Hi guys, i came from Scottrade and never had this problem, but i am testing out the demo of IB's TWS right now and when i place an order, it automatically buys 25% of it on margin. Is this right or am i just confused?
Is this a reg-t or portfolio margin? Are they charging you interest for the position or just representing your current buying power after the trade? Maybe DEF, the IB rep in ET can help.
Because you are looking at a "margin" account IB caculates what margin the current position would use. Buying on margin means you borrow from IB in order to have sufficient purchasing power. In practice, you ddo not do any borrowing unless the required purchasing power is larger than the account size. To reiterate, the "margin impact" section is there for information and it doesn't imply you are buyin' on margin.
I'm not sure, but i would guess it's a reg-t. Ahh that makes sense... But why would IB want to do that if i wouldn't be borrowing from IB unless i didn't have enough purchasing power? Shouldn't they only display that information if i was actually buying on margin? It seems like unnecessary information that's there to confuse new IB users... Unless there's a purpose for it.
Well, if you opened a margin account you probably expect to use margin some time. Not necessarily in the form of leverage. Suppose you want to buy European stocks priced in Euro in a dollar account. Of course, you can convert currency in the account manually. The problem is this way you are exposed to currency risk. So, instead you will probably just send a buy order for the stocks and will expect IB will lend you the required amount of EUR... and this will likely be a margined transaction even if the value of stocks doesn't exeed the value of the account.
IB calculates and displays a margin requirement on the entire portfolio of positions held in an account even if the account holder has paid for the positions in full and has not borrowed any funds to effect their purchase. This is done to support real-time credit check processes and is necessary to determine the Available Funds (defined as Equity with Loan Value less the Initial Margin Requirement) on hand to support any subsequent trade activity, position transfers or cash withdrawal requests. By the way, the display of a margin requirement does not necessarily imply that you are being charged interest. Generally, a negative cash balance is indicative that one is borrowing funds to support securities purchases, however, one may be subject to interest charges even if they maintain an overall net long cash balance (as proceeds from short sales require special consideration and one may hold a long balance denominated in one currency and a lesser short balance in another. See the following link: http://ibkb.interactivebrokers.com/node/667)
A direct response from IB employee - awesome. Thanks for the information! For those who signed up with IB, how long does it take to generally get your account approved? They say 1-2 business days but it's been 3 and I'm being very patient. Does ACATS (transferring positions from my old broker to IB) take longer?
Applications are considered for approval in the order received, however, it should typically take no longer than 1-2 days, assuming you've submitted any requested identity/address verification documentation and you've responded to any email/phone inquiries our Compliance group may have. One important point is to make sure you've completed the funding notification step of the application, else it won't be considered for approval. You don't need to actually fund the application to be approved, however, you do need to indicated the manner in which you would intend to fund it (e.g., check, wire, ACH, ACATS), if approved, and the amount. An ACATS transfer will be initiated only after the application has been approved. The other transfer methods are initiated and controlled by the applicant. If you log into your account, you should be able to see the status of your application. Feel free to send me a private message if you'd like me to look into where yours stands.
I did an ACATS back a number of years. I had a problem as no one told me that if I did an ACATS of the entire account and there was an unsettled trade, IB would reject the ACATS. I don't know if this is still true. I had to stop trading, wait for settlement, and then re-request the ACATS. There was no problem with the ACATS after that. I think it was in late 2003 or early 2004 so IB may have made some changes since then. Jack