Looks like cost is 2%-ish if you wanted the option to lock in today's conversion rate for Dec 2020.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Negative interest rate (Interactive Brokers)
- Thread starter ciccio
- Start date
Looks like cost is 2%-ish if you wanted the option to lock in today's conversion rate for Dec 2020.
You could organize street riots in the EU, asking for the ECB to raise interest rates. Other than that I dont see how you can do much about it
Yes, I asked a couple of times a similar question, and got similar answers (some good, thanks all !), don´t see how OP can sort out his problem if he wants to keep all the account balance in cash in EUR and in a single IB account.
A multimillion EUR balance used fully for futures margining sounds scary btw, but to each their own expertise.
@ciccio, Just some quick remarks:
1) It used to be that brokers accepted investment-grade bonds as collateral for futures. Even if IB doesnt allow this, bonds are a safe asset which you can sell anytime to fund your margin. These days the method is not so useful as german government bond yields -0.6% but hey thats better than -1%. You can probably still find some short term eurozone corparate bonds yielding positive returns, for example Deutsche Bank, available at IB, https://www.bourse.lu/security/XS0519942139/166686
2) When you think about risk of stocks, bonds, USD, etc, keeping a large sum at IB is also not so great! IB itself has a BBB+ credit rating which is investment grade, but quite low, so this is not risk free by any consideration.
3) If your bank account in your home country does not yet charge you for keeping the money then move it there, and move it back to IB whenever you need a higher balance for margin. This will be cheaper than paying 1% to IB.
1) It used to be that brokers accepted investment-grade bonds as collateral for futures. Even if IB doesnt allow this, bonds are a safe asset which you can sell anytime to fund your margin. These days the method is not so useful as german government bond yields -0.6% but hey thats better than -1%. You can probably still find some short term eurozone corparate bonds yielding positive returns, for example Deutsche Bank, available at IB, https://www.bourse.lu/security/XS0519942139/166686
2) When you think about risk of stocks, bonds, USD, etc, keeping a large sum at IB is also not so great! IB itself has a BBB+ credit rating which is investment grade, but quite low, so this is not risk free by any consideration.
3) If your bank account in your home country does not yet charge you for keeping the money then move it there, and move it back to IB whenever you need a higher balance for margin. This will be cheaper than paying 1% to IB.
@ciccio, Just some quick remarks:
1) It used to be that brokers accepted investment-grade bonds as collateral for futures. Even if IB doesnt allow this, bonds are a safe asset which you can sell anytime to fund your margin. These days the method is not so useful as german government bond yields -0.6% but hey thats better than -1%. You can probably still find some short term eurozone corparate bonds yielding positive returns, for example Deutsche Bank, available at IB, https://www.bourse.lu/security/XS0519942139/166686
2) When you think about risk of stocks, bonds, USD, etc, keeping a large sum at IB is also not so great! IB itself has a BBB+ credit rating which is investment grade, but quite low, so this is not risk free by any consideration.
3) If your bank account in your home country does not yet charge you for keeping the money then move it there, and move it back to IB whenever you need a higher balance for margin. This will be cheaper than paying 1% to IB.
Very interesting. What is your understanding of seggregation rules if IB goes under?
@ciccio, Just some quick remarks:
1) It used to be that brokers accepted investment-grade bonds as collateral for futures. Even if IB doesnt allow this, bonds are a safe asset which you can sell anytime to fund your margin. These days the method is not so useful as german government bond yields -0.6% but hey thats better than -1%. You can probably still find some short term eurozone corparate bonds yielding positive returns, for example Deutsche Bank, available at IB, https://www.bourse.lu/security/XS0519942139/166686
2) When you think about risk of stocks, bonds, USD, etc, keeping a large sum at IB is also not so great! IB itself has a BBB+ credit rating which is investment grade, but quite low, so this is not risk free by any consideration.
3) If your bank account in your home country does not yet charge you for keeping the money then move it there, and move it back to IB whenever you need a higher balance for margin. This will be cheaper than paying 1% to IB.
To use IB's credit rating as an indication of fund safety is kind of misleading imo. Sure it is not 100% safe but unlike buying a bond from a company IB is not allowed to use customer money for business operating purpose. Also the customer fund is subject to call anytime unlike a bond in which the principal is only paid upon maturity.
To use IB's credit rating as an indication of fund safety is kind of misleading imo. Sure it is not 100% safe but unlike buying a bond from a company IB is not allowed to use customer money for business operating purpose. Also the customer fund is subject to call anytime unlike a bond in which the principal is only paid upon maturity.
I agree 100%
I agree 100%
Careful here - We have a good case study in front of us called MF Global.
I certainly do not agree 100%, but find comfort in segregation.
I can speak from direct experience because I was involved in the failure of MF Global and also in the failure of Refco. Those who had an account to trade stocks or futures have recovered everything (even if after a long time). Those who had an account to trade on unregulated products (for example forex) lost about 50%.
Segregation is good, money on demand is good, 7B in capital which IB boasts is also good, trading only regulated products is good, and if I didnt know this I would not keep my money at IB. However, when we are talking about an account with a few million in it, a difference between an AA rated bank and a BBB+ rated broker starts to make a big difference.
@ciccio, is your bank also charging negative rate?
@ciccio, is your bank also charging negative rate?