FOREX - Looking for the most cost-efficient way to do it

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Topic Author
turbotroll
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FOREX - Looking for the most cost-efficient way to do it

Post by turbotroll »

Hey, all.

Up until today, I have been using Interactive Brokers for my FOREX USD -> MXN trades. I recently learned, though, that my Brokerage account does not allow for that specific use case (I was told this by the IB team).

I've been looking for other ways to do this FOREX every month - it'd be from my Schwab USD acc to my Santander MXN one. One alternative is just doing it directly through Schwab, as a Wire that gets converted using the Schwab Day Exchange Rate. I'm not sure this is the most cost-efficient way to do it, because when I compare the Schwab <> Interactive Brokers rates, there is a big difference.

Does anyone have any tips in regards to how to make this FOREX every month? Any services I could use? Or maybe there's an argument to be made to just ignore the costs and go with whatever is simpler.

Thanks for any tips!
grateful75
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by grateful75 »

Can you please explain why it is not allowed on IBKR? I have a friend who often does USD->GBP conversion to send GBP to UK account.
Topic Author
turbotroll
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by turbotroll »

grateful75 wrote: Tue Aug 02, 2022 5:23 pm Can you please explain why it is not allowed on IBKR? I have a friend who often does USD->GBP conversion to send GBP to UK account.

Yes. IB told me that any FOREX done in a brokerage account would need to ultimately be in the purpose of investing and/or trading. Apparentely (and I learned this recently) you can't only do FOREX for the sake of it in an IB account.
grateful75
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by grateful75 »

That is quite interesting. Did they point you to any policy document?
Topic Author
turbotroll
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by turbotroll »

Kind of. This is the translated message:

Dear Mr. X,
Given IBKR policies, the main use of your account must be the Trading of Financial Instruments, Forex transactions must be associated with the purchase of assets in currencies other than the dollar and not the purchase of assets and not the purchase of divis and not to the divis of divis.
There is no minimum requirement that must be met, but Forex should be an activity derived from your investments, it should not be the ultimate goal of your account.
We only have minimum amounts defined for the following cases:
1. Subscribe to real-time data, for which you must maintain a balance greater than USD 500.
2. Request margin, in which case you need to have a minimum balance of USD 2,000.
3. Trading options require a minimum balance of USD 2,000.
The moment your account drops to $2,000; this will behave as a cash account (cash account) that the balance is greater than the minimum of USD 2,000.
Transfers, Permits, Market Data, TWS Platform, Currency Exchange, and others
https://ibkr.info/en/article/2189


And at the end, they reference this article: https://ibkr.info/es/article/2189
Atlantic_ave
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by Atlantic_ave »

Interesting. I also use ibkr only for this purpose (USD to mxn). I wonder if buying some random ETFs may avoid our accounts to be flagged. Exchanging every month systematically and use the free wire may also be irritating to them.
This email they sent you really don't explain much.
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squirrel1963
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by squirrel1963 »

turbotroll wrote: Tue Aug 02, 2022 5:32 pm
grateful75 wrote: Tue Aug 02, 2022 5:23 pm Can you please explain why it is not allowed on IBKR? I have a friend who often does USD->GBP conversion to send GBP to UK account.

Yes. IB told me that any FOREX done in a brokerage account would need to ultimately be in the purpose of investing and/or trading. Apparentely (and I learned this recently) you can't only do FOREX for the sake of it in an IB account.
I don't have IBKR, but I was thinking about them and I read in another thread that they don't like it if you use them just for FX. I don't have any further details.
LMP | Liability Matching Portfolio | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks
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rob
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by rob »

Is wise and option for you to do the currency conversions?
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
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Mike747
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by Mike747 »

I use Revolut, pretty straight forward
Atlantic_ave
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by Atlantic_ave »

Wise fees are getting worse and worse (latest hike today). Revolut is better but still nobody beats IBKR. I use the three services, but stopped exchanging with wise in the past year.
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squirrel1963
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by squirrel1963 »

Currently I use xe.com and the fees seem pretty reasonable. You set up ACH from checking and they'll withdraw the money, do FX, and send it via wire to the foreign bank.
If I remember correctly the markup over interbank is about 0.1% for $10K amount for EUR. I haven't used them in a while though.
LMP | Liability Matching Portfolio | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks
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Mike747
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by Mike747 »

I never used Wise, but looked into it once and from what I remember, it's better than a regular bank wire from your checking account as long as the amount is small.

What I like about Revolut is that you receive a debit card which you can use when you're on vacation, so you don't have to use your USD denominated credit or debit card.
Topic Author
turbotroll
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by turbotroll »

Both Xe and Revolut are not available yet in MX :( . I think that for the moment my only alternative is to do it via Schwab.

Thanks for the help, folks!
Atlantic_ave
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by Atlantic_ave »

You cannot apply from a US address? They would ship it to MX even if the address is different from the application address i believe.
grateful75
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by grateful75 »

I have been moving money to UK (3-6 times a year) using IBKR without any issue. I hardly have any assets at IBKR. I usually push money from bank account to IBKR (4 day hold as opposed to 44 day hold is pulled by IBKR), convert it to GBP and then push it to my UK based account. They have not advised me to stop doing that.
kale005
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by kale005 »

How much are you converting everything? If is it small, Schwab ATM withdrawals?

Alternatively, wire USD to your MX where they have account that you can do multicurrencies and shop around in MX.
Topic Author
turbotroll
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Re: FOREX - Looking for the most cost-efficient way to do it

Post by turbotroll »

Yeah, I settled for a Wire with FOREX, directly from Schwab. They hace a good enough rate and it’s easiest route by far.
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