MTD Interest and intraday Spot FX trading?

A

AndreaG87

Hi all,

During the previous week I did 500-1000 trades on ZAR spot currency in my IBKR demo account with some software I developed.

I took 50k from my base currency (GBP) and converted in 100k EUR (i.e. buy 100k EUR.GBP on margin). This generates a +100k EUR and a -50K GBP position.

I then run a lot of quick trades between EUR and ZAR with some profit (say, 1k EUR). All trades involve using ZAR for a few seconds, which is then converted back to EUR.

After a few days, "accrued interest rates" skyrocketed from 0 into -4500GBP.

My understanding is that this is due to the fact that currencies take a T+3 to settle and trades cumulate into a very large total ZAR position, from which the negative interest rate is computed.

I want to understand if:
1) the huge accrued interest rate is actual and will be debited at the beginning of the next month, or I can discard it as a wrong estimate which will be updated in the next days

2) If this is an actual interest rate, and my reasoning is correct, it means that any fx cross operation ends up generating a loan debt unless 3 days pass between each operation, which is simply absurd. How could a trader afford trading FX spot currencies, then?

thanks
 
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AndreaG87 said:
After a few days, "accrued interest rates" skyrocketed from 0 into -4500GBP.
More...
Your reports give you the values in your base currency, which is GBP in your case. But it does not necessarily mean that the debit interest was accrued on GBP alone. It could be that a portion was on GBP, another portion on EUR an another portion on ZAR. Getting hit with GBP4500 after only a few days sounds a bit excessive to me. You may want to investigate on which currencies you are actually being charged debit interest.
 
Hi HobbyTrading, thanks for answering. I can confirm that all debt is caused by ZAR, which is then converted into the base currency (GBP). I fail to understand the debt magnitude as the margin was opened with borrowing GBP, which got exchanged in EUR and then ZAR-EUR, EUR-ZAR etc.
 
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It sounds like that you have a negative ZAR cash balance. The interest rate is approximately 6% according to IB's website. I do not know the details how IB charges interest if you do day trading and close any short positions before the end of the day.
 
It's quite mysterious. My ZAR cash account is nil (the script is built to zero all balances apart from EUR) and by going through the entire transaction list, I confirm the net of the 500 transactions is a debt of 1.5 ZAR.
 
you can just generate a flex query (where you look at your statement) and look at the "interest detail" or whatever it is called.
 
PROBLEM SOLVED. IF YOU TRADE SPOT FX, READ HERE BECAUSE IT VERY LIKELY INTERESTS YOU AS WELL:

I was illuminated by IBKR. Our intuition was correct.

Some currency pairs settle at T+2, whereas other pairs settle at T+1. The gap generates an implicit financing which accrues on a daily basis, compounding in a massive debt.

Also, read the following

https://www.interactivebrokers.com/en/index.php?f=709

Funny they put as a caveat to watch out for asynchronies in settlement days but they don't provide a calendar (for what I see)
 
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AndreaG87 said:
PROBLEM SOLVED. IF YOU TRADE SPOT FX, READ HERE BECAUSE IT VERY LIKELY INTERESTS YOU AS WELL:

I was illuminated by IBKR. Our intuition was correct.

Some currency pairs settle at T+2, whereas other pairs settle at T+1. The gap generates an implicit financing which accrues on a daily basis, compounding in a massive debt.

Also, read the following

https://www.interactivebrokers.com/en/index.php?f=709

Funny they put as a caveat to watch out for asynchronies in settlement days but they don't provide a calendar (for what I see)
More...

Do you have the link that says which currency belongs to T+1 or T+2
 
Unfortunately not, and it seems IBKR is silent about it apart from the festivity calendar. I asked for a confirmation to the help desk and I'll report back in case
 
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