Interactive brokers - problems dealing with platform and costs

Susie2017

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Im asking for an uncle who in 2019 opened an online investment account with Interactive Brokers. He purchased a few shares in US dollars using some sterling. Then forgot about the account for a few months. When he rechecked he realised he was being charged a fair bit of interest, even though the account had a credit balance in sterling. I have logged on for him and tried to look into what is going on. It would seem he opened a margin account, even though he doesnt recall asking for one. They have given him a US dollar 25000 credit balance. Also they appear to be charging interest on the stocks as they are in US dollars. He has sent multiple queries asking for the margin to be removed to no avail. They have sent him complicated intructions to use on their trader workstation (TWS) to 'close all non base currency balances'. The insuructions dont match the appearance of the workstation (the portal looks different). There is no answer to a phoneline given. The only communication is through a message centre and the replies and queries are magically deleted very quickly. I have tried to use the TWS for him but i do not know what I am doing. I think he needs to close the negative USD balance and then request a downgrade to a cash account, although even if he does this I think he may be caught for other hidden charges. Also he has tried moving the stocks to Davy, but they IB have been no help to him. To me it seems like a matrix from which it is nigh on impossible to leave. Any idea who might he ask to assist him in his predicament. I dont think the portal is suited to an investor who might buy a couple of shares to hold. It all looks very complex and he needs expert help. Any suggestions ?
 
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Hi Susie,

TWS can be very overwhelming, dont worry about it. From what you said it seems like your uncle holds an equity position in USD, Cash in GBP and a loan in USD. What you will need to do is put in enough USD in order to zero the loan. You can do this by selling the USD equity (tax implications etc. may not be an option) for cash or by converting some other non-USD cash to USD. You already have some GBP in the account, so you can sell this for USD or you can lodge e.g. EUR and sell that for USD.

From a desktop:
1) Go to the homepage, click 'Log in', then 'Portal log in'.
2) Click the menu button again, click in to 'portfolio' and it will show you your positions held and underneath that it shows your settled cash position (this should show a negative USD balance). Click on USD and click 'close balance'. (There may not be enough cash to settle the balance).
otherwise
3) Click on the menu button under 'portfolio' there should be a 'convert currency' option. Click that and basically just sell the GBP or the EUR that you have lodged in order to zeroise the USD cash position. Email IB and they will convert it back to a cash account.

Come back if you have any other issues.

As regards switching to Davy, he is 10x better with IB for fees etc.
 
I will try all that when I meet up with him tomorrow. Sounds a little complicated. Are you sure that he should stick with IB. He finds Davy easier to use. The statements on IB look quite complicated/hard to follow for someone without a background in accounting/ finance. Davy just send him contract notes. Fees didn't look too bad for ftse shares - are they really 10x higher ? I will let him know perhaps he should stay with IB and try to figure out how it works !
 
Hi, we logged in this evening and managed to convert the negative US dollar position (i think). The system posted multiple (scary) warnings but we went ahead anyway along the lines of;

1. confirm mandatory cap price ...etc etc This may cause an order that would otherwise be marketable not to be traded
2. There is insufficient market data for one or more orders in the group. IB strongly recommends against this kind of trading. Are you sure you want to submit all orders anyway?
3. your order size is below the GBP 20000 ideal pro minimum and will be routed as an odd order.

None of which we could fully understand but we went ahead.

His positions are now listed in USD but the negative USD balance is gone. He now has a +USD balance of 0.14c which when i tried to convert would not go through, i think its too small.

His buying power is still now listed as £25903 GBP. As per initial post did not ask for this to his recollection. When he asked for a cash account he got the following reply;

Your request to downgrade to a cash account has been reviewed and rejected due to a non-qualifying position being held in the account (USD XXXX.14 Negative Cash balance). Cash accounts cannot sell stock short or hold negative cash balances in any currency.

Please review your portfolio and close this position if you wish to continue with the downgrade process. Additionally, please review the information below as a reminder of basic Cash account limitations.

* Cannot borrow to buy stock, write uncovered options, sell stock short or maintaining certain option spreads;
* Cannot transact with unsettled funds;
* Cannot maintain short balance in any currency. The account will be required to convert funds prior to transacting in products denominated in a currency you do not hold.
* Subject to forced liquidation if fees (e.g., monthly activity) without sufficient cash available to satisfy.

If you have any further questions, please feel free to respond to this ticket so that I may further assist

My question is should he still go ahead and ask for a cash account. He does not intend to buy any further stocks on this platform. Would it be best to leave things as they are or go ahead with changing to a cash account. He may sell the stocks in around 5 years and just close the account. Will he be able to do this without having a margin - I assume so ? Will it cost him much to keep the £25k buying power ? When i try to run a statement on costs it wouldnt open for him. Also even though his cash balance is around £1k, his available funds and excess liquidity are listed as around £6 k - why is this ? Many thanks for earlier advice on this matter !
 
His positions are now listed in USD but the negative USD balance is gone. He now has a +USD balance of 0.14c which when i tried to convert would not go through, i think its too small.

His buying power is still now listed as £25903 GBP. As per initial post did not ask for this to his recollection. When he asked for a cash account he got the following reply;

Your request to downgrade to a cash account has been reviewed and rejected due to a non-qualifying position being held in the account (USD XXXX.14 Negative Cash balance). Cash accounts cannot sell stock short or hold negative cash balances in any currency.

Please review your portfolio and close this position if you wish to continue with the downgrade process. Additionally, please review the information below as a reminder of basic Cash account limitations.

* Cannot borrow to buy stock, write uncovered options, sell stock short or maintaining certain option spreads;
* Cannot transact with unsettled funds;
* Cannot maintain short balance in any currency. The account will be required to convert funds prior to transacting in products denominated in a currency you do not hold.
* Subject to forced liquidation if fees (e.g., monthly activity) without sufficient cash available to satisfy.

If you have any further questions, please feel free to respond to this ticket so that I may further assist

My question is should he still go ahead and ask for a cash account. He does not intend to buy any further stocks on this platform. Would it be best to leave things as they are or go ahead with changing to a cash account. He may sell the stocks in around 5 years and just close the account. Will he be able to do this without having a margin - I assume so ? Will it cost him much to keep the £25k buying power ? When i try to run a statement on costs it wouldnt open for him. Also even though his cash balance is around £1k, his available funds and excess liquidity are listed as around £6 k - why is this ? Many thanks for earlier advice on this matter !

Ok great at least you made some progress. You say you have a positive balance and IB say you have a negative balance? It's 14c, just put a fiver on the balance and make sure there is no question, then request the change.

If he's leaving the account open, then yes you should change to a cash account. He clearly doesn't understand the terminology, in a cash account at least he won't be able to repeat/get into a similar position.

Yes in a cash account he will be able to trade. His buying power at the moment is his available cash plus margin (the loan provided to you by the broker). In a cash account, his buying power will be limited to his cleared cash. Excess liquidity is the amount value you have over the margin provided to you. These should be irrelevant if you have a cash account.

While the terminology and interface appear quite complicated, IB have an extensive knowledge database that you can use. Also use that with investopedia.com to explain the concepts/terminology.
 
Interactive Brokers charge a $10 monthly maintenance fee (or currency equivalent), so that could explain some of the charged 'interest'.
 
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