Emini Trade on Euro base currency account- IB

K

kenokabe

Guest
Hi Traders,

I am an InteractiveBrokers user, and wonder what it is like to trade Emini on an Euro currency base account not USD.

In thier site, they say as follows.

You may buy or sell securities in a currency other than your base currency and a margin loan is created in the non-base currency and is collateralized by the Base Currency.

If you do not wish to have a margin loan in a non-base currency, you may exchange currencies through IB's "IDEAL" currency network. Bids and offers are posted for trading just like any other securities or commodities commissions. IB's currency rates are much better than any retail bank or credit card exchange rate and they are very close to the rate offered by professionals in the Interbank Market. For information on FX commissions.

My question is do I have to pay a round-tip currency spread of EUR-USD when I open and close the position after all?
Is it not clever at all or unrealistic to trade frequently non-base currency equity such as Emini SP on EURO base currency account?

I will ask the user support, but I'd like to hear the advice and opnion by the traders here. I am going to post a reply from the support here, too.

Thank you.
 
Kenokabe,
There is no "fatal cost"

You do not need to exchange the currency before and after each trade. For example, if you have a EUR account and buy and sell one ES future for a 1 point profit, you will then have a USD balance of $45.20 (1 point profit - $4.80 roundtrip commission). You can then choose to convert this into EUR, or you can simply let your USD balance build up until you decide that you wish to convert it into EUR.

The history behind the IDEAL currency network, is that originally, IB asked traders to fund their accounts in the respective currency of the products traded. However, many traders found this inconvenient as they did not want to fund separate accounts and also did not want to incur the steep charges and wide spreads at their local bank. We then launched the universal account which allowed you to trade products which were denominated in different currencies. Some firms will do the FX for you automatically, however then you will be at the whim of the rate that they set for you. We decided to provide a continuous bid and offer during US hours, so that customer could make the choice of when and at what rate they wanted to do an exchange.

A typical quote on IDEAL for EUR-USD would be 1.1066/1.1086 – a spread of about 20 points. It’s probably too wide to day trade currencies via IDEAL – but should be vastly superior to the exchange rate that you will get at your local bank. (NB for currency traders we offer the currency futures, which usually have a 1 to 3 point spread).
 
Quote from Steve_IB:

Kenokabe,
There is no "fatal cost"

You do not need to exchange the currency before and after each trade. For example, if you have a EUR account and buy and sell one ES future for a 1 point profit, you will then have a USD balance of $45.20 (1 point profit - $4.80 roundtrip commission). You can then choose to convert this into EUR, or you can simply let your USD balance build up until you decide that you wish to convert it into EUR.

The history behind the IDEAL currency network, is that originally, IB asked traders to fund their accounts in the respective currency of the products traded. However, many traders found this inconvenient as they did not want to fund separate accounts and also did not want to incur the steep charges and wide spreads at their local bank. We then launched the universal account which allowed you to trade products which were denominated in different currencies. Some firms will do the FX for you automatically, however then you will be at the whim of the rate that they set for you. We decided to provide a continuous bid and offer during US hours, so that customer could make the choice of when and at what rate they wanted to do an exchange.

A typical quote on IDEAL for EUR-USD would be 1.1066/1.1086 – a spread of about 20 points. It’s probably too wide to day trade currencies via IDEAL – but should be vastly superior to the exchange rate that you will get at your local bank. (NB for currency traders we offer the currency futures, which usually have a 1 to 3 point spread).
More...

Steve@IB,
Thank you for your prompt reply,

I understand the system well now, and think it is a very good one.

I probably trade ES 1 or 2 times a day, but reading your explaination, the trade frequency doesn't affect the currency exchange cost that occurs only when I chose to do so.
Let me make sure using an example.

I deposit 10,000 EUR on the account.
After a several trades, fortunately, a 1000 USD balance has been add up after the commission and without any extra IDEAL spread cost so far. Then, at this point, I decide to mirge this 1000 USD into 10,000 EUR with one way IDEAL spread cost.

Do I understand correctly?

Thank you.
 
Steve left for the night so I'll answer....

You are correct. You can let the $1000 in your example sit in USD until you do an FX conversion.

Note: just to make clear, if you buy and sell in the same day, the USD balance will only increase/decrease by the amount you gain or lose after fees.
 
Quote from def:

Steve left for the night so I'll answer....

You are correct. You can let the $1000 in your example sit in USD until you do an FX conversion.

Note: just to make clear, if you buy and sell in the same day, the USD balance will only increase/decrease by the amount you gain or lose after fees.
More...

Thank you def,

Then what about it it not the same day?

Ken
 
I'll need to check to be 100% certain but I believe if you hold a position overnight w/o having sufficient funds in the currency where you trade, you will have a margin loan.
 
Correct. Debit/credit interest rates are applied to each individual currency balance - please see Fees&Minimums section on our website which gives the current rates.
Thus, if you have a -ve EUR currency balance then you would pay interest on this (but would gain interest on the extra USD balance)
 
Quote from Steve_IB:

Correct. Debit/credit interest rates are applied to each individual currency balance - please see Fees&Minimums section on our website which gives the current rates.
Thus, if you have a -ve EUR currency balance then you would pay interest on this (but would gain interest on the extra USD balance)
More...

Ok, thanks, actually, I was about asking about the debit interest issue. Great support, you people.
 
Good support.

However, I still seeking a possibility to hear opnions from a trader who already do that, not from IB people.

Thank you.
 
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