Has anyone set up a multicurrency account on IB? Whats the benefit of doing so and how does IB handle currency conversions?
I'm living in Austria/Europe, so I have an EUR-based multicurrency account. On a german Board I read today that these accounts (based in EUR) are not SIPC-secured - that worries me a bit. But left that aside it works fine. You do not even have to change money if you only daytrade. But I think most questions are answered by the IB-site. The only thing that worries me is the SIPC-protection-thing ... Harry
Hi, I have 2 MC accounts now with IB - opened the 2nd. one only recently, because they added now also options trading to MC accounts - which was not the case, when I opened the first MC account just a couple of weeks ago. It's a pitty, that one cannot just upgrade an existing account - one has always to create a new account.... Well, what are the benefits : As radio Eriwan always said - it depends... on ones needs. For me , living in Europe, with my home currency EUR - , the MC account has several advantages : Although my MC account is in EUR , I can buy and sell US stocks in $, UK stocks in GBP, German stocks in EUR, Swiss stocks in SFR and all stockoptions, ETF's etc. - All from one account. I could even buy many important US stocks listed on XETRA in Germany in EUR. They trade as from 9.00 a.m CET on in Frankfurt ( XETRA ) until 8.00 p.m. CET. This opens some room for overnight strategies ! The MC account is in EUR and with the Frankfurt branch of Citibank - no money transfers to US necessary. I have my personal account also with Citibank since many years - so all money transfers are free of charge for me and are executed in 1-2 days ( not usual here in Germany ). Aside from these points, a MC account helps to reduce currency exchange-rate risks. How does this work ? Say your MC's account base currency is EUR. You fund your account in EUR. The cash in EUR or Equities purchased in EUR are held as a collateral for a margin loan in foreign currencies, which you get from IB once you buy equities in other currencies than the base currency of your MC account. As an alternative, you can always buy the necessary amount of foreign currency for the trade by selling EUR vs. the selected currency directly from your MC account for the current spot price. ( So one could also trade currencies as well if he likes ). There's no delay - you buy the currencies just as stocks or options. I.e. : You have 10.000 EUR in cash in your MC account. Now you want to buy 100 MSFT shares for a price of 5000 USD in total. With your buy order filled, you get automatically the margin credit in USD - so your account shows 10K EUR in cash, but 5K USD as loan + 5K worth of MSFT as position. Now you sell the 100 MSFT for 51. Automatically, the loan of 5K USD is "paid back" and 100 USD profit remain on your account in USD, until you buy EUR from this profit. So you actually never used your EUR and you didn't expose them to exchangerate risk. The only position at risk is the 100 USD profit, because you'll have to convert them into EUR if you need the cash. But you could also decide to keep them as USD in your account, reducing the size of the loan you'll need for your next USD buy. Of course, this works also the other way around : say you had to sell your 100 MSFT for 49 USD, so you made a loss of 100 USD. Now your account shows still 10K EUR in cash, but - 100 USD loan which you will have to pay back - either by future USD profits or by selling the equivalent amount in EUR vs. USD. However, your cash in EUR is always protected against exchange rate risks since you don't have to exchange them. Here's IB's explanation about MC accounts : A Multi-Currency Account allows you to fund your account in one currency (your base currency), and buy or sell securities in another currency. When you purchase a security in a non-base currency, a margin loan is established to fund that security with your base currency serving as collateral on the margin loan. Unlike with other foreign securities brokers, you are not forced to exchange currencies in order to purchase foreign securities. When you sell a security, funds are created in the currency in which the security is settled. In addition to the ability to easily purchase or sell foreign securities, we offer you the opportunity to exchange funds between currencies (whether you own securities in a particular currency or not) at any time at the currently quoted exchange rate provided by our "IDEAL" currency-trading network. Multi-Currency Accounts will only work with Equity Margin or Equity Options Level II Account Types in a base currency of US Dollars, Euros, Hong Kong Dollars, British Pounds or Swiss Francs. You may purchase US, UK, Swiss, and German securities at this time.
Thanks for the info guys. Harry, I'm in the U.S., but am looking into trading on the XETRA German exchange. Have you traded on the XETRA at all Privateer? And if so how is the liquidity?
Privateer wrote: "It's a pitty, that one cannot just upgrade an existing account - one has always to create a new account.... " Privateer, One can easily upgrade existing account to a Multicurrency account: Just log-on to your account through IB website and select "Account upgrade" from the menu.
Hi H trader & Harry, Harry - maybe it doesn't help much on your concerns about account protection - but surely interesting to read is the Standard & Poors Rating for Interactive Brokers Group , including it's subsidiary Timber Hill ( used to be the other way around in the past - but times are changing ) You can find it here : http://www.interactivebrokers.com/download/sp_rating.pdf Htrader : yes, I traded on XETRA , but not via IBIS network, as IB is offering it. I think, having access to IBIS is great plus , since this usually the route only the big guys ( banks etc. ) can use in Germany. Look at their bid and ask sizes und you know what I mean. I have also a german broker-account, because IB offers this MC account only since a few months. Usually XETRA is very fast and efficient,. because it's a totally computer-driven trading platform - much like an ECN. And for the top 30 Stocks ( Dax ) there's also enough liquidity. Some of the NEMAX 50 Stocks ( german's mini nasdaq ) are also very liquid. US stocks on XETRA : well, this is a special situation, since the so called US Stars is a new segment on XETRA. It is a bit comparable to the Nasdaq Market-Maker system - there are several large US MM's and some german MM's who make the Market for the SP100 and Nasdaq 100 stocks on XETRA. So you'll always get a price , but the spreads are larger than in the US - especially during non-US trading hours. Liquidity : you'll always get a price. Of course trading US stocks on XETRA makes only sense, if you don't have the time to trade during US market hours or if your account is too small for daytrading directly in the US. You can daytrade US stocks on XETRA with an account < 25K. Since IB's MC account is a margin account anyway - you can even trade with 1:2 margin. Something most german brokers won't allow you. Have yet to find out, whether shorting of US stocks on XETRA is possible. US Stocks trade in EUR on XETRA, ( and on other german exchanges ) but are, of course, still subject to changes in currency exchange rate USD/EUR. If you want more info about XETRA, or to see live and for a limited time free of charge, how the US stars are traded on XETRA, follow this link : http://deutsche-boerse.com/usstars/index_e.htm Good Luck
Fohat : thanks for the info. I noticed the "upgrade button " in my account options. But : One cannot "upgrade" a stock-margin MC account to a stock & options Level II MC margin account !. You had to apply for a new account and are now making all the transfers (this at least is easy and fast ) When I opened the MC account back in August, there was no possibility, to "upgrade" my single currency USD stocks & options marging accounto a MC account in EUR. The reason is, that EUR accounts are held in Europe, while USD accounts are held in the US. Furthermore, back in August, there was no Stocks & Options Marging L 2 MC in EUR available at IB - it's obviously fairly new.
@Fohat I Think Privateer meant uprgrading to an options account - but if not, you're certainly right.
quote: yes, I traded on XETRA , but not via IBIS network, as IB is offering it. I think, having access to IBIS is great plus , since this usually the route only the big guys ( banks etc. ) can use in Germany. Look at their bid and ask sizes und you know what I mean. --- hi, i just wanted to let you guys know that IBIS = Xetra. Deutsche Boerse AG changed the name to xetra ab 4 years ago or so. I really dont know why the heck IB is using this old name... however to all of you who think about trading german stoxx on Xetra - the best i can recommend you is to get to the website of the deutsche boerse AG (there´s also an english version) and look for the regulations because there are several things one should know before he starts trading on Xetra, i.e. that there are things like opening-, midday- and closingauctions, volatility breaks etc...if you only have IB as a quotefeed for german stoxx you already face the first problem: they dont show any auctions (or at least i havent found em). some might say that this is not that important but as they often occur in fast moving stocks and they often mark bottoms or tops you should know when one starts (with the indicated price and the indicated volume). could be one improvement for the next IB-version... regards, kev//