Interactive Brokers (Best Kept Secret)

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Rainier
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Re: Interactive Brokers (Best Kept Secret)

Post by Rainier »

Hope some IB users can help. I just transferred some securities to IB from Fidelity.

When does cost basis get transferred for covered lots? The shares came over but the basis is still missing. What about uncovered lots? Will that get transferred? If not, can I manually enter?

Also, what is the best way to link my account to Fidelity for cash transfers? On the IB side or the Fidelity side and by what method?
muffins14
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Re: Interactive Brokers (Best Kept Secret)

Post by muffins14 »

For me the cost basis took a couple of days.

Actually that reminds me of another thing I liked more at Fidelity — it was easier to see that specific lots were at a loss and I should TLH. At IBKR, you have to go to the tax optimizer, note the current price, then subtract your basis. No automatic color coding or gain/loss calculation etc per lot.

For transfers, I just set up my Fidelity account via ACH inside IB. No complaints about that, but as I wrote earlier, it seems I can’t withdraw it for 60 days, which seems excessive to me
Last edited by muffins14 on Thu Aug 04, 2022 6:34 pm, edited 1 time in total.
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Startled Cat
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Re: Interactive Brokers (Best Kept Secret)

Post by Startled Cat »

muffins14 wrote: Thu Aug 04, 2022 7:33 am Actually that reminds me of another thing I liked more at Fidelity — it was easier to see that specific lots were at a loss and I should TLH. At IBKR, you have to go to the tax optimizer, note cue current price, then subtract your basis. No automatic color coding or gain/loss calculation etc per lot.
I find this extremely annoying. I can't imagine what IBKR's designers are thinking.
comeinvest
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Re: Interactive Brokers (Best Kept Secret)

Post by comeinvest »

Startled Cat wrote: Thu Aug 04, 2022 5:33 pm
muffins14 wrote: Thu Aug 04, 2022 7:33 am Actually that reminds me of another thing I liked more at Fidelity — it was easier to see that specific lots were at a loss and I should TLH. At IBKR, you have to go to the tax optimizer, note cue current price, then subtract your basis. No automatic color coding or gain/loss calculation etc per lot.
I find this extremely annoying. I can't imagine what IBKR's designers are thinking.
I agree there are a number of things to be improved at IB, this is just one of them. The tax optimizer is an awkwardly implemented afterthought, probably programmed by someone in a rush with little to no oversight, that doesn't really integrate with the platform neither functionally nor visually. Overall however IB has unique markets and features that none of the other U.S. brokers offer, and I find TWS is a unique tool for those who like the concept of a spreadsheet-like portfolio management and trading platform.
Kenneth Almquist
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Re: Interactive Brokers (Best Kept Secret)

Post by Kenneth Almquist »

muffins14 wrote: Tue Aug 02, 2022 6:55 am And maybe another thing is that fidelity doesn’t put a 60-day hold on incoming money from direct deposits. I could see this being annoying and forcing me to go on margin for things like rent payments, because I usually only hold about 5-10k cash. At fidelity I can spend the cash as soon as it arrives from my paycheck.
If you have, say, $100,000 of VTI at Interactive Brokers, you can deposit $10,000 and withdraw it the same day. This will show up in your account as a -$10,000 cash balance and $10,000 funds on hold. The margin limits apply to the cash balance, which is why you need marginable securities (like VTI in this example) in your account for this to work. You aren't charged any margin interest because margin interest is based on the total cash in the account, including funds on hold.

So the fund holds at Interactive Brokers aren't really an issue if the amount of money you are moving around is small compared to the size of the portfolio you have there. It can be an issue when you are first setting up an account or closing one.
Count of Notre Dame
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Re: Interactive Brokers (Best Kept Secret)

Post by Count of Notre Dame »

Rob Bertram wrote: Wed Aug 04, 2021 11:43 am
Nathan Drake wrote: Wed Aug 04, 2021 10:35 am Do you have a strategy for using leverage to invest and how to pay off the loan?

I.e., only 10-20% leverage…only make interest payments as long as they are low…but pay off the loan once your investments return some satisfactory amount?

That’s my biggest hesitation with leverage, how to time moves…
There are a few strategies involving leverage that have been discussed on the forum. Most of them target a specific leverage ratio (e.g., 10%, 20%, or 50% -- based on your risk tolerance). This means that every dollar that you deposit, then you also borrow additional funds on margin in order to keep to that target ratio. When the portfolio appreciates and therefore reduces the ratio of portfolio / debt, then the strategy has you buy more assets to return to your target level. When the market drops which drives up the leverage, the better strategies have you stay the course so that you are not selling assets while they are low.

It goes without saying that many forum members have strong opinions around debt and borrowing in general. It can be abused, so be very aware of the risks that you are assuming.

Here is one example of my discussion on a leveraged portfolio: viewtopic.php?f=10&t=143037

My strategy has a target leverage during the accumulation phase (e.g., 100% leverage) that tapers down to a maintenance level (e.g., 40% leverage) that can support a sustained withdrawal model. During the withdrawal phase, you do not sell assets. Instead, borrow more. Your portfolio should be sufficiently large that withdrawals are extremely small relative to the portfolio value. So to answer your last question, there is no reason to "time your move" as it is a buy and hold strategy. The target holding period is forever.
I have the same plan as well, that is to never sell any securities and just margin a small percentage of the gains in my portfolio as tax-free spending. While in the asset accumulation stage, I run my margin at 2x. Assuming a 50% decrease in my portfolio's value and 20% maintenance margin, I maintain an emergency fund with a HELOC that is 10% of the total value of my portfolio. This is how much cash I'd have to plunk into the account to avoid a margin call. As my brokerage grows beyond my ability to borrow against my home and other lines of credit, my plan is to start buying a bond ETF to lower the future expected volatility of my portfolio and thus the risk of a margin call. I foresee ending up at a more balanced 60/40 equities to fixed income asset allocation at my end state, starting at 100% equities. What is your asset allocation?
Count of Notre Dame
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Re: Interactive Brokers (Best Kept Secret)

Post by Count of Notre Dame »

muffins14 wrote: Tue Aug 02, 2022 7:30 am
comeinvest wrote: Tue Aug 02, 2022 7:18 am
You must have had lots of TLH to incur $650 in commissions. If you used market orders, you might have saved a lot with limit orders, which have only a fraction of the cost.
There is also IB Lite which also has no commissions.
But if you use box spreads diligently, use no futures etc. that can often lead to negative cash balances, and don't use any of the products (e.g. international equities) that IB has but most other brokers don't, and if you are approved for portfolio margin at Fidelity as well as for the level of options trading that you need for box spreads, then Fidelity (or Schwab) are the way to go.

What do you mean with "Fidelity came within 0.37% on margin" - 0.37% higher than IB? How did you achieve that?
I did limit orders, but even at $0.005 per share, 3000 shares is $15. I was doing TLH on like 700k-800k of VXUS/VTI/ITOT/IXUS at a time.

I was at 2.58% margin at IB, and fidelity was willing to do 2.95%. It’s a discount off their benchmark, so will still float like IB floats. When I tried to negotiate it while at fidelity they offered like 6-7%, in Jan 2022, I said no thanks and left for IB, but when I offered to bring assets back to fidelity on the condition they try to match the margin rate, this is what I got.
What is the maintenance margin at Fidelity? Right now VTI only has a ~10% requirement. How often does Fidelity change these thresholds?
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squirrel1963
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Re: Interactive Brokers (Best Kept Secret)

Post by squirrel1963 »

I just opened an account and I have a few really dumb questions on how to use the Web interface, so apologies in advance.

I might at some point evaluate using IBKR instead Vanguard as primary broker, but for the time being I want to hold some securities and cash in Euro. This makes sense to us because we have a lot of ties to EU and might use funds to eventually buy an apartment or house in some Eurozone countries.

Q1: What is the difference between "Convert Currency" and "Forex" ? Thus far I only tried "Convert Currency" and it's super easy to understand and use. Is there any reason to use "Forex" for my case (just convert to/from USD and EUR) ?

Q2: I was charged $2 USD to convert $500, which is fine as it was a test trade. Presumably it's a flat fee, and I would get charged the same to convert 100K ?

Q3: If I want to buy an UCITS ETF or individual stock, I specify the ISIN and then I would place the order while EU markets are open. I do not have margin enabled, and here my thinking is to do currency conversion first, and then I am hoping that the trading platform will automatically pick EUR funds for payment. Is that correct?

Q4: I don't see a need specify the market on which the trade is made, but if I ever need to, how do I do it?

Again sorry for the really dumb questions, but IBKR videos are not particularly helpful. TIA !
LMP | Liability Matching Portfolio | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks
gougou
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Re: Interactive Brokers (Best Kept Secret)

Post by gougou »

squirrel1963 wrote: Fri Aug 12, 2022 7:41 pm Q2: I was charged $2 USD to convert $500, which is fine as it was a test trade. Presumably it's a flat fee, and I would get charged the same to convert 100K ?
The commission is 0.2 basis point with a $2 minimum. So you pay $2 commission to convert $100K and $20 to convert $1M.

https://www.interactivebrokers.com/en/index.php?f=49654

Not familiar with other questions.
The sillier the market’s behavior, the greater the opportunity for the business like investor.
HKexpat
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Re: Interactive Brokers (Best Kept Secret)

Post by HKexpat »

Currency convert is effectively a shortcut for a market price order. If you trade the currency pair, you can set a limit price similar to trading stocks. I always use currency convert, but I could imagine wanting to place a limit order when exchanging a large sum in a currency pair that isn't as heavily traded as, say, USD to EUR.

My recollection is that you can trade immediately after a currency conversion, but you cannot immediately withdraw the foreign currency unless you have a margin account. I initially opened a cash account and there were a number of small annoyances that disappeared when I switched to a margin account. I'd just go for that even if you have no intention to trade on margin.

The trade is executed in the currency listed in the trade. I don't recall seeing an option to pick the exchange. Without a margin account, you need to have a sufficient balance in that currency. It doesn't automatically do the conversion for you.

By the way, there's no reason to exchange USD to EUR to invest in a fund denominated in EUR instead of an equivalent fund denominated in USD. The two track each other exactly using the current currency exchange rate. That's why the performance between identical funds can differ depending on which currency you look at.
levijean
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Re: Interactive Brokers (Best Kept Secret)

Post by levijean »

Has anyone else had trouble logging into IBKR bill pay recently? I havent been able to get in for a couple months. Support had me try a bunch of different things with my browsers to no avail; they say they are working on the back end system with no ETA for a fix. I have automatic recurring payments set up, it seems ridiculous to not be able to get in there to manage them.
tj
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Re: Interactive Brokers (Best Kept Secret)

Post by tj »

levijean wrote: Wed Aug 24, 2022 10:11 am Has anyone else had trouble logging into IBKR bill pay recently? I havent been able to get in for a couple months. Support had me try a bunch of different things with my browsers to no avail; they say they are working on the back end system with no ETA for a fix. I have automatic recurring payments set up, it seems ridiculous to not be able to get in there to manage them.
I didn't even know they had bill pay.
22wisted
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Re: Interactive Brokers (Best Kept Secret)

Post by 22wisted »

A new paper from SSRN notes that the execution quality of IBKR pro is quite subpar, compared to the other "free" brokers; https://papers.ssrn.com/sol3/papers.cfm ... id=4189239 .

To summarize:
... 85,000 stock trades (average of $100) they made through five leading retail brokers. They did get significantly different pricing through different brokers for identical orders to buy or sell at the current market price.

But their best pricing came from a broker that takes payment for order flow, namely TD Ameritrade, now a unit of Charles Schwab. Fidelity, which takes no order payments, got worse prices on the professors’ trades than did TD Ameritrade. And its prices were no better than those from the E*Trade unit of Morgan Stanley, which does take payments. Robinhood, which used revenue from order-flow payments to subsidize the industry’s first commission-free trading, delivered middle-of-the-pack pricing. Interactive Brokers ranked last in the execution pricing of the professors’ orders.
...
The statistical results they posted are also interesting:
Their trades cost on average 0.07% at TD Ameritrade, 0.20% at E*Trade, 0.23% at Fidelity, 0.31% at Robinhood, 0.44% in their Interactive Brokers Pro account (which charges commissions and does not take PFOF), and 0.46% in their Interactive Brokers Lite account (which has no commissions and takes PFOF).
While Bogleheads are buy-and-hold investors, for someone who DCA's $500 per month into an IRA with IBKR, we lose a bit from execution quality....

According to the authors:
Citadel on average provides the best execution while Two Sigma and UBS have the worst execution, with a maximum range around 3 cents.”
comeinvest
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Re: Interactive Brokers (Best Kept Secret)

Post by comeinvest »

I have not read the paper, but I think it was noted elsewhere in this forum that most customers of the free trades brokers use market orders, while most orders at IB are limit orders, supposedly as IB customers are more sophisticated. If true, then the all-in cost of limit orders would matter more, which was not studied in the paper.
km91
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Re: Interactive Brokers (Best Kept Secret)

Post by km91 »

I was quite surprised at the finding since execution cost and quality are supposed to be IB's biggest selling points, especially on the "pro" side. The front page of their website says net trading costs for customers in August was 2bps, significantly lower than what the research claims
comeinvest
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Re: Interactive Brokers (Best Kept Secret)

Post by comeinvest »

km91 wrote: Mon Sep 19, 2022 4:41 pm I was quite surprised at the finding since execution cost and quality are supposed to be IB's biggest selling points, especially on the "pro" side. The front page of their website says net trading costs for customers in August was 2bps, significantly lower than what the research claims
Read my previous post. Supposedly most orders at IB are limit orders. The cost of limit orders at IB is very small if you have the tiered plan with exchange rebates; with high enough trading volume, the commission can be negative after exchange rebates, i.e. you get paid for each trade.

You can also choose which exchange or trading venue your order is routed to for each order, i.e. no order is internalized or goes to market markers, unless you want it. My understanding is that direct routed limit orders will be executed faster on average, which means you are less subject to adverse selection, than with limit orders that are routed to market makers. I too would like to better understand the all-in trading cost.
AlohaJoe
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Re: Interactive Brokers (Best Kept Secret)

Post by AlohaJoe »

comeinvest wrote: Mon Sep 19, 2022 4:28 pm I have not read the paper, but I think it was noted elsewhere in this forum that most customers of the free trades brokers use market orders, while most orders at IB are limit orders, supposedly as IB customers are more sophisticated. If true, then the all-in cost of limit orders would matter more, which was not studied in the paper.
The paper suggests that the market makers know that IBKR's customers are more sophisticated and that's why they don't give them as much price improvement as they would to a more naive retail investor. (Under the assumption that if a sophisticated trader is trading they might know something the market maker doesn't, so they the market maker needs a bigger margin of safety and can't give as much price improvement.)

But IBKR has said somewhere or other that the trades in the paper (IIRC they were for 100 shares? But I'm too lazy to check) are much smaller than the average IBKR trade so the results aren't representative.

I think the paper is a great first step -- trade execution is a massive black box and almost certainly more important than free trades -- but it clearly comes with a lot of limitations. Hopefully more transparency spurs more competition and other papers follow.
occambogle
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Re: Interactive Brokers (Best Kept Secret)

Post by occambogle »

Any thoughts on IBKR Pro interest rates for cash at the moment? While not the best on the market they are more competitive than some of my bank savings accounts... https://www.interactivebrokers.com/en/a ... -rates.php
I'm talking about instant access, not CDs....
zie
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Re: Interactive Brokers (Best Kept Secret)

Post by zie »

occambogle wrote: Thu Sep 22, 2022 2:18 am Any thoughts on IBKR Pro interest rates for cash at the moment? While not the best on the market they are more competitive than some of my bank savings accounts... https://www.interactivebrokers.com/en/a ... -rates.php
I'm talking about instant access, not CDs....
Not impressed. I look at it from the other perspective, how much do I have to pay someone to hold cash for me? I expect to get the fed interest rate - fees.

I can't control the interest rate, but I can control the fee. .5% is not ridiculous for cash, it's average for the market(unsurprisingly it's also around what banks charge), but I'd much prefer to pay under that if possible, and generally speaking, it's quite possible to pay under that.

Some money market funds charge less(Vanguard's MMF's, TOIXX, some of Fidelity's, etc). ETF's like SGOV and ICSH, while not technically cash charge way under that fee, if you can handle the ETF format's weaknesses for cash-like holdings(for example, they do not have a guaranteed stable NAV).
Whether rich or poor, a young woman should know how a bank account works, understand the composition of mortgages and bonds, and know the value of interest and how it accumulates. -Hetty Green
deanmoriarty
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Re: Interactive Brokers (Best Kept Secret)

Post by deanmoriarty »

I am thinking of moving from Vanguard to IBRK for these reasons:

1) Convenient access to emergency cash via margin, which I don't necessarily plan to abuse (and potentially ever use), but it is nice to know that I can "safely" borrow 5-10% of my portfolio to, say, buy a car in cash or pay for a massive emergency.

2) I will likely be an expat later in life, possibly without a US address, and IBRK seems to welcome this group, whereas Vanguard doesn't.

Having only owned Vanguard mutual funds so far, I am rather uncomfortable with having to trade ETFs, especially when it comes to tax loss harvesting.

The absolutely best feature I love about Vanguard is the ability to "exchange" funds, whereby I can exchange VTSAX with VFIAX for tax loss harvesting without ever being out of the market.

How do folks deal with this? Do people really keep two browser tabs open and issue two different orders (e.g. sell VTI, buy VOO) several minutes apart, taking the risk of the market having run away +/- 1%? I'm sure if I would find myself in this predicament I would tax loss harvest much less frequently, out of caution.
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whodidntante
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Re: Interactive Brokers (Best Kept Secret)

Post by whodidntante »

occambogle wrote: Thu Sep 22, 2022 2:18 am Any thoughts on IBKR Pro interest rates for cash at the moment? While not the best on the market they are more competitive than some of my bank savings accounts... https://www.interactivebrokers.com/en/a ... -rates.php
I'm talking about instant access, not CDs....
You need to understand that the first 10k earns nothing, or at least I think that's right. It is EXTREMELY easy to beat what they offer. Basically, any modest effort to do better will result in doing better.
occambogle
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Re: Interactive Brokers (Best Kept Secret)

Post by occambogle »

whodidntante wrote: Tue Oct 04, 2022 10:21 am You need to understand that the first 10k earns nothing, or at least I think that's right. It is EXTREMELY easy to beat what they offer. Basically, any modest effort to do better will result in doing better.
Thanks... I do understand that, and the calculator on that page does calculate the blended rate after taking account of the first $10k, e.g. 2.53% for $50k, so you can compare easily.
It may be easy to beat that offer with competitive savings accounts available to US residents, but for non-resident US citizens who are limited to only a few US financial institutions it's not bad... though I realize this is a specific scenario. My US credit union's instant-access savings account offers only 1%. If there's a cash-like instrument that can get better e.g. something tradeable like an ETF with a broker, I'll be happy to hear any suggestions.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

Does anyone know if IBKR charges foreign transaction fee when you withdraw at the ATM abroad?
bling
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

Marseille07 wrote: Sat Oct 22, 2022 11:41 pm Does anyone know if IBKR charges foreign transaction fee when you withdraw at the ATM abroad?
https://www.interactivebrokers.com/en/i ... rsal-debit

looks like no exchange fee, but there's a 50c fee per use from IBKR + the fee from the machine. schwab still reigns supreme in this area.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

bling wrote: Sun Oct 23, 2022 11:52 am
Marseille07 wrote: Sat Oct 22, 2022 11:41 pm Does anyone know if IBKR charges foreign transaction fee when you withdraw at the ATM abroad?
https://www.interactivebrokers.com/en/i ... rsal-debit

looks like no exchange fee, but there's a 50c fee per use from IBKR + the fee from the machine. schwab still reigns supreme in this area.
Thank you! I think I can live with this, if I draw $300 or something, the fee isn't ideal but livable.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

Anyone know if IBKR might close your account due to low balance & inactivity?

I have some VOO in Lite right now but it is not currently my primary brokerage and I'm wondering if I can repurpose the proceeds elsewhere. I do plan to leave $100+ cash, but not sure if that's enough.
tj
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Re: Interactive Brokers (Best Kept Secret)

Post by tj »

Marseille07 wrote: Sun Oct 23, 2022 3:53 pm Anyone know if IBKR might close your account due to low balance & inactivity?

I have some VOO in Lite right now but it is not currently my primary brokerage and I'm wondering if I can repurpose the proceeds elsewhere. I do plan to leave $100+ cash, but not sure if that's enough.
I did a full account transfer from IBKR to Public, and my log in credentials seem to still work.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

tj wrote: Sun Oct 23, 2022 4:00 pm I did a full account transfer from IBKR to Public, and my log in credentials seem to still work.
Thank you. Could I ask how long ago your ACATS was? It'd be reassuring if you ACATS'ed more than a year ago.
tj
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Re: Interactive Brokers (Best Kept Secret)

Post by tj »

Marseille07 wrote: Sun Oct 23, 2022 4:05 pm
tj wrote: Sun Oct 23, 2022 4:00 pm I did a full account transfer from IBKR to Public, and my log in credentials seem to still work.
Thank you. Could I ask how long ago your ACATS was? It'd be reassuring if you ACATS'ed more than a year ago.
September.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

tj wrote: Sun Oct 23, 2022 4:08 pm
Marseille07 wrote: Sun Oct 23, 2022 4:05 pm
tj wrote: Sun Oct 23, 2022 4:00 pm I did a full account transfer from IBKR to Public, and my log in credentials seem to still work.
Thank you. Could I ask how long ago your ACATS was? It'd be reassuring if you ACATS'ed more than a year ago.
September.
Thanks. The jury is still out then, I wouldn't expect them to close that fast even if they eventually do.
tj
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Re: Interactive Brokers (Best Kept Secret)

Post by tj »

Marseille07 wrote: Sun Oct 23, 2022 4:10 pm
tj wrote: Sun Oct 23, 2022 4:08 pm
Marseille07 wrote: Sun Oct 23, 2022 4:05 pm
tj wrote: Sun Oct 23, 2022 4:00 pm I did a full account transfer from IBKR to Public, and my log in credentials seem to still work.
Thank you. Could I ask how long ago your ACATS was? It'd be reassuring if you ACATS'ed more than a year ago.
September.
Thanks. The jury is still out then, I wouldn't expect them to close that fast even if they eventually do.
Td Ameritrade locked me out immediately after a full transfer was processed. I had to call the 800 number to get assistance to log in and download a 1099 the following spring.
international001
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Re: Interactive Brokers (Best Kept Secret)

Post by international001 »

Marseille07 wrote: Sun Oct 23, 2022 11:59 am
bling wrote: Sun Oct 23, 2022 11:52 am
Marseille07 wrote: Sat Oct 22, 2022 11:41 pm Does anyone know if IBKR charges foreign transaction fee when you withdraw at the ATM abroad?
https://www.interactivebrokers.com/en/i ... rsal-debit

looks like no exchange fee, but there's a 50c fee per use from IBKR + the fee from the machine. schwab still reigns supreme in this area.
Thank you! I think I can live with this, if I draw $300 or something, the fee isn't ideal but livable.
WEll.. usually the biggest fee is what the foreign branch charges you. It depends a lot on the foreign bank
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

international001 wrote: Sun Oct 23, 2022 4:52 pm WEll.. usually the biggest fee is what the foreign branch charges you. It depends a lot on the foreign bank
How would you defend against that though? If you bank with Schwab International, they can somehow get the fee by the foreign bank waived?
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

tj wrote: Sun Oct 23, 2022 4:47 pm Td Ameritrade locked me out immediately after a full transfer was processed. I had to call the 800 number to get assistance to log in and download a 1099 the following spring.
Yeah, they are quick to inconvenience you for some reason. I ran into something similar despite stopping an ACATS out of TDA.
tj
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Re: Interactive Brokers (Best Kept Secret)

Post by tj »

Marseille07 wrote: Sun Oct 23, 2022 4:57 pm
international001 wrote: Sun Oct 23, 2022 4:52 pm WEll.. usually the biggest fee is what the foreign branch charges you. It depends a lot on the foreign bank
How would you defend against that though? If you bank with Schwab International, they can somehow get the fee by the foreign bank waived?
Schwab international doesn't let you have a bank account, only brokerage.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

tj wrote: Sun Oct 23, 2022 6:03 pm Schwab international doesn't let you have a bank account, only brokerage.
I see, thanks!
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Re: Interactive Brokers (Best Kept Secret)

Post by bling »

Marseille07 wrote: Sun Oct 23, 2022 4:57 pm
international001 wrote: Sun Oct 23, 2022 4:52 pm WEll.. usually the biggest fee is what the foreign branch charges you. It depends a lot on the foreign bank
How would you defend against that though? If you bank with Schwab International, they can somehow get the fee by the foreign bank waived?
if you're talking about the ATM fee, it's not waived, it's reimbursed by schwab. if you're talking about exchange fees, never ever ever ever let the ATM convert for you. always select local currency.
Marseille07
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Re: Interactive Brokers (Best Kept Secret)

Post by Marseille07 »

bling wrote: Sun Oct 23, 2022 7:20 pm if you're talking about the ATM fee, it's not waived, it's reimbursed by schwab. if you're talking about exchange fees, never ever ever ever let the ATM convert for you. always select local currency.
I was talking about the ATM fee. I guess it is a plus that Schwab reimburses it at all.

I'll choose local currency next time I face the situation. I know I've selected USD in the past before knowing this.
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

I ran a report on IB for year-to-date that I just haven't done in a long while (haven't been nearly as active in viewing investments this year as in years past) and holy smokes, stock lending is really bringing in a fat yield this year! Easily covers all my broker related expenses and much more! I have a lot of less common (and very uncommon in bogleheadland) funds and shockingly they get loaned out a lot for ridiculous yields. Obviously it doesn't hurt that rates are higher in general but I'm seeing some collateral commanding 20+% and many are also +10%.

The only possible explanation I've come up with (for such high fee rates) is that it is algos borrowing these shares b/c it just makes no sense why a human would choose such obscure funds (particularly multi asset funds), in other words, it's not some SPY shares commanding 20% to borrow.

I decided to do a test and ran a screener to filter for high utilization (eg. increased likelihood of shares being lent out) and high fee rate (eg. rate for borrowing shares) and selected 3 funds from the screener that I'd be happy to own anyway and purchased a round lot of all three. I'm going to track what they bring in via share lending for awhile, should be interesting. I'd be particularly interested in doing this with a fixed income fund but I ran out of time before close yesterday so I'm going to see how it goes with the three I selected.

In addition to tracking the total absolute yield I'm interested to see how sticky/volatile the utilization and unusually elevated fee rate is over time (hoping it's not transient from day to day, week-week, etc...).

Anyone else surprised what they're getting from the yield enhancement program these days? I forgot to mention, I have IBKR Pro, I don't remember if the yield you receive is different between lite/pro but some fuzzy recollection has me thinking it is.
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Re: Interactive Brokers (Best Kept Secret)

Post by AlohaJoe »

corp_sharecropper wrote: Wed Nov 30, 2022 8:07 am In addition to tracking the total absolute yield I'm interested to see how sticky/volatile the utilization and unusually elevated fee rate is over time (hoping it's not transient from day to day, week-week, etc...).
It is extremely transient. Just this year I've had it as low as $48 for all of January up to $638 in August, with the exact same securities.
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nyinvestor718
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Re: Interactive Brokers (Best Kept Secret)

Post by nyinvestor718 »

what are the tax implications of stock lending? Is there risk in losing the lended shares?
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Re: Interactive Brokers (Best Kept Secret)

Post by tj »

nyinvestor718 wrote: Wed Nov 30, 2022 11:11 am what are the tax implications of stock lending? Is there risk in losing the lended shares?
You might get payments in lieu of dividends instead of dividends. So, ordinary income instead of qualified dividends.
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

AlohaJoe wrote: Wed Nov 30, 2022 8:16 am
corp_sharecropper wrote: Wed Nov 30, 2022 8:07 am In addition to tracking the total absolute yield I'm interested to see how sticky/volatile the utilization and unusually elevated fee rate is over time (hoping it's not transient from day to day, week-week, etc...).
It is extremely transient. Just this year I've had it as low as $48 for all of January up to $638 in August, with the exact same securities.
Interest rates have changed significantly since January, I'm certain everyone has received more for share lending since the beginning of the year. I'd say without actually crunching the numbers my shares are lent out at a relatively similar amount and frequency every month that I've looked. I do notice some trends here and there for certain types (for instance, my REIT fund has been borrowed more the last couple of months) so I don't doubt there are some transient characteristics in this area.

For the existing securities I have it has been quite stable the last few months (about as far as I looked). My hypothesis is that for typical funds that one just owns with zero consideration toward lending it may be transient for specialized/sector funds and more consistent (but lower yields) for common broad indices, but for funds screened for these characteristics it might be stickier and of course have higher yield. I mean, I have an alt fund that keeps getting loaned out for like 10-12%+ for months now. I can not understand why any human would want to borrow/short a fund that does trend following on dozens of commodities, currencies, bonds, etc (I'd sure love to see the investment thesis for taking that short position on a somewhat opaque multi-asset fund - main reason I'm thinking it is purely technical algos doing the borrowing) but it seems to be consistently lent for a seemingly consistent high interest rate for as far back as I've looked, which has tickled my curiosity.
Last edited by corp_sharecropper on Wed Nov 30, 2022 5:54 pm, edited 1 time in total.
corp_sharecropper
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Re: Interactive Brokers (Best Kept Secret)

Post by corp_sharecropper »

tj wrote: Wed Nov 30, 2022 1:39 pm
nyinvestor718 wrote: Wed Nov 30, 2022 11:11 am what are the tax implications of stock lending? Is there risk in losing the lended shares?
You might get payments in lieu of dividends instead of dividends. So, ordinary income instead of qualified dividends.
Please verify before committing to this but I believe that IB will make an effort (NOT guarantee) to return your shares so that you receive dividends and not payments in lieu, whenever possible.

I seem to get some payments in lieu here and there but it seems to be quite a minority of the time.

I believe IB is your counter party for lending (which is good, imo) as opposed to the actual end borrower which is who knows. I don't remember the details but I believe IB even credits the position and payments in lieu a few cents more than the mark. You really don't see/notice any of this, your positions don't actually disappear from your view of your account and if you were to "do" anything with your shares that happen to be on loan at that moment (like sell, ACATS transfer to another broker, or simply unenroll from lending) they are returned to you immediately.

Is there risk? Sure, like everything. I wouldn't consider it much more than just a normal brokerage holding your shares in their name, which is what all the big brokers do and probably about the same as a margin account where they may already be lending your shares depending on the terms of the fine print you sign when opening an account. I'll put it like this, if there's an event which causes you to lose specifically because you're lending shares at one of the major brokers, then there's probably going to be a lot more to worry about than just that and everyone will be in a world of hurt along with you. That's my opinion anyway, no doubt someone may have an alternative that i would consider "extreme", and not interested in debating about it personally, so take all opinions, do research, evaluate your own situation/risk, and at least you'll make your own, informed, decision.
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Re: Interactive Brokers (Best Kept Secret)

Post by AlohaJoe »

corp_sharecropper wrote: Wed Nov 30, 2022 1:47 pm
AlohaJoe wrote: Wed Nov 30, 2022 8:16 am
corp_sharecropper wrote: Wed Nov 30, 2022 8:07 am In addition to tracking the total absolute yield I'm interested to see how sticky/volatile the utilization and unusually elevated fee rate is over time (hoping it's not transient from day to day, week-week, etc...).
It is extremely transient. Just this year I've had it as low as $48 for all of January up to $638 in August, with the exact same securities.
Interest rates have changed significantly since January, I'm certain everyone has received more for share lending since the beginning of the year. I'd say without actually crunching the numbers my shares are lent out at a relatively similar amount and frequency every month that I've looked.
The change isn't due to interest rates. It went from $48 to $638. Are you suggesting that rates went up 15x?

What's more some of my interest rates have gone down over the year. MFUS has gone from 11% in January to 6% in November.

The change is due to different amounts of borrowing.

REET wasn't loaned out a single time all year until August 8. Then it was loaned out regularly from 8-August to 27-October. It hasn't been loaned again in the month since then. The median borrow was 228 shares. But one time someone borrow 6,000 shares. And another time someone borrowed 1,100 shares.

MFUS was borrowed 0 times in January, once in February, once in March....0 times in October.....but 7 times in November.

etc, etc.

Not a single one of my securities gets borrowed out at a relatively similar amount and frequency every month.

If yours have, that's great. But I wouldn't really expect it to continue that way indefinitely.
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Re: Interactive Brokers (Best Kept Secret)

Post by HKexpat »

There are two potential sources of variation: more investors are borrowing the share for shorting, and IBKR is getting the shares from you rather than someone else. It may well be a combination of both, but I suspect the latter is a more likely driver for why you see such big changes month-to-month. When there are millions of shares available to be borrowed, the odds that 1,000 of yours are borrowed just aren't very high. But when your account is selected, they're presumably going to borrow as many as necessary and available.
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Re: Interactive Brokers (Best Kept Secret)

Post by nyinvestor718 »

Dumb question but for those that have margin, are we automatically opted into share loaning program?
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Re: Interactive Brokers (Best Kept Secret)

Post by Tanelorn »

nyinvestor718 wrote: Thu Dec 01, 2022 8:52 am Dumb question but for those that have margin, are we automatically opted into share loaning program?
If you use margin, they can loan your holdings and not pay you. That’s separate from the share lending opt it, which shares the revenue for if they lend from a cash account or a margin account not using margin. If you want the latter to happen, you have to sign up for it.
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Re: Interactive Brokers (Best Kept Secret)

Post by saver007 »

IB stock lending work great with CASH like ETFs to boost yield.

Let's say you want the cash to be in short term Treasury ETF like BIL or SHY.. The added benefit you get for lending it even if small let's say 30 to 50 basis points is quite substantial considering low expected yield from ETF .. for example 30 basis points boost to a 3% yield is quite good (10 % boost).

of course there is a bit of uncertainty.... You never know if/when your cash like ETFs will be lent... In my past experience,
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Re: Interactive Brokers (Best Kept Secret)

Post by tj »

saver007 wrote: Thu Dec 01, 2022 11:50 am IB stock lending work great with CASH like ETFs to boost yield.

Let's say you want the cash to be in short term Treasury ETF like BIL or SHY.. The added benefit you get for lending it even if small let's say 30 to 50 basis points is quite substantial considering low expected yield from ETF .. for example 30 basis points boost to a 3% yield is quite good (10 % boost).

of course there is a bit of uncertainty.... You never know if/when your cash like ETFs will be lent... In my past experience,
I don't understand why those shares would be lent if the ETFs aren't being volatile. Why would someone pay the premium to borrow?
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