Interactive Brokers

[DU Trader]

But I cannot convert my AUD into USD because this has been deemed as a 'margin' trade and actively refused by the system. This FX conversion trade never got the chance of being transmitted at all, so the cutomer service rep got all confused unsure of what trade I was talking about. Eventually, after wasting more than 1 hour in the Australian midnight, neither the trade issue rep or the guy at the phone trade desk can help. .

their homepage info explicitly says FX trading is not affected by the margin restriction. did the customer service rep explain that?

 

[sails]

...I suspect that what IB clients are being told is not in alignment with how the system works, as your experience seems to suggest. On Thursday, while having an online conversation with IB Support, I was told that I had cleared my margin (I had a small negative balance at the time, but it was more than compensated by accrued dividends that were already recorded against my account). Yet last night I received a system generated email from IB that was saying I still had margin and if not cleared by the 14th they would sell some of my shares. Support are saying that accrued dividends are taken into account when it comes to determining if you still have open margin, but I am not sure if the system calculates on that premise. I intend to take no further action based on what support have told me, but I will be very p***** off if they sell some of my shares.

Bellenuit, my understanding is that any liquidation of shares would be made by the system and not by humans. Worse still, I have read from others some years ago that it can be done randomly by the system sometimes with very nasty and costly surprises.

If you look on the account window on the TWS software you can allocate one position as "liquidate last". But that seems to be the only control one has if the IB system randomly starts closing positions.

If you wait and the system does start messing with your positions I think it would be a time consuming and frustrating job to try and get it sorted especially as the system has sent you an warning email.

I haven't used IB's margin lending but have a reg.t account with some option trades in it. I haven't received any warning emails so hoping it will be ok

Just my and good luck to all those with IB accounts this week...

 

[yazz]

Nov 11th is getting close , so I guess we’ll know exactly how the changes impact us over the next day or 2.

I only day trade e-mini futures, and based on what I’ve (mostly) been told, the changes won’t impact me. i.e. I’ll still have a T-margin account, and can still short futures contracts.

I’ve opened a company account just in case though. I’ll fund it if there’s a problem with my individual account.

 

[jlryan87]

I have been told by IB on a ticket I raised that I could pay off a negative USD balance with a positive AUD balance by doing an FC transaction and it would not contravene the limitations on margin trading that are currently in force. I haven't actually done it, but I am surprised that it didn't work for you.

Please try to do it. I am very interested to see how it works out for you. By the way, I have also tried doing a similar trade but this time I selected fx trade instead of currency conversion. The order gets rejected straight away as well. Apparently IB's statement about this margin debacle not affecting fx trades is also wrong.

On Thursday, while having an online conversation with IB Support, I was told that I had cleared my margin (I had a small negative balance at the time, but it was more than compensated by accrued dividends that were already recorded against my account). Yet last night I received a system generated email from IB that was saying I still had margin and if not cleared by the 14th they would sell some of my shares. Support are saying that accrued dividends are taken into account when it comes to determining if you still have open margin, but I am not sure if the system calculates on that premise. I intend to take no further action based on what support have told me, but I will be very p***** off if they sell some of my shares.

My understanding is that accrued dividends are dividends that have not been officially paid, hence no cash in your account yet. I think you should put yourself on the safe side by wiring in enough cash to cover up any net negative balance. IB looks at the net cash balance for your base currency. As long as it is positive (even if some of your other currency cash balances are negative), you are still covered. FYI, I didn't get that system generated email you were referring to.

 

[jlryan87]

their homepage info explicitly says FX trading is not affected by the margin restriction. did the customer service rep explain that?

'Sorry for the inconvenience' is the reply I get when they can't answer my questions anymore. They also said my margin is all covered, hinting me that the system retriction will not start liquidating my stock positions randomly.

 

[geecee]

The good news is we now have until the end of the trading day on Thursday, November 14. I wonder if that's the absolute final deadline.

 

[leeandj]

I got an offensive big surprise yesterday when I was trying to get things straight

It appears that IB has not been totally honest in the way they present the whole margin debacle. In reality, my account is practically freezed on the basis of no fault on my part. If your account is not, please kindly let me know (post here or PM if that is ok).

A bit of background here. I have some US shares (all paid with cash), positive AUD cash balance but negative USD cash balance (net cash is positive). But I cannot convert my AUD into USD because this has been deemed as a 'margin' trade and actively refused by the system. This FX conversion trade never got the chance of being transmitted at all, so the cutomer service rep got all confused unsure of what trade I was talking about. Eventually, after wasting more than 1 hour in the Australian midnight, neither the trade issue rep or the guy at the phone trade desk can help.

Next, I tried purchasing some US shares (for testing purpose only as I put in some ridiculous price that cannot be filled). Expectedly this trade is automatically rejected as well. It is at this point I have an epiphany. All trades are margin trades regardless of whether I have enough cash for them. It is because the account is Reg T margin. I do not think there is a cash account which I can convert to at this point (correct me if wrong).

What really happen is: Australian accounts are all technically freezed if your sole purpose is trading stocks. The term 'freeze' should have been honestly communicated at the starting point of the margin debacle.

I don't agree with you, I definitely was able to do what I think you are describing. When I received the information about closing out negative margin balances, I had Aussie stocks in my account, and a negative USD cash balance. I sold some stocks, which gave me a positive balance of AUD and a negative balance of USD. I did a FOREX trade (short AUD, long USD) which worked perfectly.

Let me know if you want more detail on the exact trade I did.

Secondly, I would not expect you to be able to place an order for US shares as your USD balance is negative as the order would be increasing your negative balance. You would have to purchase sufficient USD (by selling your AUD) before you could do this trade.

Please note that I am quite new to IB, only having set up my Margin account a short while before this all happened, but am relaying my experience to possibly assist you.

Lee.

 

[jlryan87]

I don't agree with you, I definitely was able to do what I think you are describing. When I received the information about closing out negative margin balances, I had Aussie stocks in my account, and a negative USD cash balance. I sold some stocks, which gave me a positive balance of AUD and a negative balance of USD. I did a FOREX trade (short AUD, long USD) which worked perfectly.

Let me know if you want more detail on the exact trade I did.

You are more than welcome to share here, or you can PM me.

Secondly, I would not expect you to be able to place an order for US shares as your USD balance is negative as the order would be increasing your negative balance. You would have to purchase sufficient USD (by selling your AUD) before you could do this trade.

Not true at all. My example is probably a bad example. But I wouldn't be able to do that even if my USD is positive. Actually, IB looks at you net cash, not the currency of the stock. Anytime when you initiate a stock trade, there is an initial margin allocated, so regardless of whether your cash is positive or negative, it is a margin trade per se. I would be happy if you can prove me otherwise.

 

[yazz]

It looks like the changes won't effect futures traders like myself.

My account is still a T-Reg margin account i.e. they didn't change it to a Cash Account.

Good news.

 

[OZ Trade]

Those having trouble with currency trades.. are you being sure to select "Currency Conversion" and not "Virtual FX Position" as the trade type?

 

[bellenuit]

Please try to do it. I am very interested to see how it works out for you. By the way, I have also tried doing a similar trade but this time I selected fx trade instead of currency conversion. The order gets rejected straight away as well. Apparently IB's statement about this margin debacle not affecting fx trades is also wrong.

I tried to do a forex trade today.

First I used the desktop Trader Workstation App (on OSX), but after selecting Forex and Sell, it said it didn't recognise the ticker AUD.USD. I had done it previously using that app. In retrospect (it just occurred to me now), I previously had a line in my list of stocks that had the ticker AUD.USD and I did the buy/sells against that line. This time I simply selected Sell and it came up with a box that asked me the ticker and then rejected AUD.USD. It happened under both Stocks and Forex.

I then started the "mobile TWS" app on my iPad and was able to Sell 400 X AUD.USD under "forex" without problems, which will clear my negative USD balance.

 

[jlryan87]

I tried to do a forex trade today.

I then started the "mobile TWS" app on my iPad and was able to Sell 400 X AUD.USD under "forex" without problems, which will clear my negative USD balance.

Hats off for your suggestion
Jusr found out that I can submit the FX order in mobile TWS, but I ain't too satisfied as the mobile version does not allow me to choose between currency conversion or fx trade. Now when I logged into desktop TWS, that irrelevant restriction seem to have been lifted and I can now submit a currency conversion trade!

Just curious though. Have your currency trade been filled?
If it has, and with your now positive USD cash balance, just wondering if you are able to submit an order for buying US stock?

 

[jlryan87]

It looks like the changes won't effect futures traders like myself.

My account is still a T-Reg margin account i.e. they didn't change it to a Cash Account.

Good news.

When I queried IB, I was being told that there is no option of downgrading from a Reg T margin account into a cash account. There is however, an alternative which involves creating a linked cash account. It is a bit of a hassle though. A cash account has limitations, the one I know is when you sell some shares, you will only get that cash proceed after 3 days (have to wait for the actual settlement).

 

[bellenuit]

Hats off for your suggestion
Just curious though. Have your currency trade been filled?
If it has, and with your now positive USD cash balance, just wondering if you are able to submit an order for buying US stock?

I think currency trades are T+2, so it will be Thursday before the USD is available.

I didn't think there was any difference between a forex trade and a currency conversion other than that for the former IB will keep a record of your forex position so you can calculate gains etc. should you subsequently reverse it. But I could be wrong on that as I only ever trade AUD.USD to regulate my account balances. I have noticed in my reports that I have an open forex position and I have no idea where it came from. Probably because at one time I sold AUD.USD and it defaulted to forex rather than currency conversion.

 

[yazz]

When I queried IB, I was being told that there is no option of downgrading from a Reg T margin account into a cash account. There is however, an alternative which involves creating a linked cash account. It is a bit of a hassle though. A cash account has limitations, the one I know is when you sell some shares, you will only get that cash proceed after 3 days (have to wait for the actual settlement).

I got conflicting information from IB. One person I spoke with at IB a few weeks ago said the margin accounts would be converted to Cash Accounts. But then when I asked them to clarify the situation, they put me through to some specialist on the matter, and they told me that my account would remain a T-reg margin account, it's just that there'd be some restriction e.g. unable to short stocks and carry a negative balance etc.

At this stage my account remains a T-Reg margin account. If they do decide to convert it to a cash account, I have a company account setup and ready to go, which has no margin restriction. That's my Plan B.

 

[bellenuit]

I got conflicting information from IB. One person I spoke with at IB a few weeks ago said the margin accounts would be converted to Cash Accounts. But then when I asked them to clarify the situation, they put me through to some specialist on the matter, and they told me that my account would remain a T-reg margin account, it's just that there'd be some restriction e.g. unable to short stocks and carry a negative balance etc.

At this stage my account remains a T-Reg margin account. If they do decide to convert it to a cash account, I have a company account setup and ready to go, which has no margin restriction. That's my Plan B.

Yazz, what is the difference between a cash account and a T-reg margin account with the restrictions you mentioned - unable to short stocks and carry a negative balance etc.? What will you be able to do on the restricted Reg-T margin that cannot be done if converted to a cash account and would cause you to switch to the company account?

I also ended up setting up a company account (fortunately I already had a company for share trading), but would prefer to use my individual account where possible.

 

[yazz]

Yazz, what is the difference between a cash account and a T-reg margin account with the restrictions you mentioned - unable to short stocks and carry a negative balance etc.? What will you be able to do on the restricted Reg-T margin that cannot be done if converted to a cash account and would cause you to switch to the company account? ...

Cash Accounts have a settlement period, T-Reg Margin accounts don't. Cash Accounts also don't offer 50% intra-day margin discount on e-mini futures like T-Reg accounts do. Those 2 disadvantages will impact my style of trading i.e. day-trading e-mini futures during the US session.

 

[bellenuit]

Cash Accounts have a settlement period, T-Reg Margin accounts don't. Cash Accounts also don't offer 50% intra-day margin discount on e-mini futures like T-Reg accounts do. Those 2 disadvantages will impact my style of trading i.e. day-trading e-mini futures during the US session.

Thanks. I'm still not sure what you mean by no settlement period. Just on shares, which is all I deal with apart from currency conversion, won't you still have to settle by T+3, otherwise you go negative (assuming balance insufficient to cover)? Are you just referring to not having to have sufficient funds in the currency of the stock traded, so long as overall you are positive after the purchase?


Also, I have portfolio margin on my individual account. I assume it is treated the same as T-Reg, apart from margin calculation when margin is allowed.

 

[yazz]

Thanks. I'm still not sure what you mean by no settlement period..

With a Margin Account, when you close a trade (futures, stock, options, forex), the margin used to open that position is available immediately, for further trading. With a Cash Account, you need to wait for a settlement period (T+3 for stocks), before that money is available for trading.

Just on shares, which is all I deal with apart from currency conversion, won't you still have to settle by T+3, otherwise you go negative (assuming balance insufficient to cover)? Are you just referring to not having to have sufficient funds in the currency of the stock traded, so long as overall you are positive after the purchase?

Yes. If I were day-trading using a Cash Account, I'd need more money in my account to cover the settlement period.

 

[jlryan87]

I think currency trades are T+2, so it will be Thursday before the USD is available.

I didn't think there was any difference between a forex trade and a currency conversion other than that for the former IB will keep a record of your forex position so you can calculate gains etc. should you subsequently reverse it. But I could be wrong on that as I only ever trade AUD.USD to regulate my account balances. I have noticed in my reports that I have an open forex position and I have no idea where it came from. Probably because at one time I sold AUD.USD and it defaulted to forex rather than currency conversion.

I have not done fx trades using IB, so can't really comment. But based on my past experience with pure fx brokers, settlement is immediate. The currency conversion trades I did with IB are also immediate in regards to settlement.