Foreign CCY via FXCONV? When?

Discussion in 'Interactive Brokers' started by rts232, Oct 3, 2021.

  1. rts232


    Why are EU IB clients (meaning UK/US) not allowed to create positive foreign currency balances (via FXCONV)? After the whole mess with the new EU subsidiaries this was a problem supposedly having to do with regulation. I don't believe this.

    Will this change? It there a timeline? What's the real reason for disallowing this? Anything helps...
  2. IB does not support FX transactions (via FXCONV) that could create a negative balance due to EU regulation. If you want more the cheapest way is to use FX futures.
  3. rts232


    See, this is, what I do not understand: It's a direct conversion by means of applying the spot rate. Where's the leverage? Where's the danger in creating a negative balance?
  4. Example of leverage:
    Balance: 10KEUR
    Sell 1 000 000EUR at 1.16 EUR/USD
    Balance: -990 000 EUR, +1 160 000 USD
    Assume the spot is now 1.175 EUR/USD
    The market value of your balance in EUR is -990 000 + 1 160 000/1.175 = -2 766 EUR
  5. rts232


    I was talking about ccy conversion without using portfolio margin (or cfds). I mean, ok sure, you could leverage yourself via margin in a ccy conversion via FXCONV, but that would wouldn't make much sense, right, and it could be very easily prevented by the broker.
    On the other hand, considering EU clients actually do have access to cfd trading anyways and CAN run into negative territory with this, how on earth does their argument hold? You can create negative balances, but only so, if you use the right tools?
  6. def

    def Sponsor

    We can only be guided by what the central banks in the locations we are registered allow. I'm not an expert on Ireland or Europe there is no doubt the near collapse of the system in 2008 governs some of the rules and logic today.
  7. rts232


    Thanks, def, but I really do not understand the actual regulatory aspect supposedly in play here: There are numerous products allowed to be traded for EU clients, that could result in negative portfolio balances. The mere FX conversion, by way of using portfolio margin, could theoretically result in a negative balance, too. What gives? Everything else - beyond the asset class used - being the same cannot lead to one on thing being allowed and the other forbidden. It's against basic logic...OR I haven't understood what the actual problem is supposed to be.

    EDIT: Am I right to assume UK, US and HK customers are indeed exempt from this nonsense?