Do I need to open a futures account to trade futures now when the universal account is in effect and I do have an options and stock account with IB? What are your thoughts on this? I once started filling out forms for the futures account but somehow never finished that. I would not like to go through this again if I am to be honest. TIA. wally_
how does the universal account affect auto liquidation? Lets say I buy futures, options, stocks. Futures decide to move against me by 40 points in one second. Do my stock positions get liquidated to feed the futures loss? The main reason I like having seperate accounts is so that I don't have to be fully invested. Having all money in one account that invests 10 % in eminis, I could potentially lose all my money if NQ went to zero before position gets auto liquidated. However, If the futures account was isolated, well, I guess IB would just freeze my accounts anyway. WOW, I just realized how dangerous playing with futures is. NQ could do one of those spikey things up 1000 points and my broker could come after me and all my assets.
wally: if you are just going to trade futures, you are probably best just opening a futures account. No need to go through the extra paperwork. lundy, yes, it is a pretty complicated process as the regulations between the various regulators must be followed. If you have a futures and equity portfolio, it will try to autoliq first on the side (fut/equity) that went below the margin requirements. It will then seek out positions on the other side of the portfolio. The process gets more tricky if you carry numerous positions in different currencies and markets around the world. as for the FX, it is confusing and I'm sure an FAQ will be added shortly to the web site.
Yes IB needs to provide more detailed explanations on the multi currency and universal accounts. Especially regarding the cost of the (intraday) currency loans (with ex.), the protection provided to this new type of account (SIPC?) ... Also do you need the latest version of TWS to trade in a universal account?
lundy - As you noted, you're not really isolating your exposure by having two accounts. Losses in a futures account are NOT limited to the amount you have posted for performance bond. If you took a big hit in a single day greater than the assets in the account, the broker has the right to persue you for the difference. A separate account at your broker doesn't make it any less easy to do that than a single universal account. Only way to at least slow them down (if that's what someone hopes to do) is to keep your futures account and equity account at different brokers. As far as the universal account goes - the biggest issues seems to me to be how they handle the normal equity account insurance (SIPC and supplemental) for the equity positions (futures aren't insured), whether cash is considered part of the equity positions and therefore covered by account insurance, and exactly how the deal with cross-margining (maybe I missed that) - e.g., using available equity in your equity positions against your performance bond requirements and at what kind of a haircut. If those issues can be handled equitably, a single universal account sounds great IMO anyway.
does not encourage more people to go wild in trading futures either in usa or overseas ... it is a more dangerous animal than stocks .... been there done that ....
aa, two good points. the account is designed to sweep excess cash into the securities side of the account in order to provide maximum insurance protection to the clients. lundy, i didn't address the issue AA brought up but it is worth repeating that it is naive to think that if you blow out an account that the broker will eat the loss. You would be liable. You need to trade within your means.
def - Sweeping cash to the equity side is great and maximizes account insurance protection. Presumably the equity/cash side is covered by SIPC and supplemental insurance like a normal equity only account? How is cross-margining done (or is it done)? Cash on the equity side (which it sounds like cash will always reside thanks to the sweep) is presumably not an issue. But what's the discount/haircut applied to any other securities (e.g., available equity on stock positions, cash-like instruments, etc.)? Thanks.
Equity is covered as normal (SIPC plus supplemental insurance). Cross margining will not initially be available. I'm not sure what the plans are for the future on cross margining. Global cross margining would be a killer product but easier said than done - especially on the clearing/back office and regulatory side. One thing at a time for now... Now i have to eat some crow. I just looked at my account where I scalped an Australian future the other day and there is still some cash on the commodity side. I hope I didn't jump the gun on the sweep feature but it was mentioned in a call I was on. My account is a bit unique in that it is an internal "test" account and there are limitations on fund xfers. Thus I'll have to confirm the sweep details. Though, I do believe my information is correct. Haircut: things should be the same as before 4:1 for cash. Day trading margins/overnight margins for futures. naturally if/when some degree of cross margining is implemented the haircut levels will change.
DEF: my IB futures account has been active fro almost two years. I just opened an equities account 10 days ago so new that the check issued to fund the the account hasnt cleared yet. What I really want is this new product. THE UNIVERSAL ACCOUNT. HOW do I do this now that I have taken the actions that I have?? THANKS