Settled cash, question

[raf_bcn]

Yes, of course the settlement is t + 2 , but that doesn't affect the idea I am trying to explain. It only defers the situation for two days.

But the fact is the same. The Broker is charging a whole day interest for a transaction that took place 40 minutes earlier.
That is like what happened with the car parking in my country. You parked 1 hour and 1 minute , you had to pay 2 hours. The financial industry is like that ?

_But the unfair thing is that the transaction didn't take place 40 minutes earlier but 10 hours after.

_The limit hour to communicate an early assignment decision by the holder is beyond 16:20 . So it is not ok to compute that as being done at 16:20. Maybe it is later.

This is standard across the industry. Look at it from the perspective of your counterparty. They exercised the option on Wednesday and expect to receive payment on Friday.

Yes but I received the stock on Thursday. And the puts holder for sure also received the cash on Thursday. Which day and hour is IB accounting this cash in the balance of the holder ? also at 16:20 of Wednesday ?

the same goes for after-hours trades. Even if you buy a stock at 20:00 on Wednesday, it still affects your settled cash balance on Friday.

Yes but you are not going to pay interest on Friday, because IB looks at the cash at 17:00. Am I explaining correct ? If the transaction is made at 20:00 on Wednesday, on Friday at 17:00 won't be settled.




Please, a couple questions that will help us to clarify that.

1_ At what time does the day end for the financial industry in USA ? at 12:00 am EST ?
2_ All the stock trades that took place during the day settles + 2 but exactly at what hour, every trade settles at the hour that took place or they grup all the trades and settles them at the same hour ?
what hour they do that ?
3_ Which time of the day the brokers look at the client cash balance in order to deretminate the interest they must pay ? Is the same for all brokers ?


4_ In case nobody knows the answer to these questions, please can anyone give an advice to whom could I adress these questions ?
For sure there is a regulation for all this.

Thanks.

 

[elt894]

Yes but you are not going to pay interest on Friday, because IB looks at the cash at 17:00. Am I explaining correct ? If the transaction is made at 20:00 on Wednesday, on Friday at 17:00 won't be settled.

I think this gets at the crux of the matter, so I'll just focus on this point. T+2 doesn't mean that the trade settles exactly 48 hours after it occurs. It means by close of business two days later. So a trade at 20:00 on Wednesday would still be settled by 17:00 Friday. See "Operation" here: https://en.wikipedia.org/wiki/T+2. These are antiquated conventions that go back to the days when paper stock certificates would be transferred by hand.

 

[raf_bcn]

Thank you for the insight @elt894

Wikipedia,
_ if a stock is purchased on Friday at any time before the close of trade on that day, a payment or check must arrive at the broker's office by the close of business on Tuesday.

The stock market closes at 16:00 EST. So probably they settle the transaction after 16:00 on Tuesday . But before 17:00, as they want to charge interest.

_In your opinion @elt894 , in the trade in this example , the buyer would have to start paying interest Tuesday at 17:00 or Wednesday at 17:00.
In my opinion on Wednesday, the settlement day + 1 . It makes no sense to start paying the same day that you begin borrowing. If the broker wants to charge one day of interest, 1 day has to pass. IB accrues interest on a daily basis.

_And finally. If you buy stock on margin in the pre-market and sells in the after market, are you paying interest for those hours ?
In theory if all the trades settle at the same hour, you won't pay interest for that.
I don't know what really happens. But it is difficult to believe that the broker won't charge interest.

thank you.

 

[elt894]

The stock market closes at 16:00 EST. So probably they settle the transaction after 16:00 on Tuesday . But before 17:00, as they want to charge interest.

_In your opinion @elt894 , in the trade in this example , the buyer would have to start paying interest Tuesday at 17:00 or Wednesday at 17:00.
In my opinion on Wednesday, the settlement day + 1 . It makes no sense to start paying the same day that you begin borrowing. If the broker wants to charge one day of interest, 1 day has to pass. IB accrues interest on a daily basis.

You pay interest for the period from Tuesday 17:00 to Wednesday 17:00. The way this shows up on your accounts statements at IB is that on your Tuesday account statement you will see your "ending settled cash" line become negative. The negative interest accrual will be reflected on your Wednesday statement.

_And finally. If you buy stock on margin in the pre-market and sells in the after market, are you paying interest for those hours ?
In theory if all the trades settle at the same hour, you won't pay interest for that.
I don't know what really happens. But it is difficult to believe that the broker won't charge interest.

You won't be charged interest.