IB's New IRA Margin Account

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Norm

The email announcement said that it would have instant settlements, instead of the 3 day settlements of the normal IRA cash account. There would not be any actual margin (or loaning of money).

Sounds like you could buy and sell to the limit of your account repeatedly in one day.

Any thoughts on this new account?

Norm
 
If you want to trade a lot of stocks you don't lose your money for three days of phantom settlement. When you're trading electronically why do they even need time to settle anyway?

For me this has been the impetus to go back to trading stocks/ETFs in my IRAs instead of just using futures.

SSB
 
I got this additional information from IB:
"...it is not full margin trading for day trading of IRA accounts. It only allows you to re-invest the proceeds from a sale once. So you can sell IBM and buy DELL in the same day and not wait three days. But, if the new shares go against you, there is no
trading out of the position until the first sale has settled in T+3."
 
That's ridiculous. So if you sell IBM, then buy DELL the same day and the next morning a nuclear bomb goes off in Washington you can't exit your position? Either do it the right way or not at all, don't give us this half @ssed "stuff" :mad:

Then again, thanks IB for giving us the ability to trade in foreign currencies. But I'm sure the SEC will come up with some reason to stop that to "protect" us from being able to make a living without enriching wall street brokers.....

SSB
 
I blame the regulators, not the broker. This is one of the "joys" of trying to manage tax-sheltered assets. Many financial advisors would have us believe that sheltering of assets from tax (which is only temporary anyway) is the be-all and end-all of human existance. I plan to cash in my tax-advantaged assets as soon as I can do so without paying the 10% penalty. I'll just pay the @#$%^& tax.
 
Quote from SideShowBob:

That's ridiculous. So if you sell IBM, then buy DELL the same day and the next morning a nuclear bomb goes off in Washington you can't exit your position? Either do it the right way or not at all, don't give us this half @ssed "stuff" :mad:

SSB
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I think you'll find that that is the rule in all cash accounts. IB is doing it the right way. If you stay in the Cash category then you cannot use the funds from a sale until they settle. If you then buy with the settled funds you could exit the same day or in the next second for that matter. But you could not use the newly created (unsettled) cash for three days.

If you want to be able to use unsettled funds to buy on the same day you sell, with the chance of being locked up for three days, then you would change your Cash Account to the newly created "IRA Margin Account".

They don't mention it but you'll probably pay interest on the use of the unsettled funds if you go with an IRA Margin Account.
 
Quote from rwk:

I blame the regulators, not the broker. This is one of the "joys" of trying to manage tax-sheltered assets. Many financial advisors would have us believe that sheltering of assets from tax (which is only temporary anyway) is the be-all and end-all of human existance. I plan to cash in my tax-advantaged assets as soon as I can do so without paying the 10% penalty. I'll just pay the @#$%^& tax.
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I'd rather be able to use the untaxed compounding available inside a sheltered account and pay the tax later.
 
Quote from JackR:

I think you'll find that that is the rule in all cash accounts. IB is doing it the right way. If you stay in the Cash category then you cannot use the funds from a sale until they settle. If you then buy with the settled funds you could exit the same day or in the next second for that matter. But you could not use the newly created (unsettled) cash for three days.

If you want to be able to use unsettled funds to buy on the same day you sell, with the chance of being locked up for three days, then you would change your Cash Account to the newly created "IRA Margin Account".

They don't mention it but you'll probably pay interest on the use of the unsettled funds if you go with an IRA Margin Account.
More...
This has been hitting EVERY brokerage firm.

The Fed recently clarified trading with unsettled funds in cash accounts. In most case it's more restrictive for customers. Not sure what IB's policy was before regarding unsettled funds in IRA accounts. Some firms had been allowing customers to buy and sell in the same day with funds that were made available from a sale as early as the day before.

It shouldn't be called an IRA Margin Account, as there cannot be any lending in cash accounts (so there shouldn't be any interest charges either). It's basically saying you can make a new purchase today when you have unsettled funds. However, you have to fully pay for them before you can sell them.

If you sold stock today to pay for your new purchase, you cannot sell the new purchase for 3 days. Otherwise this is a free-ride violation and your account MUST be restricted. The funds must be delivered from your sale...into your account... before the stock is considered "fully paid-for". I don't like it either (cause now you guys can't trade and pay commissions) but thems the new rules.
 
Allowing an investor to get trapped into a position in a retirement account seems completely ridiculous. What the hell is the SEC thinking? Do they have _any_ practical experience with investors and accounts?

I mean the whole point of the settlement delay used to be for manual movement of payments and stock certificates. Is there any risk at all of non-settlement any more? Even if a clearing firm goes belly-up and fails to settle their trades, doesn't the DTC end up making the counterparties good, and the BK firm ends up owing the DTC? If so, why is there any risk involved in letting people use unsettled funds that are guaranteed to settle?
 
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