IB FX Dealing Network

You would expect the Brits to be out to rip off everyone, anywhere, anyway, anytime they can. The British people have on civil liberties and the USA is walking in Britain's foot steps. It is only a matter of time. It is all rotten right down to the core.

Catoosa:

 

They invented some stuff called CFD to avoid stamp tax. No tax on futures (yet).

 

AlanM

You can use CFDs to trade without paying the tax, and you can also use CFDs to short and also get margin of around 20%

CFDs could effectively be looked at as a futures contract, but they mirror exactly the share price - so could be called a "cash contract"

Catoosa

Where are u from?

 

CFD's are probably the way to go in London as stamp kills the game for anyone who has to pay it.

Anyway, a reply to the previous questions:

For European stocks, IB charges 0.1% (or 10 basis points). You should find that this is a very competitive rate for Europe. (For German stocks commission goes down to 4 basis points for incremental over Eur15,000).

Stamp tax is imposed by the respective governments, and is must also be paid. Stamp tax rates are:

UK stocks 0.5% on the purchase only
Irish stocks 1% on the purchase only
Swiss stocks 0.07% or 7 basis points on all transactions
There is no stamp tax for Germany.


Regarding the IB IDEAL. This has been introducing largely to facilitate currency exchanges for customers that wish to trade stock in an overseas country. The spreads, which are usually 20-40 pips, will be much better than any bank.

If you wish to trade FX, then you should consider using the FX futures. The futures market is now open 23 hours a day and spreads are usually 1-2 pips – far better than what you will get in an FX spot market where you will usually be trading against the house. Liquidity is also very good, for example now it is 5:35am EST, one of the quietest periods of FX trading and markets are:

EUR .9040 .9041 8x20
CHF 1.6219 1.6220 41x19
AUD 0.5356 0.5358 35x2
JPY 0.007875 0.007877 20x40
CAD 0.6395 0.6398 58x46

 

I am in the USA.

Catoosa

 

So what's a CFD? Something like bullets or conversions? What do they cost and who offers them?

 

Stamp tax 1.5% in the U.K. is standard, unless you are a dealer. Go ahead and "invest" there if you like, but avoid "trading". If you want to trade there seriously, then you'll have to trade CFDs.

 

CFD = Contract For Difference

You find yourself a UK broker.

And instead of buying a given stock XYZ, you instead enter into a contract with the broker to exchange the cash flows that would result if you HAD bought the stock. The broker then hedges this transaction by going into the marketplace and actually buying the stock. They don't pay stamp tax because they are exempt.

To you it works basically the same as trading the stock. Except:

1- You'll likely get better margin treatment

2- You won't have to pay stamp tax

3- You'll likely have a finance charge on the WHOLE purchase price.

4- There might be funky treatment of dividends (check your contract)



(There's also spreadbetting available in UK, but then there is no centrallized market - instead you're just transacting at the posted prices.)

 

there is no "centralised" market for CFDs either - the CFD price is a function of the price in the market - not the price in the market

but with spreadbetting, you are trading against the "house", with CFDs you are able to trade with other participants - but one of those participants may be the "house"

 

EUR on IDEAL was trading at 0.9949/0.9966 then all of a sudden it went to 0.9750/1.0049 and stayed there. I bought EUR in the morning and if I wanted to sell I 'd be screwed.