At the moment on EUR account bigger than €100,000 , IB is charging a negative interest rate of 1.1%. Has anyone of you found a solution to avoid such expensive cost? I trade only futures. I need to take advantage of all off my liquidity at every moment to be able to use the maximum leverage in the event of trading signals. Do you have any suggestions? Thank you.
You would have to convert your cash Euros into something else which does not have a "negative interest rate". This could for example be forex (e.g. exchange EUR to USD), or use the Euros to buy some stock. Your cash Euro position will get smaller, resulting in you being less exposed to the EUR negative interest rate.
Dear HobbyTrading, Thank you for your suggestions. 1) If I'd buy USD or any other currency I would have the risk for the movement of the currency and this is a risk I would not like to have. In fact I live in Europe and I can't risk to have USD in my portfolio. 2) If I'd by any stocks I would risk the movement of the stock and also I would not have free liquidity for 100% of my capital. Thank you
I am guessing from your question that you want exposure to EUR but without the carry cost. The way I do it is through a basket of EU and EU peripheral currency, all held below their respective fee thresholds. Think SEK, DKK, CHF, GBP, etc... the challenge is to mix the weights in a way to best reflect the movements of the EUR. No magic formula here - I use the excel solver on historic data for that.
Another way - you may want to look further into that is to use multiple sub-accounts to raise the fee threshold limits. Not sure if that would work!
Thanks Tonyf, this is a great idea, but it is not applicable to my case because the value of my IB account is several million euros, while the maximum value for not paying interest expense (up to tier cut off) is only 100,000 $ or equivalent. Even if I distributed over 10 currencies related to the euro, I would have covered only the problem for 1 million dollars.
Thanks Tonyf, this is a solution that I had evaluated, but in my case it is not applicable because I should have several dozen sub-accounts with all the complications that would result for their management.
My account is quite large as well but 90% USD. Another idea that I have not explored yet can be found here: https://www.elitetrader.com/et/thre...sition-liquidation.336414/page-4#post-4952652 "Sig" buys short dated treasuries instead of holding cash. I am curious to see if this works for you - keep us posted.
I see from your other replies that you are talking about a fairly large trading account. In that case you may want to reconsider whether you only want to have exposure to EUR. Maybe your expenditures are in EUR (cost of living etc.) and thus that you want to have EUR cash, or EUR-based investments in your account. But to better hedge your capital to future geopolitical and -economical events it could be preferential if you do have exposure to non-EUR currencies (e.g. USD, GBP, CHF, JPY). I am surprised to see that you are willing to take the financial risks of futures, but consider the risk of stocks as too high and undesirable. Futures have a much higher volatility and risk profile than stock for the same amount of invested money.
We seem to share the same risk aversion profile, and possibly approach to investing. But in fairness to OP, his/her question is properly framed to only deal with his/her EUR holdings. He/she is not looking for advice regarding planing, FX or asset allocation. Why do you feel entitled to give him/her such unwarranted advice?