IB Universal Account

I only trade US stocks for the time being. I tend to hold my positions overnight, generally up to one week or two.

I came across the IB Universal account and found the idea of having an account in £ but trading $ quite attractive, but then I came to the conclusion that I would gain very little from it if anything and I might be better of using $ as my base currency since 100% of my trades are in $.

I reasoned that I would gain no protection if the dollar went further down since I hold my positions overnight and I'm generally continously in the market.

It also appears that when you place a trade in a currency other than your base, a margin position gets created on the total of the value of the transaction instead of only the portion that you borrow using margin if you had placed your order from an account in $, so I would pay more in margin as well.

Am I correct in thinking that I'm better of having $ as my base currency?

Personally, I would keep the account in GBP as you can easily, and at very little cost cost, convert any profits back from USD to GBP. The biggest single issue is the GBP/USD exchange rate. If you had converted a PDT account to USD in July last year then you would have lost over £2K during the fall of the USD.


Paul

Trader333 said:

Personally, I would keep the account in GBP as you can easily, and at very little cost cost, convert any profits back from USD to GBP. The biggest single issue is the GBP/USD exchange rate. If you had converted a PDT account to USD in July last year then you would have lost over £2K during the fall of the USD.


Paul

Click to expand...

Hi Paul, thanks for your response.

It is indeed the GBP/USD exchange rate that I'm most concerned about. I've been lucky enough to compensate for the loss with my winnings, but I don't think using GBP as a base currency would protect me against that.

Since I tend to always have a position and hold it for a few days, it is as if I had an USD account in a way. Regardless of my base currency, I would still lose when the dollar goes down.

In fact, I suspect a GBP base currency would cost me more because of the margin loan that gets created when you buy a USD stock.

I'm just wondering if I'm missing the obvious.

Trader333 said:

Personally, I would keep the account in GBP as you can easily, and at very little cost cost, convert any profits back from USD to GBP. The biggest single issue is the GBP/USD exchange rate. If you had converted a PDT account to USD in July last year then you would have lost over £2K during the fall of the USD.


Paul

Click to expand...

I think I just understood what you mean. Sorry to be slow.

Your advice is to open a GBP base account which will give me the flixibility to buy some USD if most of my trades are in USD and leave that in the USD "subaccount" or chose to leave the money as GBP and use the margin procedure.

Thanks for that.

I suspect that denominating your account in GBP is okay for swing trading, but isn't such a great idea for daytrading.

I live in Canada, currently using a pretty expensive brokerage for my first small forays into equity investing (I'm a business student), so I run into the same issue of currency exchange risk. The thing you need to take into consideration is that if you have a GBP denominated account, you will lose a small percentage of your funds each time there is a conversion. Brokers will usually have a disclaimer on their website stating that they act as a principal for you when exchanging currencies, and that they may make a profit doing so.

I recently did a slippage calculation for same day trades (i.e. selling a previous long position and buying a new one), and the round-trip slippage figure that kept cropping up appeared to be roughly 1.9%. Currency slippage is actually a bit lower than that, since I wasn't allowing for SEC premiums, but it can still be significant.

As a result of the above, it's likely that in the future, I will have both CND and USD denominated accounts, since I plan to invest in both markets.

This is why the IB Universal Account seems to be an interesting deal.

I haven't got one yet, but here is what I gathered from a few searches.

When you open an account at IB, you decide which currency you want to be your base currency. Whenever you trade in a foreign currency, you create a "subaccount".

This leaves you with 2 choices: You can either do nothing, and the amount you invest is converted each time you do a transaction, or you can convert some of your money from your base currency to the foreign currency and that goes to your subbaccount. Subsequently, there is no exchange as long as you have enough funds in your subaccount.

I could be completely wrong, but this is the way I understood it and it makes IB very appealing to me.

Can someone tell me what the GBP/USD exchange rate is?

d-

1.9428
This means 1 £ = 1.9428 US$

Richard

Hi guys,
As IB account holders will know you can get conversion rates on trading screen,however the spread can be quite large.The best way to convert is to ring dealing desk and they will get a better price from floor.I havent done this myself but was told by chance when querying something else.

Indi

Indi you shouldn't need to call any dealing desk. The rates on the screen should be good enough. At this time 0840 GMT, IDEAL is showing a market 1.9363/83 and IDEALPro is showing 1.9370/73). This is very tight for a currency conversion.

Regaring the earlier question, the base currency just determines the translation applied to your account window and statement, and to the currency used for margin determination. You can fund/withdraw cash in any currency, not just your base. You can always change your base currency also.

Let's say you open a GBP account and trade US stocks. You will generate a US$ balance - either negative or positive depending on whether you make money and/or hold positions. You can choose to do a currency conversion at any time you wish. We quote currency markets 21 hours per day. If you have a negative currency balance you will incur an interest charge so you may wish to avoid this by keeping all currency balances positive.

Hi,
I previously had my trading account at Tradestation but have since shifted my cash to my bank account in the UK. I want to now create a new trading account account but want to avoid the risk of leaving my cash in $. Can someone who has a Universal IB account please give me an example of a trade and the exchange conversions/commissions involved?
For example if I had £50K in my universal margin account (w/ 4X day margin) and I want to make a day trade as follows:
Buy 100 shares @ $150.00

Assume I make $1 and sell all 100 shares at $151.00

How will IB charge me in the universal account?

If there is a link that shows this then this will also be appreciated.

Thanks,
Imran