IB accrued interest

Discussion in 'Forex Brokers' started by gwac, Feb 14, 2006.

  1. siki13


    Can someone put here real life example for what is Interactive brokers interest for the following trades executed today,two are closed today and two wednesday 3/8/2006

    1.buy 100k usd/jpy 1200 EST - Closed 1600 EST (today-monday)
    2.sell 100k usd/jpy 1200 EST - Closed 1600 EST (today-monday)
    3.1.buy 100k usd/jpy 1200 EST-Closed 1800 EST (wednesday)
    4.1.sell 100k usd/jpy 1200 EST- Closed 1800 EST (wednesday)
    #51     Mar 6, 2006
  2. KS96


    It shouldn't take you more than cooking an egg.... :D

    Why don't you just do the trades and then wait
    for your monthly haircut....errr...statement?
    #52     Mar 6, 2006
  3. KS96


    The worst is trade #4:

    (-100k * (4.551% + 1.5%) + 0% * some_millions_Yen ) * 2/360 = -33.62 USD
    (So, if you hold for a year, that's 6051 USD in interest charges!)

    Considering that you only need 2000 USD margin to open
    such a position, the interest charges of 33USD are 1.65%
    of your margin in 2 days! Good luck trading... while they suck your account dry, and they let you know only once a month!

    Add around 5 USD for 2x commissions.
    #53     Mar 6, 2006
  4. IBj

    IBj Interactive Brokers

    If I understand the framework correctly, all trades are done "today". Trades 1 & 2 are closed today, while 3 and 4 are closed on Wednesday. Assume 2 day settlement in all cases. My answers are all converted back to USD:
    1. net interest = 0 (in/out in same day creates no settled balance)
    2. net interest = 0 (see #1)
    3. [buy USD, sell JPY] net interest = credit 11.68 USD (+20.26 from USD, -8.58 from JPY)
    4. [sell USD, buy JPY] net interest = debit 33.62 USD (-33.62 USD, +0.00 from JPY)
    #54     Mar 6, 2006
  5. KS96


    Try this trade with a smaller size, and your credit can easily turn into debit.
    #55     Mar 6, 2006
  6. gowron8


    If I may, I don't believe there is much room for dispute in terms of the advatages of an ECN trading environment for one who places primarily short term trades. Brokers that trade against you (bucket shops) will inevitably use well known tactics to extract pips from and stop out profitable short term traders. Traders do not encounter this type of problem in an ECN environment.
    I do agree that the interest IB charges for over night trades seems to be excessive, but this is not an issue for daytraders.
    So, what kind of trader would want to trade on the IB platform?
    A short term trader who doesn't hold overnight positions and desires an ECN environment for the reasons stated above. One who places trades around 100k worth of currency or more as the round turn comissions for these sized trades are about .5 pip. This combined with IB's very low spreads would make the comission plus spread competitive with even the lowest spreads that you could find at the bucket shops.
    #56     Mar 6, 2006
  7. siki13


    Would be possible to bypass negative net interest if i close
    position on 1655 EST and the reenter on 1705 ?
    #57     Mar 6, 2006
  8. IBj

    IBj Interactive Brokers

    Yes. The whole basis for interrest calculations is settled cash positions and the end of the clearing day is 17:00 EST.
    Trades done after 17:00 are treated as next day transactions and settle one business day later than trades done at, say 16:55 EST.
    #58     Mar 6, 2006
  9. --------------------------------------------------------------------------------
    Quote from siki13:

    Would be possible to bypass negative net interest if i close
    position on 1655 EST and the reenter on 1705 ?

    Except you cannot reenter at 17:05 because IdealPro is closed from 17:00 til 17:30.
    #59     Mar 6, 2006
  10. Moreover, the combined impact of spread and commission may well exceed any interest savings, depending on the currency pair. You could try to consistently beat the spread with a limit or stop limit order, but then you'd risk missing re-entry altogether, especially with a 31+ minute break.
    #60     Mar 6, 2006