to IB's financial services license to allow margin lending. This means that we cannot allow IB clients to open new positions funded by margin lending or increase the size of existing margin lending positions if this would increase any margin balance with IB.

These restrictions do NOT apply to trades using cash (i.e., without margin lending/borrowing) and do NOT apply to futures or forex trading (where credit is not provided by IB). Of course, these restrictions do not prevent closing existing positions.

Please assist your clients to log in to Account Management as soon as possible and review the Regulatory Notice and complete the short form included in the Notice.

If you have any questions regarding this notice, please send an email to auclients@interactivebrokers.com.

Thank you,
The Interactive Brokers Team

 

[Kryzz]

Despite accepting the new agreement at least 3 times now, this screen keeps popping up each time I log on. I also seem to be unable to access account management as I cannot proceed past this screen.

Just got off the phone with IB then, they're aware of the issue about the screen going back to the start. I asked for an ETA when this would be fixed, I was quoted 1-2 business days, and to try logging on again late tomorrow afternoon or the day after :s.

This is the first time I've ever had to actually speak to someone at IB, the guy answered the phone with just a "hello" - can see what everyone is talking about re: the cusomter service being sub standard.

 

[tech/a]

Just got off the phone with IB then, they're aware of the issue about the screen going back to the start. I asked for an ETA when this would be fixed, I was quoted 1-2 business days, and to try logging on again late tomorrow afternoon or the day after :s.

This is the first time I've ever had to actually speak to someone at IB, the guy answered the phone with just a "hello" - can see what everyone is talking about re: the cusomter service being sub standard.

Been with IB 15 yrs.

Second to none!
I've always found their help desk brilliant.
Even HK when I've had to get in touch A/H
Always an English speaking girl there.
I forget her name but she is brilliant!

 

[Chilli]

Re: bellenuit

There is an email address at the bottom of the article link above which is specifically for questions about the Australian margin lending problem. Might be worth a try.

Just got this reply back:

"At this point our application to ASIC to modify our financial license has been lodged and we are waiting for ASIC to process it. Thus, we are unable to provide you the ETA in how long this process will take, however, we are expecting the process to take week and perhaps months, but not years. Lastly, it is our best interest to reinstate the margin lending facility for our Australian customer's, but we are not in the position to comment the reinstatement until ASIC has review our application"

 

[DocK]

The reply to my email:

Thank you for contacting IB Customer Service.

1) Our application to ASIC to modify our financial services license has been lodged and we are waiting for ASIC to review it. Our conservative expected time for this process is somewhere between 6-8 weeks and we hope to expedite this as much as possible.

2) The sales proceeds will be counted towards paying the margin loan and it could not be treated separated. In such case, if your account remains to have a negative total cash (the total cash after adding in all currencies in the securities segment is negative), you will not be able to open new positions (including futures). Therefore, any trades that would create or increase existing margin loan would not be allowed.

3) Once the sales proceeds are contributed to paying the margin loan it cannot be drawn up to it prior balance (Given the account remains to carry a margin loan).

4) A margin loan is defined as the total cash amount after adding in all currencies (after taking into account of interest/ dividend accruals) in the securities segment is negative. Lastly, you should still be able to make trades that would decrease the margin loan or when your total cash is positive.

Regards,

 

[Chilli]

The reply to my email:

I have since been further advised that the application to ASIC was submitted roughly one month ago. So if they are stating a 6-8 weeks processing time, then hopefully only another 2-4 weeks to wait.

 

[Kryzz]

I have since been further advised that the application to ASIC was submitted roughly one month ago. So if they are stating a 6-8 weeks processing time, then hopefully only another 2-4 weeks to wait.

Still can't believe this situation or how IB didn't see this coming given changes to legislation were made in 2010.

This must be affecting people massively, my trade frequency will virtually be cut in half now!

 

[Chilli]

Still can't believe this situation or how IB didn't see this coming given changes to legislation were made in 2010.

This must be affecting people massively, my trade frequency will virtually be cut in half now!

Me too Kryzz. From what has been posted above, it would seem that ASIC told IB in 2010 that their License didn't need updating, but have now decided that it does. So it would seem that ASIC have allowed IB to continue offering Margin loans to existing and new clients for three years when their License precluded them from doing so.
To my mind this is yet another case of ASIC being asleep at the wheel again. I shall be writing to ASIC shortly to express my displeasure. Hopefully if they receive enough similar correspondence, they may pull their finger out and update the Licence promptly.

 

[hseldon1234]

Hello,

I am new to IB, account only operational for a week or so.

I am trying to figure out how to place orders that are equivalent to E*Trade's Profit Target conditional orders. I.e trailing sell orders where the trigger price is above the current market price (last close), moves up when the market closes up, and stays put when the markets closes down.

A bit like Trialing MIT but aims to catch spikes.

Is it possible?

 

[CanOz]

Hello,

I am new to IB, account only operational for a week or so.

I am trying to figure out how to place orders that are equivalent to E*Trade's Profit Target conditional orders. I.e trailing sell orders where the trigger price is above the current market price (last close), moves up when the market closes up, and stays put when the markets closes down.

A bit like Trialing MIT but aims to catch spikes.

Is it possible?

Yes, I believe this is what we term "bracket orders" and one you have your core order in, you can right click and select "attach bracket order", it will add the stop loss and take profit, you then can adjust the prices...if you want I can do a video of this tomorrow....

 

[hseldon1234]

Yes, I believe this is what we term "bracket orders" and one you have your core order in, you can right click and select "attach bracket order", it will add the stop loss and take profit, you then can adjust the prices...if you want I can do a video of this tomorrow....

Thank you. If I understand correctly, bracket orders are nearly what I am after, two conditional sells, one above and one below. But I think bracket orders do not trail up rights? I.e. I want the 2 conditional sells to automatically adjust upward if the close today is higher than the previous close.

 

[CanOz]

Thank you. If I understand correctly, bracket orders are nearly what I am after, two conditional sells, one above and one below. But I think bracket orders do not trail up rights? I.e. I want the 2 conditional sells to automatically adjust upward if the close today is higher than the previous close.

No, you need to manually tighten stops...

You would need a platform that's allows the development of code for that...IB is just a broker / execution platform.

 

[Natb]

From the ASIC website

http://www.asic.gov.au/asic/asic.ns...okerage to stop new margin loans?opendocument

 

[Chilli]

From the ASIC website

http://www.asic.gov.au/asic/asic.ns...okerage to stop new margin loans?opendocument

Thanks for that. From reading the requirements I doubt this is going to be the formality that we were lead to believe it was. I fail to see how IB are in compliance with ASIC rules, seeing as they don't generally issue margin calls. Do any other US brokers allow margin lending to Australian clients?

 

[bellenuit]

I fail to see how IB are in compliance with ASIC rules, seeing as they don't generally issue margin calls.

Why do you say that? I have never got a margin call as I usually have no more than 20% margin on the equities I own. But I always understood I would get a margin call if I reached the relevant limits.

 

[Trembling Hand]

I think that they do give margin calls. Many many moons ago I remember getting a warning when I was holding a few futs contracts into the last 15 min of the day session when they remove the intraday margins to overnight. Got a warning in TWS and an email.

I would assume that is still their process??

 

[CanOz]

FYI....their latest financial position.

 

[Chilli]

Why do you say that? I have never got a margin call as I usually have no more than 20% margin on the equities I own. But I always understood I would get a margin call if I reached the relevant limits.

Buried deep in the terms and conditions that we all agreed to when opening our accounts, here:

C. IB Will Not Issue Margin Calls: IB does not have to notify Customer of any failure to meet Margin
Requirements prior to IB exercising its rights under this Agreement. Customer acknowledges that
IB generally will not issue margin calls; generally will not credit Customer's account to meet
intraday or overnight margin deficiencies; and is authorized to liquidate account positions in order
to satisfy Margin Requirements without prior notice.

I hope I'm wrong, but I fail to see how IB will be able to satisfy ASIC requirements whilst this clause is in place.

 

[So_Cynical]

(IB) has advised its clients of this decision and made them aware of their potential rights. Individual clients may wish to seek legal advice on their personal circumstances.

I'm guessing under Aust law that as Aussies we have a right to a margin call? and that if any IB customer has suffered a financial injury due to not getting a call, he/she has a legal avenue to explore?

 

[Natb]

Bit more from the news. hopefully a resolution can be reached, I'd really prefer not to have to open another account.

http://www.smh.com.au/business/lice...-us-brokers-loans-dealing-20130827-2sobs.html
http://forexmagnates.com/interactiv...ility-following-breach-of-asic-license-terms/