IB FX Dealing Network

Discussion in 'Forex' started by zentrader, Dec 20, 2001.

  1. Can anyone with an IB multi-currency account tell me what the typical bid ask spread for a currency exchange transaction is? Thanks.
  2. def

    def Interactive Brokers

    i think the spreads are about 40 pips. they are not intended to compete with the currency futures which have very tight spreads. The idea is to provide a rate that is cheaper than doing a conversion via a bank where the spreads are usually much wider.
  3. snowcoop


    If you can trade directly with a bank, for huge hedge funds, multi-nationals, etc..., the bid/ask is about 5bps wide, depending on size. It widens out from there but I would not pay more than 20-30 pips wide.
  4. def

    def Interactive Brokers

    i haven't looked at the spreads lately but if i'm not mistaken when I ask my bank to xfer money from USD to HKD or another currency I pay a wider spread. Ditto for credit card transactions. In any event, on Monday, i'll log in and check the IB spreads to confirm.
  5. So what's the spread like, Def? 40 pips sounds huge to me if you want to "trade" even with a multiple day time frame. Can you give a last quote for today 04/30? thanks in advance.
  6. That's because 40 pips IS huge.

    IB's FX dealing certainly isn't the best deal around.

    However, I think they've changed the way the run it. (Correct me if I'm wrong --) IB used to maintain a wide (40 or 50 bps) quote and only allowed you trade on the bid/offer -- i.e., you couldn't enter a non-marketable order. But there was no commission charge, so all you paid was the wide spread.

    Now they charge a commission and also allow you to make your own markets.

    The spreads have tended to be a bit narrower now, but not by much.

    For serious FX trading there are better choices. On the other hand, it's convenient, so I use it anyway. :)
  7. Htrader

    Htrader Guest

    So if I understand this correctly, then this 40 pips is the spread that I must pay if I want to trade European currency denominated stock in my US dollars account.

    I'm not that familiar with FX trading but what percentage of the total currency price is 40 pips?
  8. Htrader,

    No, I understand they loan you the securities and you pay the margin interest of the securities currency.

    I don't intent to trade actively but with 40 pips I would need the currency to move almost 1 full percentage point to have a profit.
    Also I am concerned by what is said in the agreement: the transactions are not regulated, they have the right to refuse your orders(you are dealing privately with IB only). So what if you are stuck in a sinking currency and you can't even withdraw the funds? Obviously that's a bit extreme but still...

    Also what about the debit interest on your purchases of securities that are in a different currency? Do you pay interest if you only daytrade?
  9. def

    def Interactive Brokers

    kicking, i'm going to have to defer on this one till tomorrow when I can get some more info.

    as for overseas trading, i did scalp in and out of a german stock a few weeks back and the commissions charged for financing were negligable. I forget the exact numbers. I'll get more info on that Thursday as well.
  10. trinfo


    I don't think the IB FX dealing network is intended to serve as The FX Trading Platform, but to mainly facilitate multi-currency trading in other instruments. If you are wanting to trade the actual currencies, you are better off going to hotspotfx or matchbookfx, where you will get decent liquidity. More importantly, IBFX doesn't allow you to trade forex on margin, which is a really big reason not to use IB for FX trading :)

    0.40% probably is not a really big problem unless you are trying to constantly switch all your capital between different currencies. Realistically, you will just do the conversion once and then keep your account split between EUR+USD+AUD etc. etc.

    (To the person who asked, 1 pip is the smallest tick-size-thingie. Its actual value depends on the currency pair being traded - e.g. for USD/JPY it would be 1/100th of a yen, for EUR/USD it would be 1/100th of a cent, etc.)
    #10     May 1, 2002