IB's accrued interest

Discussion in 'Automated Trading' started by travis, Nov 16, 2007.

  1. travis


    All of a sudden I discovered this beautiful feature: accrued interest. Whenever I looked at my monthly IB statements I always saw "accrued interest = -5" or "accrued interest = -10" dollars, but I thought it was just some detail I would never understand... and that there was no way that IB would charge me for anything other than the data fees. Well, I was wrong.

    I had a positive USD balance, and they didn't charge me accrued interest for that of course, but I also had a (smaller) negative EUR balance, I don't know for what reason, since I never traded anything in euros. That cost me about 7 dollars a month for years, for a total of hundreds of dollars.

    I called customer service at IB and they told me ... I don't remember if it was to buy or to sell euros, but it is now fixed because it says "EUR 0", while for years it said EUR -1100. Still, now in TWS it says I have an open FOREX trade, and puzzles me.

    Can anyone please explain to me the following:

    1) why did I get a negative euro balance when I didn't even trade anything that EUR as a currency and my base currency is USD.

    2) why didn't IB warn me that I was getting charged about one hundred dollars a year in accrued interest.

    3) how can it even happen that you have an overall positive balance and get charged accrued interest.

    4) how come I have an open FOREX trade now that I closed the negative EUR balance (in a sense it looks as though my account was normal with a negative euro balance, because at least I didn't have any open trades).
  2. TraDaToR



    I had the same kind of problem when I funded my IB account. My base currency is the euro, but since I made the wire from TS, my funds were already in $( even if almost everything was in euro in my "view account" window). Since I mainly trade the US markets, I decided to convert euros I was thinking I had on my account and ended up with a negative euro balance.

    Hopefully, I figured it out pretty quick and bought back my negative euros.

    - Have you ever convert something in euros?Have you ever sold euros?

    If it is not the case, it is weird...
  3. TraDaToR


    Your post made me watch my EUR balance and I was -0.75 Euros. I converted it but I don't understand since I left something like 5 Euros 2 months ago...

    Does anybody know what the problem is? What are the fees that made my euro balance negative again?
  4. travis


    Regarding your possible fees the answer is easy - you have a detailed report of all fees and past fees in acct mgmt and that at least is clear.

    On another forum they told me that I must have traded something in euro sometime in the past. Maybe I did, years ago. Then they said - I must have lost on that trade. Then, because of a loss in euro traded futures, I had a negative euro balance on my account, for years, until I noticed it recently.

    Thanks a lot, IB. Since my base currency is USD, shouldn't there be a way to automatically adjust these losses so that all my cash is always in dollars? This way I lost hundreds of euros in accrued interest, while my overall balance was positive (and yet lower than the minimum balance required to receive interest). So as a consequence I lost money without a reason for it. Other than this IB is very very satisfactory.

    However, imagine how many people get charged accrued interest like me and how much money IB makes because of this. Say you make a trade in a currency other than your base currency and lose money. You will have a negative balance and get charged accrued interest because of it, and it will be that way until you notice it, because IB neither warns you on your statement nor on the web site page that explains accrued interest. Even this procedure of buying euros is everything but clear and intuitive. I had to call customer service to find out about it.

    Now, finally, my statement today didn't show any accrued interest debited and appears as follows:

    Cash Report ( November 15, 2007 )
    Cash Detail Total

    Base Currency Summary
    Starting Cash xyz
    Ending Cash xyz
    Ending Settled Cash xyz
    Average Credit Balance xyz

    Starting Cash 0
    Ending Cash 0
    Ending Settled Cash 0

    Starting Cash xyz
    Ending Cash xyz
    Ending Settled xyz
    Average Credit Balance xyz

    The EUR section of Interest Accruals reads: "Interest Accrued 0.00" and I hope it will stay like this in the future.
  5. Daal


    just accept the loss man
  6. i think you get charged that interest when you trade FX using IB, i see that i am paying 200 a month in interests for shorting AUDCAD and AUDSGD...
  7. The beauty of IB is that it both gives and takes Libor. So count yourself lucky that you have such a good broker. You can do a carry trade, which is impossible with any other retail broker.

    Now about managing forex positions...

    What you need to understand is the following. Imagine you going to Europe. You have USD's, but not Euro's. There are two things you can do. One is that you convert USD's into Euro's. It is clean, and there are no charges other than the conversion.

    The second and this is what I suspect you did is that you went to Europe, but asked somebody to borrow some Euros on the promise that you will pay back the Euros. So off you went to Euro land, and you gambled and lost. So now instead of having a profit to pay off the loan you lost and you "forgot" to pay off your debt. Unlike the loan shark, IB just says, "ok when you are ready you can payoff, but until then you owe us money, and that money is costing you interest."

    It is actually rather simple. Thus shorting something like the AUD becomes very expensive as the interest rate is rather high. Remember that unless you AUD, you are asking to borrow AUD, and that will cost you quite a bit of money.
  8. bjw


    i agree. it's an excellent feature ib has to hold balances in several different currencies and it's a very useful tool if you know how to use it. obviously, if you don't, that's another story, but that goes for everything ib offers.

    look at it as two different accounts. the fact you have 1000 in account 1, doesn't mean you wouldn't need to pay interest on a deficit in account 2