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Question for Canadian users of Interactive Brokers


Liberty
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Hi. So I'm considering switching to IB Canada to reduce my fees and get a margin account. I've never used margin before, I've always been pretty vanilla for that kind of stuff, but I'd like to have as an extra tool in the toolshed to lever up a bit if there's some macro event (blood on the streets) or a salad oil scandal or whatever causing some of my watchlist to drop a lot and I don't have cash on hand.

 

My question is about margin requirements in Canada at IB.

 

Googling around, I've found many people talk about 30% requirements in Canada for stocks that are on approved lists and 50% for most of the rest.

 

But here in the IB Canada FAQ it says:

 

Does IB Canada apply the same margin rules as most Canadian brokers?

According to applicable Canadian rules, margin requirements on certain stocks may be as low as 30%. However, this reduced margin rate of 30% will only be applied on an intra-day basis as we comply with Reg T (US) margin rules which require overnight margin requirement of at least 50%.

 

https://www.interactivebrokers.ca/en/?f=%2Fen%2Fgeneral%2Feducation%2Ffaqs%2FcanadaFAQs.php%3Fib_entity%3Dca

 

And there's also this:

 

Above margin requirements are intraday. Traders wishing to hold positions overnight should also look at the Special Memorandum Account (SMA) field and ensure it is at least 0$ ten minutes before the close of the regular trading session (usually 15:50pm ET). In the calculation of the SMA, the maximum loan value is 50%.

 

https://www.interactivebrokers.ca/en/index.php?f=marginCA&p=stk

 

This seems pretty clear to me, but I just want to confirm that the margin requirements for Canadians at IB is 50% except intraday and that I'm not missing something else that changes how this work?

 

I suppose that the Canadians who are talking about getting a 30% margin requirement are at purely Canadian brokers who don't follow US Reg T..?

 

50% vs 30% makes a pretty big difference in how big your cushion is before you get a margin call (well, IB just liquidates apparently), so it's important, not that I think I'll ever get close to that limit...

 

I just want to make sure I understand this correctly. Thank you in advance for your help.

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I found this:

 

IB CANADA ORGANIZATIONAL UPDATE

 

 

Dear IB Customer,

 

We are sending you this communication to inform you of an upcoming change to Interactive Brokers Canada Inc.’s (IB Canada) operations, which will have minimal impact in terms of changes required of you, but offers a number of benefits intended to simplify the management of your account.

 

As background, IB Canada has traditionally relied upon Interactive Brokers LLC, it’s U.S. affiliate, to provide various operational and back office services. This arrangement, while advantageous from the standpoint of internal operational efficiencies, introduces a number of drawbacks to clients which, as our Canadian presence has expanded, we seek to eliminate by managing these services directly through IB Canada. In particular, the benefits of this change include the following:

 

- Elimination of the Pattern Day Trading requirement;

- Reg. T margin rule will no longer apply (i.e., no distinct initial and maintenance margin requirements or SMA calculation;

- Opportunity for more favorable interest debit/credit calculations as balances currently segmented between securities and commodities will now be consolidated;

- Simplified statement presentation due to consolidation of security and commodity segments;

 

It’s important to note that this change will have no impact upon the products offered, commissions or the manner in which you access your account and enter orders. As part of the conversion, which is scheduled to begin mid-September, you will be provided with an updated account ID (note that your user name will remain unchanged) at 2013 year end will receive two sets of annual statements and tax forms.

 

We look forward to providing you with the benefits of this conversion and invite you to contact our Canadian Customer Service Center toll free at 1-877-745-4222 or direct at 1-514-847-3499 with any questions regarding this matter.

 

Interactive Brokers Customer Service

 

http://canadianmoneyforum.com/showthread.php/16154-Interactive-Brokers-Canada-%28IB-Canada%29

 

Apparently IB Canada is splitting itself more from the US parent and so won't have to follow some of the US regulations that affect things like this.

 

I'd still love to hear from anyone with a Canadian IB account about their experience and what they know about all this. Is it possible that they've updated the margin requirements in Canada and haven't updated the materials on their site yet, which still talk about Reg T and 50%? TIA.

 

Update: Well, to keep this back and forth with myself going... I spoke to IB Canada on the phone and apparently they've done the switch and Canadians aren't bound by the US rules, so eligible stocks have a 30% margin requirement. Not sure why their website isn't fully updated to reflect that yet.

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IB offers 30% margin requirement on S&P 500 component stocks. I always thought this was standard across all brokers but possibly not.

 

As for margin calls, they are "pretty nice". They'll let it go minus 1 to 2% of total stock value (appx) up to about an hour before closing before acting automatically.

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IB offers 30% margin requirement on all S&P500 stocks. This is standard I would imagine across all brokers.

 

Until the fall of 2013, IB Canada didn't, they had a 50% overnight margin requirement because they had to follow some US rules because IB US was doing various services for them and was regulated with US rules.

 

But now they offer the Canadian 30% overnight requirements.

 

What confused me is that they haven't updated many parts of their website to reflect that yet...

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As a US a/c i always had 30% on approved TSX stocks.  So do Canadians get better margin now on US stocks at 30% than we do for Reg T a/c's?  Of course US residents and maybe Canadians are eligible for portfolio margin which is even more favorable on US stocks. 

 

You also have to consider the difference between initial margin and maintenance margin requirements.

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