J.P. I don't know. Maybe it's harder to collect. Or perhaps someone noticed some IRA's in the other 20% of the CHF big losers and wondered about IB's risk, resulting in a very precipitous, not thought out, decision to "fix it right away".. Obviously, after due consideration, they are restoring futures trading, but with more protection for themselves. Jack
Think you hit the nail on the head with harder to collect. If you can only contribute X amount per year you won't be allowed to contribute say $25K if you are underwater by that much. And they can't force you to either, so I'd assume they'd just lose it. I do not like the way this was handled, it almost seems as if different departments were acting without any coordination, like IB has internal fiefdoms that are almost independent. Not good.
But apparently they can force you to: JackR said: A number of years ago there was a thread about exercising of some call options held in an IRA account. They were exercised and there were insufficient funds to cover the called stock. So IB sold on the open on Monday. The stock sold for less than the exercise price. The account took a hit greater than its equity. Thus, a debit balance. The account owner had to pay up. [Assuming JackR's recall is accurate.]
J.P. Well it took place in 2005. I was off a bit, The owner had an IRA and a regular account. IB covered the debit from his regular account. In looking at the thread I see IB also fixed the options exercise problem - they will not exercise an ITM option if it will put the IRA account into a debit position. Here is a link for those of you wanting to read all 17 or so pages: http://www.elitetrader.com/et/index...nt-need-suggestions.51251/page-11#post-799601 Jack
I read the 17 pages; thank you for posting. And that seems to settle that aspect of this: If an IRA account has a negative balance the broker can get it back any way they can. Contributions limits to IRA accounts notwithstanding, a debt is owed to the broker and it needs to be paid in full either through the IRA (unlikely due to the contribution restraints) or to the broker outside of the IRA.
I'd think there would be tax consequences if you settled an IRA debt outside of an IRA. Safe to say either way you're up the creek....
But we still have the unanswered question: Why, then, is IB making a distinction between IRA and non-IRA accounts?
My contact at IB indicated it was a regulatory issue, so perhaps they are not allowed to put their IRA customers in a position where they can lose more money than they have. I'm guessing that is the reason why short-selling is not allowed in an IRA account. Gary
Shorting requires borrowing a stock . This requires margin. Margin is a loan. Loans are not allowed in an IRA-type account. Selling or buying a futures contract does not involve borrowing, you have a contract to buy or sell something. Technically futures do not use margin. They require a performance bond. The bond "ensures" your performance.
If this is truly a regulatory issue then IB should specify which regulatory issue created this change. Surely IB should want it's clients to be fully educated and informed on this issue. If they can't identify the regulatory issue then I call IB out on issuing "total effing BS" !!