Hi kiwi_trader, It is because small costs does add up. You don't wish to pay, say, US$10000 interest per year due to its policy on interest calculation. It is similar to why people like cheaper commissions and better fills. The burden, if your trades turn out to be losers, will be smaller. Another reason is they want to earn as much as possible. Since other brokers can offer more competitive interest calculation, why not use others even if you don't think interest is a big deal? Everyone like to earn more.
Yes, the cost does add up. There's no point trading forex in IB. The deal is not attractive. There's another hidden cost on min commission. Although the website indicates the min is $2.50 or USD Equivalent, that is not true. For some weird reasons, IB tends to charge more for all other currencies. For example, the min for GBP is charged more than US$0.35 per trade [the min commission is GBP1.5 (about US$2.85)]. I don't think $2.85 and $2.5 can be deemed as an equivalent! Even if you ask the staff, most still don't know about it. You can know only when you receive your account statement. Finally this is the real min commission list (you cannot find it on IB website) at the best of my knowledge. I figured it out all the hard way. Currency===Min commission AUD 3.5 CAD 3.5 (<-- That's crazy! It is equal to US$3.17) CHF 3 EUR 2 GBP 1.5 HKD 20 JPY 250 MXN 25 SEK 20 USD 2.5
here u go from wikpedia, hidden charges, unfair and undisclosed: http://en.Wikipedia.org/wiki/Interactive_Brokers#Interest_rates
what a joke, all your interests gains are completely wiped out by your actual gains/losses and overnite positions costs. may well end up even down on your balance...well u sure do if u have multple accounts.
This is due to using legacy rates for setting minimums. It is already being addressed. There are some big chnages coming soon to our FX offering.
What's worse is that every time I see someone criticize the confusing way they calculate interest, someone from IB describes in detail how clearly it is explained on their website. How about explaining it clearly on my monthly statement, i.e., attribute the interest charged to the day margin was used??? and at what interest rate??? Ameritrade sucks, but they do it just fine.
Competely disclosed, actually. http://www.interactivebrokers.com/en/accounts/fees/interestMethods.php You just need to be willing to spend a few minutes working through an example. If it is important to you, spend the time to learn, say 5-10 minutes depending on math aptitude (interest calculations are math, after all). If it isn't important to you, then it is a non-issue anyway. What the Wikipedia entry omits to say are the following: * security and commodity accounts are separately regulated. Commingling is not permitted since you would probably lose the SIPC and Lloyd's insurance protection. We decided not to test that possibility. * IB's approach to tiered rates is intended to discourage small accounts. Small capital usually means less trading and we want traders of the semi-pro and pro variety, not hobbyist investors. If you have 15K with IB, you get a poor effective rate. If you have 500K, you get a pretty nice one. As with everything in life, we can't be all things to all people. If you plan on trading and putting your money in the market, then commissions and brokerage services are the key points (and where IB has focused). If you want interest returns, then maybe look for better rates in tbills or money markets funds at your bank.
u get crap if u have open positions and your profits/losses are 'taxes'. almost all the interests u gain from your balance are wiped out by the other charges.