Interactive Brokers

[bellenuit]

I'm just glad there's still a way to trade on a margin account. I already had a company setup, and so it was no extra expense for me to open a company account.

I day trade the E-Mini futures during the US session. I don't trade anything else. Dealing with a cash account with T+1 settlement would be a huge headache. My plan B was to use Mirus/RCG - they're OK, but IB's platform is way superior.

Yazz. Were you able to link the company account with your personal account in any way so you didn't need to separate logins or need two access key devices (sorry, I can't remember the correct names for them). Also, have you tried to transfer cash or shares between accounts? Is it instantaneous?

I have an individual account with IB, but also have a company that I used when trading with Ameritrade before they pulled out of Australia. I may set it up on IB.

Unfortunately I am overseas at the moment and have only a slow and sporadic internet connection. It hasn't held up long enough yet for me to place questions directly with IB. IB is deadly slow on my hotel wifi.

 

[bellenuit]

bellenuit

One issue I have with IB's decision to no longer offer Australian individuals margin and setting up a company structure to continue to get their great rates is IB’s actual commitment to Australia. If they are hoping to be in a position to allow margin lending in 4 or 5 months, why not let the status quo continue where you cannot increase your margin balance but do not need to pay it off in such a short time. I am overseas and will only be back in Australia a few days before the deadline, which is mighty inconvenient. After going through all the hassle with setting up a company structure, how assured can we be that they simply won't pull the plug completely in Australia and force all accounts to close. I don't know how profitable their Australian operations are, but if they lose a lot of customers because of the current issues, that might tip the balance away from continuing to operate here.

When I first opened an account with IB, there was a lot of talk about becoming part of the CHESS system, something that never seems to be mentioned anymore.

I love IB, but disliked the way they handled this, particularly the inadequacy of the notice for those abroad. I would hate to have to go thought it all again at a later stage if their commitment to Australia is not strong. Pure speculation on my behalf, but worth considering for those contemplating restructuring their trading vehicle to fit the new regime.

 

[yazz]

Yazz. Were you able to link the company account with your personal account in any way so you didn't need to separate logins or need two access key devices (sorry, I can't remember the correct names for them). Also, have you tried to transfer cash or shares between accounts? Is it instantaneous?

I have an individual account with IB, but also have a company that I used when trading with Ameritrade before they pulled out of Australia. I may set it up on IB.

Unfortunately I am overseas at the moment and have only a slow and sporadic internet connection. It hasn't held up long enough yet for me to place questions directly with IB. IB is deadly slow on my hotel wifi.

I might be wrong, but I don't think it's possible to link a Company account to an Individual account because they're separate entities legally and from a tax point of view. But I haven't asked them specifically though.

I have had 2 linked individual accounts at IB before. Transferring between them is pretty easy, and instantaneous, using the account management page. But I did have different logins / security codes for each account. Not sure if you can have the same logins for both accounts.

 

[skc]

Re: bellenuit

One issue I have with IB's decision to no longer offer Australian individuals margin and setting up a company structure to continue to get their great rates is IB’s actual commitment to Australia. If they are hoping to be in a position to allow margin lending in 4 or 5 months, why not let the status quo continue where you cannot increase your margin balance but do not need to pay it off in such a short time.

I'd thought they couldn't maintain their status quo because of ASIC. Although I do share your view on whether their committment the Australian would be affected.

 

[kid hustlr]

I'm just glad there's still a way to trade on a margin account. I already had a company setup, and so it was no extra expense for me to open a company account.

I day trade the E-Mini futures during the US session. I don't trade anything else. Dealing with a cash account with T+1 settlement would be a huge headache. My plan B was to use Mirus/RCG - they're OK, but IB's platform is way superior.

What would be the major issues in just using the cash account. is T+1 settlement really that much of a problem? Or am I missing something?

 

[yazz]

What would be the major issues in just using the cash account. is T+1 settlement really that much of a problem? Or am I missing something?

It depends on your trading style

I personally day trade e-mini futures during the US session. I typically open and close positions withing 15 mins to a few hours, and I'm always all cash by the end of the US session. So with a Cash Account, if I open and close a e-mini futures position on say Tuesday morning (US time), the cash for the first purchase won't be available until 1 full business day i.e. won't be available until the start of the Thursday US session. That's what IB told me when I rang them. The other disadvantage is that with a cash account I won't get the 50% intra-day margin discount on the e-mini. So it's a hassle for my style of trading, but it really depends on how you trade i.e. if you hold positions longer and trade less frequently than me, a Cash Account might be OK.

 

[kid hustlr]

It depends on your trading style

I personally day trade e-mini futures during the US session. I typically open and close positions withing 15 mins to a few hours, and I'm always all cash by the end of the US session. So with a Cash Account, if I open and close a e-mini futures position on say Tuesday morning (US time), the cash for the first purchase won't be available until 1 full business day i.e. won't be available until the start of the Thursday US session. That's what IB told me when I rang them. The other disadvantage is that with a cash account I won't get the 50% intra-day margin discount on the e-mini. So it's a hassle for my style of trading, but it really depends on how you trade i.e. if you hold positions longer and trade less frequently than me, a Cash Account might be OK.

Appreciate the reply, assuming I trade similarly to you (I do).

Not having the cash in the account until 2 days later isn't that big of an issue it? It wont prevent you from trading or taking a position, its just annoying that you cant see a life update of your current account balance?

Agreed about the 50% intraday thing, that hurts, effectively you need more cash in your account to fund positions.

 

[sammy84]

I'm in the process of unwinding my positions and will move to IG markets. Seems to be the best alternative for Australian shares.

I'll miss IB and will be straight back when they sort out their issues.

 

[OZ Trade]

I'm in the process of unwinding my positions and will move to IG markets. Seems to be the best alternative for Australian shares.

I'll miss IB and will be straight back when they sort out their issues.

Do your research before you sign up with IG Markets, I do have experience with them unfortunately.

Bucket shop.

 

[redsky0]

Assuming you don't have access to a margin account, how do you guys trade the major currency pairs (up/down) without the ability to short? Just started actively trading and the the viable options I see are:

(1) ETFS like ETFS 3x Long AUD Short USD (LAU3@LSE) - While these work well enough for hedging USD stock exposure, and are granular, they have large spreads and only trade London business hours.

(2) Futures on GLOBEX - Large minimum transaction sizes, not granular, narrow spreads.

Are there any better options I'm missing?

 

[skc]

I'm in the process of unwinding my positions and will move to IG markets. Seems to be the best alternative for Australian shares.

I'll miss IB and will be straight back when they sort out their issues.

IG = CFDs. Even though they are DMA, it is VERY different to trading on margin. And depending on your usual holding period, it might end up costing a lot more than another margin account provider.

 

[yazz]

...Agreed about the 50% intraday thing, that hurts, effectively you need more cash in your account to fund positions.

You also need extra cash on top of that to cover the settlement period, because it won't settle before the start of the next trading session.

 

[ftw129]

Hey guys,

So I'm in the process of opening the account for a "company as trustee for a trust".

When asking their live support for help they told me that trading on margin still will not be permitted.

Has anyone actually got their accounts set up this way yet and if so, did you select "Trust" or "Limited Liability Company" where it asks for "Type of customer" when creating the account in step 1?

 

[kid hustlr]

You also need extra cash on top of that to cover the settlement period, because it won't settle before the start of the next trading session.

Just want to make sure I understand this fully,

Overnight initial margin for ES is 5125 as per the link:

https://www.interactivebrokers.com/en/index.php?f=marginnew&p=fut

Now with the margin accounts you would only need half that (as per the link again), but because we can't have a margin account anymore my understanding is I would need atleast 5125 USD in my account in order to trade the ES.

Now to my question,

As an example, say I have 5500USD in my account, I take a trade on the ES, make a couple of ticks then close the trade 20 minutes later. Are you implying I cant't take another trade in that session because I would need to wait for it to settle? Are you suggesting I would need atleast 5125*2 = 10250 if I wanted to take a second trade that day??

This isn't my understanding but I could be wrong - thus the question.

 

[yazz]

Just want to make sure I understand this fully,

Overnight initial margin for ES is 5125 as per the link:

https://www.interactivebrokers.com/en/index.php?f=marginnew&p=fut

Now with the margin accounts you would only need half that (as per the link again), but because we can't have a margin account anymore my understanding is I would need atleast 5125 USD in my account in order to trade the ES.

Now to my question,

As an example, say I have 5500USD in my account, I take a trade on the ES, make a couple of ticks then close the trade 20 minutes later. Are you implying I cant't take another trade in that session because I would need to wait for it to settle? Are you suggesting I would need atleast 5125*2 = 10250 if I wanted to take a second trade that day??

This isn't my understanding but I could be wrong - thus the question.

Might be wrong, but according to the person I spoke with at IB yesterday, with a Cash account, after you close a trade you have to wait for the settlement period before you can use that cash for a new trade. In your example, once you close your trade, that $5125 (plus profits) won't be available until settlement, which is T+1 with futures. So if you have only $5500 in your account, you won't be able to place another trade until settlement. So you'd need extra cash in the account if you wanted to place another trade in the meantime. With a margin account, the "settlement" is immediate i.e as soon as you close the trade, the cash is available for a new trade. That's what I meant by it being a "hassle" for my style of trading.

Perhaps there's some way around the settlement period if the trade is intra-day and very short-term i.e. 20 minutes?

Might be worth asking them again.

 

[sammy84]

[SUP][/SUP]

IG = CFDs. Even though they are DMA, it is VERY different to trading on margin. And depending on your usual holding period, it might end up costing a lot more than another margin account provider.

I used to trade CFDs with MF global. That went really well....

I can't think of any other alternatives I prefer. I can sometimes spend up to 3 months out of the market, so I don't like having large cash balances with a broker. My normal holding period is < 1 month so CFDs are still appropriate.

I will miss franking credits however on longer positions.

Have you tried IG markets? Any other brokers you could recommend?

 

[skc]

[SUP][/SUP]

I used to trade CFDs with MF global. That went really well....

I can't think of any other alternatives I prefer. I can sometimes spend up to 3 months out of the market, so I don't like having large cash balances with a broker. My normal holding period is < 1 month so CFDs are still appropriate.

I will miss franking credits however on longer positions.

Have you tried IG markets? Any other brokers you could recommend?

I have used IG extensively until I stopped trading for myself. I have no problems with IG and CFD per se, I was just making sure that you make an informed decision about switching from a margin equities provider to a CFD provider (IG is NOT a broker). Obviously with IG you take on counterparty risk but you'd be well aware of that since MF (I was a client there as well). IG is listed in London so a keen eye on their share price and company announcements will help reduce some of that risk.

In terms of costs:

Say you buy and hold a position for 1 month.

With CFD @ say 8bps commission and 5.75% interest on full position size, the holding/transaction cost is ~64bps.

With another margin provider at say 50% leverage, 7% interest and 11bps commission, your costs are 51bps.

So depending on your trading style, CFD's lower commission may be more than offset by its higher funding cost.

 

[bellenuit]

Hey guys,

So I'm in the process of opening the account for a "company as trustee for a trust".

When asking their live support for help they told me that trading on margin still will not be permitted.

Has anyone actually got their accounts set up this way yet and if so, did you select "Trust" or "Limited Liability Company" where it asks for "Type of customer" when creating the account in step 1?

I am trying to open an account for a company too, but not as trustee. I selected Small Business and a few questions later it asked where I was based (I can't recall the actual question). After specifying Australia, it came up with a message that asked me to acknowledge that I understood margin would not be offered. It didn't say just for individuals, just an across the board statement that margin would not be offered. A few questions later I was asked the type of account and I specified a proprietary company. As I am trying to set up using a dead slow Bali hotel link, I placed a question with their help desk asking for confirmation on whether margin will be offered for LLCs or not. That was 36 hours ago and I still haven't got a reply.

 

[alphaman]

I spoke to IB three times and they never actually say I'll be moved to a cash account. I was told to keep a cash buffer and my account configuration (Regular T Margin account) will continue.

 

[kid hustlr]

Might be wrong, but according to the person I spoke with at IB yesterday, with a Cash account, after you close a trade you have to wait for the settlement period before you can use that cash for a new trade. In your example, once you close your trade, that $5125 (plus profits) won't be available until settlement, which is T+1 with futures. So if you have only $5500 in your account, you won't be able to place another trade until settlement. So you'd need extra cash in the account if you wanted to place another trade in the meantime. With a margin account, the "settlement" is immediate i.e as soon as you close the trade, the cash is available for a new trade. That's what I meant by it being a "hassle" for my style of trading.

Perhaps there's some way around the settlement period if the trade is intra-day and very short-term i.e. 20 minutes?

Might be worth asking them again.

If you are correct then obviously that becomes a big problem. If you want to take say 4 trades a night then you would need 20k in your account. Doesn't seem right to me but I'll ask them.

I spoke to IB three times and they never actually say I'll be moved to a cash account. I was told to keep a cash buffer and my account configuration (Regular T Margin account) will continue.

hopefully this is correct

EDIT:

me : Hello Ernest
me : I am an Australian citizen, and I was recently told about changes to my account due to margin regulations, are you aware of this change?
Ernest: yes Australian citizens are not allowed margin
me: I recognise this change in regards to stocks, as I can no longer purchase stocks on margin, yet I'm confused as to whether this change will influence my futures trading at all?
Ernest: The regulation is for stock and stock options not commodities
me: ok, so there will be no change in regards to how my futures trades will be settled? As I understand it, my futures trades are settled immediately, will this still be the case given these changes?
Ernest: As I understand it Futures are not Affected by the rule
Ernest: Is there anything else that I can assist you with today?