Cross-Margin on interlisted stocks -- common sense, but is it avail to retail customers?

D

d0rian

I ran into a Margin issue relating to a situation where I held positions on an interlisted stock (Bank of Montreal) in BOTH markets; BMO trades -- and has an options chain -- on both the TSX (Toronto) and NYSE.

I've been reading up on this, and If I'm understanding correctly, If I held positions in multiple BMO options series ALL on the US side, or ALL on the Canadian side, I'd qualify for margin relief (IOW I'd have much lower available margin requirements), since my positions, in the aggregate, would be essentially hedged against each other, and both US/Canada offer margin relief on options spreads.

HOWEVER, I held a short BMO.nyse position and long BMO.tsx position, and was told that such a situation is NOT eligible for margin relief. IOW, broker told me that my short BMO.nyse position would get treated like a naked short (and have margin calculated accordingly), even though I held a long BMO.tsx option position.

I'm frustrated, since it seems rather illogical. I suppose I understand why a margin algorithm would be programmed to treat them as two unrelated positions, but a human being looking at the situation would understand that the positions' risk should offset to some extent / qualify for standard option spread margin relief, no?

At the end of the day, I guess all I want to know whether this is standard across all brokers? Do any of them offer either (a) automatic cross-margining (if I'm using that term correctly), or (b) some sort of higher-level review where a risk auditor could review my portfolio and make margin accommodations accordingly?
 
  • Why not just trade BMO options on NYSE?
  • I assume there would be more volume and better bid/ask spreads than the TSE options.
  • IMO ..... Different markets should be considered different risks.
  • What about stat holidays? Adverse market conditions while one market is closed due to a stat holiday.

:)
 
OptionGuru said:
  • Why not just trade BMO options on NYSE?
  • I assume there would be more volume and better bid/ask spreads than the TSE options.
  • IMO ..... Different markets should be considered different risks.
  • What about stat holidays? Adverse market conditions while one market is closed due to a stat holiday.
:)
More...

Anyone else weigh in on this? IB told me that they don't offer cross-margining, although (a) they tell me many clients have asked about it, and more interestingly (b) it's NOT a regulatory thing, but rather an internal policy not to...so still holding out hope to find a broker who offers it.
No suggestions thus far though, I suppose.
 
d0rian said:
Anyone else weigh in on this? IB told me that they don't offer cross-margining, although (a) they tell me many clients have asked about it, and more interestingly (b) it's NOT a regulatory thing, but rather an internal policy not to...so still holding out hope to find a broker who offers it.
No suggestions thus far though, I suppose.
More...
I guessed you were talking IB from about the second sentence. They make money by offering as automated a service as possible and hiring drones at just above min wage to interact with customers. Don't waste your breath arguing with them, try contacting a good introducing broker who can set you up with a more high touch firm run by intelligent humans instead of a series of algorithms.
 
Sig said:
I guessed you were talking IB from about the second sentence. They make money by offering as automated a service as possible and hiring drones at just above min wage to interact with customers. Don't waste your breath arguing with them, try contacting a good introducing broker who can set you up with a more high touch firm run by intelligent humans instead of a series of algorithms.
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Yes, that's exactly why I started this thread -- I'm looking for recommendations of brokers who offer cross-margining. Barring that, I'd even take general rec's for brokers who employ the kind of level-headed intelligent humans you describe. I don't want to turn this into an IB-bashing thread: I've spent enough time on the phone/chat with them to know their limitations: the amount of just black-and-white FALSE information I've gotten from them would stun you. But here, I'm looking for something specific, so hoping some folks will chip in with rec's.
 
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