Interactive Brokers weird behavior (II)

[javier]

Hi guys,

I opened a post a few months ago regarding some unusual behavior from IB.

I ended up opening a complaint to the Financial Ombudsman Service but to my surprise they have ended up siding with them.

I’ll try to explain my case in a few words with round numbers:

–
I deposited 80 EUR in IB and they auto-converted it (without my authorization) to 100 USD (forex rate but then 1 USD = 0.8 EUR) .

Then a month later IB made another unauthorized trade (a reversal) using the forex rate of 1 month ago (say 1 USD = 0.8 EUR) to leave me again with 80 EUR. However the rate by then was actually 1 USD = 1 EUR.

–
That means, they brought me back again to my initial position but they made, one way or another, a risk-free gain of 20 EUR (close to 500 USD in the real world) without asking for my permission to operate my account.

The regulator says that “IB has already acted fairly and reasonably. The auto-conversion happened as it was a USD based account. The reversion shouldn’t have happened” but that they brought me back to my original position and that everything is fine.

First of all, auto-conversions shouldn’t happen regardless of the currency of the account but well…

I don’t care about the gain but rather that they can get away with this kind of stuff and the regulator says everything is fine.

What do you guys think? Am I missing something?

It would be great if somebody could tell me that what they did makes sense because to me it doesn’t sound IB were acting in the best interest of me as a customer.

Kind regards,

Javier

PS just to be clear I used plain numbers but the real gain for them was not 20 EUR but something close to 500 USD.

[Guillaume_GVA]

Whatare saying IB’s terms and conditions ? should be covered in it

[FunnyDjo]

It never happened to me.
What is the base currency of your account ?

[javier]

Hey, thanks for answering.

I’ll give a bit more of information.

@TeaCup

IB took some time to admit and aknowledge the mistake; but given you objected you clearly indicated i) that it was a mistake and ii) that you wanted it to be corrected. This is what they did, they reverted the mistake and put you where you were before (aka you had your 80 EUR back)

I’m not sure you understood the situation as it happened.

The flow is as follows:

• IB auto-converts a deposit
• IB reverses the deposit (a month later)
• I complain to IB: why are you guys doing stuff with my account without my authorisation?
• I turn to the regulator after a few months of struggle with IB

My request to the regulator was to cancel the reversal as I hadn’t requested any.

@TeaCup

so you don‘t have a basis to expect any more than beeing put back to square

They made a reversal a month later - getting a gain - and to do so they even cancelled the existing trades using that money.

Can a financial institution operate you account as they please for their own benefit?

Because I can see a clear risk-free gain for them here.

@TeaCup

Trust me, if you asked for 10 EUR of damages for two stamps / letters you sent; you would get it - together with an account termination from their side (which you trully deserved)

We’re talking about 500 USDs, did you miss that? You were probably too busy trying to make fun of me, weren’t you?

I used plain numbers (80 EUR and 100 USD) so that it was easy to understand but the real gain is about 500 USDs.

I think we all truly deserve to be treated fairly and not have our accounts being operated by our brokers to their own benefit, wouldn’t you agree with me?

As I said at the beginning this is more about the way they proceeded than the actual money.

@TeaCup

The only thing you should do next time, actually as a matter of your obligation to limit damages. Immediately convert the money back, which will cause you a FX trading loss - and then claim that back

You’re absolutely right on that.

I should have traded back so that there was a loss.

[javier]

@Patron

As far as I know IB converts smaller amounts back to account currency which is mentioned some where. I don’t know if 80 EUR falls into that scheme and for me the timeline of events and actual amounts are also not so clear from the posts.

The actual numbers were not 80 EUR and 100 USD.

I used those figures because I wanted to focus on the way they proceeded.

The actual gain for them was close to 500 USD.

@Patron

they understood after your complaint that you wanted to convert something back and they acted upon it

I didn’t complain to them.

I asked why my initial deposit had been converted without my permission.

They made the reversal a month after that without deigning to talk to me in any way.

Even when I had some limit trades using that converted money…

@Patron

But as far as I understand there is not damage at all but you even had some gains out of the misunderstanding so basically the matter is settled

I didn’t have any gain myself as I was brought to my previous position.

They did have a gain because of making a reversal forex transaction a month later when the rate had gone in their favor.

@Patron

If you have no faith anymore in them holding your assets you are free to change your broker

I’m in the process of closing the account.

Not because of the actual money but because it seems they can repeat their scheme whenever they want…

[ma0]

@javier

We’re talking about 500 USDs, did you miss that? You were probably too busy trying to make fun of me, weren’t you?

Why so mean?
TeaCup wasn’t that mean imho.
He was also right, according to what you said first.
They took your EUR and gave it back one month later. You just didn’t get any information or “sorry” back with it. The fact that your EUR is money and they might have gained something is probably irrelevant. It’s like if someone took your umbrella by mistake and gave it back.

@javier

and to do so they even cancelled the existing trades using that money.

This part is new and I’m not sure what you mean with it.

[javier]

@ma0

TeaCup wasn’t that mean imho.

I wasn’t trying to be mean at all. In fact I added a smiley

@ma0

This part is new and I’m not sure what you mean with it.

It means the person who did the reversal had to cancel those trades.

That is, that person pretty much knew the customer was happy with the current situation but proceeded to cancel the trades anyway and do the reversal. Of course without contacting the customer.

Dear customer, would you like me to make a reversal with a forex rate of a month ago? I mean, your current 100 USDs are worth today 100 EUR but I’m offering you to put you back in 80 EUR. How about that? Customer?? Customeeeer are you still there??

[ma0]

Ah ok.
Well it’s probably not someone who clicked here and there.
Somehow they probably screwed up many customers and had to remove those transactions and to do that it’s not like just deleting a few line from an excel sheet, but involves many operations probably.
Or maybe it’s the opposite. they just deleted a few lines like on excel.

[FunnyDjo]

For me the trader off is minor.
500usd gain or even 90 000usd gain is nothing for IB.

I find lots of advantages using IB and never had issue with them. Their support could be hard to reach tho.

If you do not like their behaviour, you won’t be able to change them.
The best for you will be to move on, close your account and try another one like SwissQuote.

[javier]

@Patron

Yes that would be indeed nice. But maybe the other person just interpreted your question “why did you convert without my authorisation” as please immediately revert that transaction. As I said it might have been a misunderstanding.

Yeah but they did the reversal a month later…

And when I asked to cancel the reversal they promptly replied with “no way”.

It’s ok for them to do a reversal one month in time later but not to cancel the reversal operation when requested by the customer just hours after it’s done.

I find it amazing…

@Patron

But as long as there was no damage caused

There was no damage for me because I didn’t exchange the EUR back into USD which was my mistake as was pointed out by TeaCup.

Instead I opened a complain and waited for them to cancel the reversal.

After the reversal my EUR were no longer worth 100 USD but 80 USD.

Again, these are simple numbers…in reality it’s a bit more than that.

[javier]

@FunnyDjo

500usd gain or even 90 000usd gain is nothing for IB.

Fully agree, it’s peanuts for them.

@FunnyDjo

The best for you will be to move on, close your account

Yeah, I’m in the process of closing the account.

They can proceed like this any time they want and they don’t accept any responsibility.

[Fireworks]

@javier

What do you guys think?

From what you’ve shared, it seems that the first conversion (EUR → USD) happened as expected, considering you haven’t disputed this point:

@javier

The regulator says that “[…] The auto-conversion happened as it was a USD based account. […]"

Then, you inform IB that they did something with your money that you didn’t authorize.

@javier

I complain to IB: why are you guys doing stuff with my account without my authorisation?

It doesn’t matter that you ask why, you basically told them that they acted with your money in a way that you didn’t sanction. From there it seems like they took a fully acceptable action considering their fiduciary duty: make you right. The regulator apparently agrees, so any profit or loss IB has made in the process are irrelevant as long as you have been treated fairly.

Just my 2 cents, certainly not an expert.

[javier]

@Fireworks

From what you’ve shared, it seems that the first conversion (EUR → USD) happened as expected, considering you haven’t disputed this point:

Well, I was told by IB that deposits are not auto-converted to foreign currencies.

That regardless of the default currency of the account so the conversion was due to an error.

@Fireworks

It doesn’t matter that you ask why, you basically told them that they acted with your money in a way that you didn’t sanction. From there it seems like they took a fully acceptable action considering their fiduciary duty: make you right. The regulator apparently agrees, so any profit or loss IB has made in the process are irrelevant as long as you have been treated fairly.

Yes I understand your point…

However it doesn’t sound right to trade using an unfavorable rate without telling me anything.

I mean, if I had swapped my USD to EUR that very same day I’d have got around 450 EUR more.

I don’t see how they were acting on their’s customer best interest.

Your point is that they just wanted to bring me back to the initial state I was a month ago without caring much that I had limit trades using that USD balance or about the market situation.

It’s a valid point, thanks.

[ma0]

@javier

without caring much that I had limit trades using that USD balance

Finally the main issue.

I think the problem here is that you were doing a trade with money that didn’t really exists.

[javier]

@ma0

I think the problem here is that you were doing a trade with money that didn’t really exists.

The money did exist…trust me on that one

I didn’t want to over complicate what happened but I bought some VTs with the USD funds about 10 days before the reversal.

That’s why I’m saying it should have been self-evident that I didn’t want a reversal.

The moment they did it I had actually (sample numbers) 10 VTs (and more limit trades for VTs) and 90 USD and thereafter I still had my VTs and some balance in EUR.

The remaining limit orders were cancelled in the process.

[javier]

Following your analogy, it was my umbrella not theirs: you cannot use stuff that doesn’t belong to you particularly if you’re company.

My position was x and after the reversal was x - 500 so I see that as damage however was I was asking in my complaint was to cancel/ revert the unauthorized reversal.

If a financial institution can do unauthorized conversions, reversals, cancel orders etc as they wish then I’d rather operate with somebody else.

I appreciate your explanation however and I agree it’s time to move pass this and change broker.

[ma0]

TeaCup is very good in explaining stuff, but I think here it should be put in an easier way:

• You put 80 EUR and they exchanged it.
• You complained.
• At this point those X EUR/USD are in a limbo.
• You did something with the X USD ← mistake
• They finally give you back the 80 EUR “stolen” by mistake.

You should have taken another 80 EUR, exchanged it in USD and do your stuff.
The only way you can really complain is that they locked your money and you would have used it to do exact that exchange that they reversed. That might be the only thing. But I believe they should have in their T&C something about mistakes like that.
So basically all this thread should have been something like:

IB locked my money in a wrong exchange that they did and I wasn’t able to perform stuff.

@TeaCup that last point might warrant a discussion. If you can’t touch your money because it’s locked in a mistake, what would you do?

[javier]

Sorry @ma0 that’s not what happened.

Let me get the factual events for you

• I deposited 80 EUR and they exchanged them into 100 USD using a normal FOREX rate.
• I operate with USD so I didn’t complain: I just told them I wanted to know the reason why this had happened to take it into account in the future: if I deposit GBPs I expect to get GBPs, same for EURs and USDs. I thought it was a genuine error and didn’t give it much importance to be honest.
• My EUR/ USD were NOT in a limbo: my balance was 100 USD (no EUR left).
• Then I bought 10 VTs and my balance was 90 USD
• I set a few trades to buy more VTs with the existing balance in USD.
• IB cancelled my trades
• IB brought be back to my initial deposit taking the FOREX of day one and respecting my 10 VTs.

That’s pretty much what happened again with sample numbers.