Interactive Brokers stops US, CAD, EU Investors from buying in China

[Luke]

Interactive Brokers stopps retail investors from buying stocks in Hongkong with "low liquidity" possibly under pressure from FINRA. Meanwhile i can yolo my Life Savings into a leveraged ARK ETF in NY. What the hell is going on? 

Edited June 7 by Luca

[Luke]

Lufax as an example is sell only now and untradable. 300k volume...

[Luke]

[Luke]

 

Ming Fai Group is also untradeable...

[thowed]

Woah - presumably this will affect all those David Webb-style Value situations?

[Luke]

33 minutes ago, thowed said:

Woah - presumably this will affect all those David Webb-style Value situations?

Yeah, its insane. I contacted IB to ask for a justification. I can not believe why they would do this, considering all the legal gambling on Robinhood. 

 

Maybe professional accounts can still buy in HK but retail is certainly closed. I might try to get access to it that way. 

Edited June 7 by Luca

[Gamecock-YT]

KYC/AML I'd guess. 

[Malmqky]

Surprised IB is doing this. Something like Vanguard who won’t even let you buy OTC sure, but isn’t IB’s second strongest selling point the international options?

[Luke]

1 minute ago, Malmqky said:

Surprised IB is doing this. Something like Vanguard who won’t even let you buy OTC sure, but isn’t IB’s second strongest selling point the international options?

No idea why they are doing this. The reason I am at IB is to be able to buy on foreign exchanges and also in low liquidity small caps.

[scorpioncapital]

Do you think this is the start of a kind of capital control and eventually will broaden to all stocks of various nations the West doesn't like? Of course, I'm sure the reverse isn't happening? Are foreign nationals we don't like still allowed to invest in US markets? And why residence and not citizenship? All very puzzling.

[Luke]

57 minutes ago, scorpioncapital said:

Do you think this is the start of a kind of capital control and eventually will broaden to all stocks of various nations the West doesn't like? Of course, I'm sure the reverse isn't happening? Are foreign nationals we don't like still allowed to invest in US markets? And why residence and not citizenship? All very puzzling.

I am waiting for IBs reply. Concerning...will update you guys

[LC]

I don't like it either. Please post IB's reply, I am curious what is driving this.

[scorpioncapital]

I am not very optimistic about the response. This is because throughout history and we see it often today that real motives are disguised under the pretense of 'for your own protection'. I actually think this is the way soft capital controls play out around the world. Notice the ever more common 'national security review'. It's so wide a truck can run through it. Or look at hijacking pension funds in Canada and force them to invest in Canada. Then there is a 'debate' if this is actually your own money or belongs to the State as a tax. Always Big Brother will find a justification for whatever they want to do from democracies to autocracies.

 

[Spekulatius]

On 6/7/2024 at 2:20 PM, Luca said:

I am waiting for IBs reply. Concerning...will update you guys

I would not hold my breath for a response. If IB decides to do something, they just do it. I think their thinking is that revenues are mininimal and not worth the regulatory hassle. Also, a while ago, they made a huge loss when customers were manipulating stock prices on HK and they were left holding the bag on margin debt. HK had a few stocks tumbling 90% in one day which is the result of stock manipulation.

 

Of course they could avoid the margin issue by making these stocks non- marginable, but I think they probably consider other issues too.

Edited June 8 by Spekulatius

[CGJB]

It will be interesting to see if this becomes a trend and the likes of Schwab and Fidelity do the same in the US. I hope not.

[schin]

On 6/7/2024 at 10:19 AM, Gamecock-YT said:

KYC/AML I'd guess. 

@Gamecock-YT - How does Know Your Customer and Anti-Money Laundering play into low volume stocks with large spreads in HK?

[Gamecock-YT]

2 hours ago, schin said:

@Gamecock-YT - How does Know Your Customer and Anti-Money Laundering play into low volume stocks with large spreads in HK?

 

Pretty self explanatory isn't it? You have a country difficult to move capital out of in China that will typically use Hong Kong as a conduit to get money out and you have illiquid stocks you can in theory manipulate the price of and layer those transactions more easily without anyone noticing. The broker is on the hook for anything nefarious that happens on their watch,  I would guess a regulator started asking them some questions about some transactions and they just decided to pull the plug entirely. 

[Luke]

 

 

This is the notification 

[Pellom]

Forgive me if I’m wrong, but that doesn’t appear to be IBKR blocking you from the trade. Just an extra layer of due diligence. 

[Intelligent_Investor]

This is only for small illiquid stocks right? So no 700HK or 9988HK restrictions?

[Luke]

17 hours ago, Intelligent_Investor said:

This is only for small illiquid stocks right? So no 700HK or 9988HK restrictions?

Yes but still. Am i not allowed to take risk on Interactive Brokers? I thought I was on a real brokerage platform and not on "INACTIVE boomer local bank broker" haha! 

[frommi]

If your account gets hacked and your money transferred out of your account via these illiquid stocks that you/the hacke bought for horrondeos prices, you maybe think a little bit different about this issue

Edited June 11 by frommi

[Luke]

11 minutes ago, frommi said:

If your account gets hacked and your money transferred out of your account via these illiquid stocks that you bought for horrondeos prices, you maybe think a little bit different about this issue

But isn't that true for any other stock exchange where low liquidity exists? And hacking an interactive brokers account is quite hard...