Haircut of Canadian treasury bills used as collateral

[tradegoodstocks]

You seem a little slow in your head. I repeat a last time what everyone knows who is familiar with this. Not only tbills but US treasury bonds can function as well as collateral. To prove this is correct you follow the procedure I outlined my my earlier post. And to see whether eur denominated bonds can be used as well (I have not checked myself) you also follow identical procedure.

Please stop repeating your irrelevant stuff. You don't read carefully, and/or you never took the time to study how IB calculates interest in the account segments. So stop replying if this is something you don't understand. I'm 100% sure IB accepts only cash or T-bills as collateral in the commodities segment, because I talked with them numerous times about it. The margin value of securities, bonds, etc., in the securities segment is irrelevant for my question.

"I am looking for EUR denominated government bonds or any other instruments that can serve as futures collateral in lieu of cash (similar to U.S. T-bills), to avoid having a too high cash drag in the futures segment of the account, as IB pays 0% interest on cash-based futures maintenance margin."

 

[M.W.]

You are acting idiotic without actually understanding how IB works. First of all, it's you who hijacked my thread. Open your own damn thread if you are so curious about your specific need.

Next, IB does internally use different accounts for securities and futures. But for liquidity, collateral, and margin purposes on the client frontend side they are all treated as one and the same. If your commodity futures require x amount of capital to support initial and maintenance margin then that is treated in the exact same way than purchasing stock that requires capital to support a purchase based on margin or cash. At least on the client side of things. So, it's utterly irrelevant whether you look to cover cash requirements of commodity futures, stocks, fx, or other securities. Hence it does not matter whether you use cash or a bond that can serve as collateral. That's what you stubbornly refuse to accept.

Next, besides US tbills also longer maturity US government bonds can be used as collateral. As pointed out many times by def and myself, the exact haircuts can be found by using the check-margin tool. I have had 2 and 5 year bonds in the past that served as collateral to cover commodity futures margin requirements. So I know for sure that it works. At least it worked in the past.

That's my last post to you in this thread. Open your own thread if you have a specific question and are so assured that yours is different from everyone else's.

Please stop repeating your irrelevant stuff. You don't read carefully, and/or you never took the time to study how IB calculates interest in the account segments. So stop replying if this is something you don't understand. I'm 100% sure IB accepts only cash or T-bills as collateral in the commodities segment, because I talked with them numerous times about it. The margin value of securities, bonds, etc., in the securities segment is irrelevant for my question.

"I am looking for EUR denominated government bonds or any other instruments that can serve as futures collateral in lieu of cash (similar to U.S. T-bills), to avoid having a too high cash drag in the futures segment of the account, as IB pays 0% interest on cash-based futures maintenance margin."

 

[tradegoodstocks]

You are acting idiotic without actually understanding how IB works. First of all, it's you who hijacked my thread. Open your own damn thread if you are so curious about your specific need.

Next, IB does internally use different accounts for securities and futures. But for liquidity, collateral, and margin purposes on the client frontend side they are all treated as one and the same. If your commodity futures require x amount of capital to support initial and maintenance margin then that is treated in the exact same way than purchasing stock that requires capital to support a purchase based on margin or cash. At least on the client side of things. So, it's utterly irrelevant whether you look to cover cash requirements of commodity futures, stocks, fx, or other securities. Hence it does not matter whether you use cash or a bond that can serve as collateral. That's what you stubbornly refuse to accept.

Next, besides US tbills also longer maturity US government bonds can be used as collateral. As pointed out many times by def and myself, the exact haircuts can be found by using the check-margin tool. I have had 2 and 5 year bonds in the past that served as collateral to cover commodity futures margin requirements. So I know for sure that it works. At least it worked in the past.

That's my last post to you in this thread. Open your own thread if you have a specific question and are so assured that yours is different from everyone else's.

I know everything you are saying. Most equities and bonds have margin value, and in most cases the totals per account are used for margin violation and pre-order margin checks. (It's a bit more complicated, but I'm simplifying for the purpose of this discussion.) That is irrelevant to my question. You are correct that for purpose of margining at IB, the account segments are largely transparent. Not so for interest calculations. Cash in the commodities segment earns 0% interest up to the amount of futures maintenance margin. The remainder beyond futures maintenance margin is netted with the cash in the securities segment. That's why many customers use T-bills, or the value of futures options, which are the only two options to serve as futures collateral in lieu of cash. Any and all other securities may be marginable and yes for purpose of initial margin and maintenance margin violations and pre-order checks they act similarly, as the account totals are what matters; but they are not allowed to be used as actual futures margin collateral, which means you still need cash in the commodities segment that earns 0% interest, while you may be paying currently ca. -4.5% debit interest on your negative cash balance in the securities segment. How much that matters depends on your portfolio, in particular on your total futures maintenance margin. In my scenario it has a big impact. If you have for example $400k futures maintenance margin, you would pay ca. $18k per year in additional interest that you wouldn't pay if you have T-bills in your portfolio, that IB then accounts for, to be used in lieu of cash as futures collateral. And no other security but T-bills will do the same thing. The T-bills will earn money market rates, only slightly less than IB's debit interest rates, so you can largely eliminate the cash drag of your futures collateral.

I discussed all this at length with IB and in other forums. No point arguing this fact.

 

[BobG]

I'm 100% sure IB accepts only cash or T-bills as collateral in the commodities segment, because I talked with them numerous times about it.

Did you actually do a trade and verify that they were using t-bills for margin to replace cash held in the futures sub-account? They told me that they do not do this. Of course, it was difficult to extract this info since I had to wade through many verbose explanations of how they calculate margin on t-bills held in the securities sub-account just like earlier in this thread.

 

[tradegoodstocks]

No because I use futures options spreads as as futures collateral. But it's black on white in an email from the IB trade desk, which elaborates on the details. It's also been discussed in the bogleheads forum. It's not documented on their web site, and most customer service agents are clueless about this - a great waste of time, as you say. There is a disconnect between customer service and the back end team.

 

[BobG]

Could you supply a link to the boglehead forum where someone has actually done this or, even better, PM me the details. I've searched and all I've found is the equivalent of this thread:
1) ib reps pretending not to understand the question
2) people who have never actually done it, claiming t-bills definitely work
3) fools insisting this is a silly question

 

[M.W.]

Has done what exactly? What do you like to know?

Could you supply a link to the boglehead forum where someone has actually done this or, even better, PM me the details. I've searched and all I've found is the equivalent of this thread:
1) ib reps pretending not to understand the question
2) people who have never actually done it, claiming t-bills definitely work
3) fools insisting this is a silly question

 

[tradegoodstocks]

Could you supply a link to the boglehead forum where someone has actually done this or, even better, PM me the details. I've searched and all I've found is the equivalent of this thread:
1) ib reps pretending not to understand the question
2) people who have never actually done it, claiming t-bills definitely work
3) fools insisting this is a silly question

I've done it and verified in one of my accounts. T-bills work as collateral in lieu of cash, and you can avoid cash drag on futures collateral this way. I heard it does not work in IRA accounts, though.

I hope nobody will start arguing again who doesn't understand the issue. Most traders have little understanding of cash management. With the high risk-free rates, the cash drag is huge if you invest with futures and use cash as collateral.

 

[BobG]

I've done it and verified in one of my accounts. T-bills work as collateral in lieu of cash

I still don't know what one has to do to get the t-bills moved to the futures account. I assume it doesn't happen automatically? Did you buy the bills in the securities account and then request that they be moved? If so, how did you get the request elevated past the customer services reps who have told both of us that it can't be done?

 

[M.W.]

Why should tbills be moved to a futures account. They are not futures. You can use cash and collateral in your other accounts to satisfy margin in your futures account.

I still don't know what one has to do to get the t-bills moved to the futures account. I assume it doesn't happen automatically? Did you buy the bills in the securities account and then request that they be moved? If so, how did you get the request elevated past the customer services reps who have told both of us that it can't be done?