Since some CTAs trade their clients accounts with fully automated operations, I am just wondering whether the IB/TWS (or any other platform) can perform required allocation/distribution of bunch/block orders based on the All accounts' Nominal sizes, rather than their NAV sizes. I assume that Nominal = Actual + Notional + Gains/Losses. In other words, the TWS platform should be able to calculate and update the allocation %/ratios automatically based on all the Nominal sizes, therefore no human entry by manual operations about allocation %/ratios is required.
I agree that they "should" be able to do it, but they don't currently. In fact, IB is very awkward in this area for CTAs. Specifically, their allocation and execution methods are not as good as their competitors. The way the platform handles partial fills is particularly awful. I've tried to get them to fix it for over a year, and they refuse. It will probably cost them a large account in the very near future. It's too bad because clients love the online access to daily reports, and the ability to produce pretty visual aids. One point of clarification. You said Nominal = cash + notional + PnL. This is not correct. Nominal = Cash + Notional. PnL does not change the nominal level until the advisor and client make a new contractual arrangement. This is on the Series 3, and the NFA is very specific about it.
Yes they can. While I am not a CTA, I trade a LP with IB and have talked with them about this exact topic. They have a feature that will denote which account is notionally funded and which aren't. Since the CTA will basically see one omnibus account, the account value would reflect that. For example. You have: 1. $100k notional funded account (trade it as $200k) 2. $200k regular account. Your omnibus account will be $400k and all trades will be allocated 50/50 between the two accounts. Also, if IB does your fees it will charge based on nominal funding. For example: You have a 2% management fee. The $100k account that is nominally funded at $200k will be charged $4000. All that is spelled out in the DD.
Thanks Epic. I meant the following. (Nominal: fixed amount)= ((Cash + PnL): variable amonut) + (Notional: variable amount) However the Notional must not exceed a pre-defined %, say 75%.
WRONG. IB allows the master account user to create pre-trade allocation instructions based on net liq, avail equity, percentage increase (opening)/decrease (closing), equal volumes, and even named volume sizes amongst the sub-accounts. Furthermore, you can have different groups that include some or all of the sub-accounts based on the strategy. Also, I can automatically write calls/buy puts on long stock positions without having to figure which sub-accounts have a given stock. I an even roll those positions to different expirations/strikes with a single trade. I have referred other advisors to IB's platform and those that have switched love it. What is it you think is missing here?
I'm not saying that they don't offer several different options for allocation. The mechanics of execution are all messed up. Ask them what happens to your manual trade allocation (you referred to it as named volume sizes) on a partial fill. Example... You have 10 sub accounts. We'll call them 1, 2, 3, 4, and so on. You submit a 10-lot futures buy order with an attached OTO limit sell. But only get filled on 6 of primary opening order. So now accounts 1-6 have all got a new position. What do you think happens when the OTO sell limit gets hit? You would probably expect that it would be applied to accounts 1-6, right? Nope, it fills accounts 1, 2, 7, 8, 9, & 10. Now imagine this scenario with 50 accounts and trading 200-300 lots. Partial fills are fairly frequent. Sure you can call them up and tell them to fix it. But it shouldn't even be an issue in the first place. If a OTO closing order is specifically attached to the parent order when first submitted, the software should know which accounts should get the closing fills. There are a lot of great things about IB, but you should know that they are well known in the asset management industry for being cumbersome when it comes to SMAs.
Ahhh, gotcha. That is not good. My experience with IB is from the stock and options side, which trades in more size and is likely more liquid than most futures so I don't have that problem.
Hi Guys/Gals What is the appropriate/correct way (in your opinion/experience) of defining Notional funding? I think this issue could be very critical/important for generating incomes/fees as assets managers. It's seldom discussed on ET. How do you make use of 1x, 2x, 3x or 4x of the same strategy and thier implications/performance vs generating incomes/fees? I hope you would understand what I try to ask.
Is the OP asking if IB will do the math for him and make the account show the notional instead of actual funding in TWS and statements? Otherwise, every broker supports notional funding in that it's just a higher allocation of equity to margin that you keep track of yourself. The broker could care less as long as there is sufficient margin.