IBKR behaves weirdly when converting currency and immediately buying with a cash account

Investing / Brokers
91

Yeah give it a try.
What I have noticed is the following

  • Limit orders with auto FX don’t work if final cash amount after trade would be less than 100 USD
  • Limit orders with final currency on hand works even if final cash amount after trade would be less than 100 USD

I have cash account. Maybe experience on margin account might be different

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92

Of course. There is no such circus with margin account.

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93

Cannot confirm, it works even with less than 50.- in cash after trade for me.

Yes occasionally there are some unusual tiny Fx happening, but I do not really care, as the fees are suuper tiny.

What I get tough is the email notice of ‘margin cushion: xxx% remaining’. But that doesnt mean much or affect my cash account without leverage.

94

I’ll move some money to VT at IBKR at the beginning of next year. As I am in the EU, I can only buy VT via selling put options, and different settlement periods for FOREX and stocks / options make it even more cumbersome in the cash account.

So I’ll try to switch to margin account. Are there any risks to consider? I will not be using any leverage beyond different settlement periods. Does it make sense to leave it in the margin mode after the transfer, or switch back to cash? I will not be doing any extra trading in 2025 after this transfer.

95

I don’t get your message, why mentioning the ex dividend date for VT? It shouldn’t affect in any way the process to buy VT shares.

Also, ex dividend doesn’t mean payment date. I think next VT dividends will be paid on Monday, at least I haven’t received any yet for this quarter.

96

Buying before ex date you will pay taxes on the divididend you’ll get.
Buying afterwards you won’t get the dividend and you won’t pay taxes (on that dividend you’ll miss).

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97

Sorry, I thought i mention it. Call me crazy, but my best guess so far, is that IBKR’s system tried to check if I can receive USDs. By the way, today, the $0.01 were converted back to CHF :smile:

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99

That’s a neat feature to completely close a FX balance.

100

The question, though, is wjy the USD balance was opened in the first place.

101

Hello, the same thing happened to me but I have not been able to disable the automatic currency conversions option since the “Permissions” option does not allow you to disable anything.

Do you know what I have to do so that IBKR does not continue to perform automatic currency conversions?

Thank you

102

Switch to margin account, but it has some other implications.

103

At IBKR since more than 25 years, some tips:

  • IBKR pro. Lite has higher fees for almost anything except commissions, there is no such thing as a free lunch. Even margin interests are higher.
  • Margin, not cash. There is no disadvantage having a margin account, you don’t have to use margin. But when you need money fast you don’t have to wait for trades / forex to settle.
  • Tiered price model, not fixed for U.S. stock markets is always cheaper. You even may end up being paid for limit orders (negative fees for adding liquidity).
  • No automatic forex conversions. I use limit orders that sometimes are in place for months…
  • On forex trades choose “FXCONV” as marketplace. If you choose “IDEAPRO” a virtual forex position will be opened. You can delete this position anyhow later.
  • In Japan there are “Funari” orders which are limit orders that are converted to Market-on-close orders if not filled that day. Out of Japan you can simulate that order type with a “Limit” “Good-til-date” order and a “MOC” order with the same OCA (One Cancels All) group. If in U.S. set the time to 15:45 for the GTD order, because a MOC order cannot be deleted after 15:50 (Nasdaq) or 15:45 (NYSE) New York time.
  • If you plan on open an account ask somebody for a reference. Friend of mine got $1000 in IBKR stock that are worth now $2400. Nice gift. I got $200 in cash after a year. Those are the maximum premiums, small accounts get less.
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104

May I ask for the reason of this tip? Is it because you get better rates when doing it manually?

105

I’m more used to limit orders. But with liquid currencies and during trading hours one can use market orders too I suppose. There is not much spread at IB.

I usually know many months before what currency I’ll need, so I use limit orders with better than actual price and then just forget about it. I just check the chart and use a price close to a top/bottom of the past. I often get filled, nice extra.

Automatic conversion may lead to unexpected forex trades, so I prefer to do it manually.

106

Interesting. Is it better to have more USD that CHF? I always thought that it was better to have CHF as this is the base currency but then IB automatically converts it to USD after trades

107

I don’t know if currency breakdown matters. I think it counts the total value

108

Previously, it was never a problem and I would keep a couple of hundred CHF as cash for after trade deductions etc, but now it automatically converts it to USD creating temporarily a negative CHF balance.

109

Yes

I think there are two things going

  1. IB has a policy to keep at least 100 USD balance (or equivalent)in account. If you happen to have only one currency then you can ignore the warning. But this doesn’t work if eventual trade needs a currency exchange in between.

  2. T+1 & T+2 settlement period means that in front end numbers look balance but in backend there are gaps.

Based on my experience, if I want to run down the balance cash on my account below 100 USD (or equivalent), I need to first convert currencies and have them settled to the ones I eventually need. Once I have that I can reduce the balance below 100 by ignoring the warning. Otherwise the trade doesn’t work

110

I finally figured out exactly what is going on with automatic currency conversions. See full explanation in this post:

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