Account Type: Margin at Interactive Brokers

Investing / Brokers
#1

I have a cash account at IB. Recently I send CHF to IB, exchanged to USD and then exchanged to EUR. Then I wanted to send that EUR back to my bank account, but as it appears, the amount available is 0.00 EUR. I guess that’s because the fx trade is not yet settled, right?

So I decided to switch to margin account. I checked the page with interest rates and it says 2.92% for USD and 1.50% for EUR.

For those of you having the margin account at IB:

  • have you ever been charged any interest?
  • how is it calculated, on daily basis? Is it also charged on daily basis? I would not like to find a huge bill end of month because I made a mistake
  • what is the basis of the loan? the settled currency on the account?
  • if I want to withdraw unsettled EUR, will they charge me interest in EUR? I want to avoid a situation where I would have a -0.10 EUR balance on my account and then would have trouble to bring it back to zero
  • what should I be careful about when having a margin account, are there any risks or downsides?
  • any other case where margin account would be useful, other than described here?

I do not indend to trade on margin, just want to be able to transfer money faster. By the way, for the part of converted USDs I bought some ETFs, and it worked instantly, with a cash account. I really don’t understand how it works. Why does IB allow me to buy using unsettled currency but does not allow to withdraw it?

#2

More likely you hit this restriction:

“In addition, there is a withdrawal hold period of three business days placed on deposits made by either wire transfer or bank check.”

Interest is accrued daily, debited monthly

I’ve always been charged peanuts when using it… highest i remember being charged was about $5 when i forgot to transfer some 4-5 figure sum for a month or so, otherwise it’s usually on the order of pennies to tens of pennies.

You get charged separately per each currency in which you’re short and in that currency itself

SEPA transfers are free of charge, at least with PF, no matter how small amount so for EUR it’s not a problem. And what’s the problem with leaving a small amount in?

Rehypothecation when you’re on margin, loss of SIPC protection

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#3

Oh there really is a restriction like this? Thanks for clearing this out! Can you tell me, so if I sell an ETF and exchange USD to CHF, I may withdraw it immediately? The limitation is only for deposited funds?

Well I certainly would not like to lose the SIPC. Maybe I’ll just revert my request then and keep cash account. I really had no problem to exchange currencies and buy ETFs at once with the cash account. So why would I like to have a margin account? I am not planning to trade with what I don’t have.

#4

Without margin, only after trade settles and broker gets paid by your counterparty’s broker which is normally in 2-3 business days as well

Well it doesn’t hurt when you’re not using the margin, and for a short term use I think you’re overrating the protecting.

#5

So to sum up:

After depositing funds, you may withdraw them after 3 business days (regardless if you have a cash or margin account)

Source:
https://www.interactivebrokers.com/en/index.php?f=1544

Limitations
The Withdrawal Hold Period is three business days (you may withdraw funds after three business days). A wire cannot be internally transferred during the three-day hold period.

After a sell trade, if you have the cash account, you will need to wait for the trade to settle (2-3 business days) to withdraw. With margin account, you should be able to withdraw immediately.

Is this accurate? If so, then I guess it’s worth to have the margin account. Because normally when you do a sell trade, you would like to withdraw immediately, and not wait a few days. And the loss of SIPC protection only affects the amount bought on margin? It’s not like the total loss of protection because you have a margin account?

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#6

Under US rules, SEC Rule 15c3-3, broker is allowed to rehypothecate up to 140% of your debt’s value. For the securities it’d rehypothecate (loan out) you’d lose SIPC protection as it doesn’t cover counterparty risks

While googling about it now, I’ve noticed that it looks like in UK (and you’re dealing with IB UK) there’s no similar regulation and so maybe as a IB UK customer you have higher risk with regards to it… i don’t know much about it, i’ll need to read up

#7

I don’t know how you’re able to figure out anything from the rules and regulations. It’s impressive.

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#8

I am trying to change from cash account to portfolio margin account on IB. I keep getting this notification. I have well > 200 K CHF portfolio of ETFs on IB. Any pointers on how to proceed?

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I did enter 3 years trading experience in every kind of instrument - stocks / bonds / cfds / etc but this notification stays

#9

I saw somewhere that for portfolio margin your account should have options trading enabled.

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#10

I don’t think so, I have a margin account and no options trading enabled.
Look into the investment objectives, I think it is not compatible with “preservation of capital”.

Edit: oops, my bad, I was talking about margin account, not portfolio margin… it says on the ibkr website that you need to be approved for uncovered options trading
I had to remove “preservation of capital” but that was not for the margin account, it was to get approved for some other kind of products

#11

Ok, I tried all combinations and permutations.
In the end I got the same message for Portfolio Margin.

But then I simply chose Margin instead of Portfolio Margin, and now my request is under review.

Maybe it is a 2 step process. First get to Margin account and then if portfolio is > 100 K, then changing to Portfolio Margin

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#12

Update: I got the margin account and I was able to convert currency ending up with negative 90 rappen CHF balance.

Now I try to change from margin to portfolio margin, but get the same message as above.

Anyone moved from margin (regulation T) to portfolio margin successfully on IB?

Edit: I read up the difference between Reg T and Potfolio Margin, but not fully sure about their differences in terms of cost of borrowing.

#14

Thanks, I raised the ticket with IB.

1 Like
#15

If I remember correctly, there is a 30 day grace period on re-changing account type after changing it once. try again in one month and please report here, as i am having the exact same experience as you describe :slight_smile:

https://ibkr.info/node/280

btw with margin account now, i am super happy that i can first buy the etfs (in usd) that i want and only then convert the according amount of CHF to USD, resulting in a zero Balance of USD. just cosmetics, but I like it :smiley:
before I always had that small reminder of USD that I could not turn into a share

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#16

Update:
Once I got the Margin account (Reg T), I raised a ticket to get to portfolio margin. I was asked to enable trading permissions (options / stock options/ index options) in the country where I want to → US

After doing that I waited for a day and then tried to change account from Margin to Portfolio Margin. It was approved within 24 hours

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#17

thanks!

for me it seems difficult to pick US for Sock (and Index) options… hmmm… :thinking:

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#18

I used phone app.
More (bottom right) → Account (top) → Trading Permissions
Then under Options I did the following:

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#19

yes, options i also had US as selectable option. just not for stock/index options. well i guess i will get there the one way or the other :slight_smile: