Interest on Money in Account

Discussion in 'Retail Brokers' started by gonnamakeit, Jun 2, 2008.

  1. Hi

    Just wanted to know whether the trading firm in which you keep your money should give you interest on the monies which you have.

    I have $5000 ish in my account but no interest...i have been told only interest for much larger amounts of money...

    is that the same with most companies..thanks
  2. Ask your broker about T-bonds.

  3. IB has EFPs which can give you market like synthetic rates on your money. Even amounts less than yours could be earning. Look at the IB website for more information.

    One downside is that IB service is about as bad as you can imagine from my experience.
  4. Thanks.

    Im with velocity Futures...but have been told that my money cannot earn interest only if more than $500K

    Not sure how it is for anyone else

    Im not keen on IB...

  5. Yes, thats cause they make money on your <500k at a very great Velocity.
  6. Pippi436


    Velocity puts your 5k in places like Sentinel and collects the yummy interest.

    Brokers earn a good chunk on that. If you read the latest IB earnings report, you can see that interest revenue is even higher on what they make on commissions.
  7. You are reading the IB income statement incorrectly. For first quarter 2008 Electronic Brokerage Commissions and Fees are $88.2 million, Interest Income $72.8 million and Other Income $18.0 million. Interest Expense is $50.8 million, so net interest income of $22.0 million is way below commissions of $88.2 million.
  8. It is the traditional policy of futures brokers to pay zero interest on cash. The normal method of earning interest on futures account cash is to buy t-bills which are allowed to be used as futures margin (with a haircut). There is usually a minimum account size of $50k to $100k before t-bills can be purchased. I am aware of one broker that has a $1 million minimum requirement for t-bills.

    IB is only broker I know of to pay interest on cash used for futures margin, but only for the amount over $10k.
  9. Pippi436


    You are right, i didn't subtract the interest expenses. Its still quite a significant amount compared to commission revenue - i was quite surprised when i read that. I just wanted to point out that it is an important part of the broker's income. For velocity probably much more so than for IB - since they don't pay interest at all.
  10. dmcw

    dmcw Global Futures

    I'm sure it's different for different firms. The minimum sized T-Bill that we offer is $5,000. You can use 90% of the value of the T-Bill as margin. However, you'll also want to carry some amount of cash in the account to cover the amount of any losses on positions.
    #10     Jun 3, 2008