IB - Trading ES - currency conversion to USD to trade US market product

Discussion in 'Interactive Brokers' started by etrades, Aug 16, 2019.

  1. etrades


    Hi guys,

    Do IB do the currency conversion at market price when the deposit is other than USD and the traded product is ES or other US market product?

    I think this would mean that the currency trade will also be part of the total P/L is that correct ?

    I was not aware of that !

    I thought since it is not an actual fx trade, they would simply apply same conversion rate on both directions of the trade such that it would not impact the P/L when I do not actually trade FX but trade other tickers such as ES or something.
  2. Hi etrades,

    IB doesn't. You need to manually convert in USD an amount that will be sufficient to cover your USD overnight margin and estimated potential losses in USD otherwise you will be charged an interest on your negative USD balance. Same goes for every currency.
    If your reference currency is not USD, then your statement will show a profit or a loss due to the variation of the USD value in your reference currency.
    Hope that helps.
    etrades likes this.
  3. def

    def Sponsor

    The idea behind letting IB clients do the FX conversion is quite simple - it gives clients the freedom to do what they want and provide full transparency in pricing. Another little hidden gem for brokers and banks is to perform FX on behalf of their clients behind the scenes and take a nice little cut on the spread. For a good sized deposit, this can be one heck of a hidden fee.

    So with IB, the power of if and when to convert is up to you and I'll add with most majors you'll pretty much see spreads quoted 1/10 of a pip wide. We don't widen spreads and you can work the market as well (ie. place a bid, go mid-point, etc). In addition, from time to time you may even see price improvement on your fills.

    So assume you deposit AUD and scalp e-mini or day trade a US stock. You won't have to convert or pay interest as your position was closed by day end. (if you have negative pnl you will be charged interest for the loan or you can convert). If you want to convert, you'll get a real time transparent quote for you to convert at a time of your choosing and you can consider the FX pnl separately.

    Finally, your account will be reported in your base currency but you'll see a section on currencies held and the mark to market real time on TWS or at day end on your statements.
  4. etrades


    Thank you for the reply def.

    If I choose not to convert but hold an overnight position, I would pay interest as per my understanding per day on one ES contract margin - how much would it be ? Is it about 80 cents ?

    Also, the reason I do not want to convert is because if I do then I would need to watch the currency trade as well.. I would rather concentrate on the main position rather than the currency rates on this. Not sure if this understanding is correct or it is another explanation for this.
    Last edited: Aug 18, 2019
  5. def

    def Sponsor

    yes, less than 80 cents given current rates and you give a perfect example of why we do not force convert. it allows clients to determine and manager their own risk and should you desire to convert, given our fx spreads, you'll have very little friction and thus even stand a chance to make money.
    etrades likes this.