Currency conversions at IB

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OxygeN

Active member
Baptiste Wicht said:
Correct, assets are yours, but it could take months to get back access to them. Even for a "small" broker like FlowBank, it took a long time.
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OK - that's what I thought. Thanks.
Baptiste Wicht said:
Your math is correct, but you are forgetting one thing: automated conversions are cheaper.

If you have a cash account, you can let IB do conversions automatically for 0.03%. So, if you do a conversion of 500 CHF it will cost about 0.15 USD. So, this gives us 0.50 USD per month and only 6 USD per year in total instead of 28.20 in your example.
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So how should I proceed to have the most automation possible? Set up a recurring money transfer both on my bank's checking account and on IBKR would be the first step, I assume.
How can I profit from the IBKR automatic conversion for 0.03%?
Buying VT is probably only going to work "manually" (me logging in, after the CHF-->USD conversion has been completed, and buy the VT amount I want), right?!
Baptiste Wicht said:
The driver is to get your money invested as soon as possible. You want your money in the market, not in cash.
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That's correct, yes. So the USD 6 paid in fees should be recovered very easily both from the VT dividends, as well as from the market itself.
 
OxygeN said:
How can I profit from the IBKR automatic conversion for 0.03%?
Buying VT is probably only going to work "manually" (me logging in, after the CHF-->USD conversion has been completed, and buy the VT amount I want), right?!
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Not right :) Simply buy VT when you only have CHF and IB will do the conversion for you.
 
OxygeN said:
Ah, ok. As long as I have USD in my cash account, my CHF won't be used?
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If you have enough USD, no conversion will be done automatically. But I believe that even if you have USD but not enough, IB will do an automated conversion for you. It should be easy to try on your next purchase of VT.
 
This week I'll buy some VT stocks with less than the USD cash I have in my account and will check on the fees (as there won't be any necessity to convert currency).
 
So this is the transaction statement:
1741366086562.png
So in fact, if I do have enough USD balance on my cash account, I just pay USD 0.35 of VT purchase fee.

I'll buy some more VT and this time I will invest more USD than what's left on my USD cash account. I should then see that some money will be taken from my CHF cash account and on that part I will pay the conversion fee - which, according to your feedback, is not always USD 2 (base minimum exchange fee). Or did I misread something?
 
OxygeN said:
I'll buy some more VT and this time I will invest more USD than what's left on my USD cash account. I should then see that some money will be taken from my CHF cash account and on that part I will pay the conversion fee - which, according to your feedback, is not always USD 2 (base minimum exchange fee). Or did I misread something?
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That's correct.
 
Baptiste Wicht said:
Not right :) Simply buy VT when you only have CHF and IB will do the conversion for you.
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Is it necessary to manually calculate the number of USD shares which can be bought for the available CHF amount beforehand?
 
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Max said:
Is it necessary to manually calculate the number of USD shares which can be bought for the available CHF amount beforehand?
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You need to make sure to not buy too many shares. Otherwise, your order will be rejected. But it should be fairly simple to estimate with a small margin.
 
Max said:
Is it necessary to manually calculate the number of USD shares which can be bought for the available CHF amount beforehand?
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I indeed looked at it, but TBH I try to retain a margin of about at least 1 VT share - this way you shouldn't be overbuying.
 
So here I am after my first "limit" VT purchase :)
When I set it up last week, I had:
CHF 551.94
USD 347.27
I set the limit to USD 117 for VT and put 6 pcs. to be bought.
Today the transaction went through and I got this currency conversion notification:
1741638029038.png
As of now, I do have following in my cash accounts:
CHF 239.52
USD -0.01

The total amount of VT stocks I bought is USD 702 so my math would be:
USD 702 - 347.27 = 354.73 (this is what I don't have in my USD cash account and therefore needs to be taken from my CHF cash account and converted)
Now I don't see the relation between USD 354.73 and the above figures (QTY 355.07 and PRICE 0.88 - which, if I subtract the price from the QTY I get 354.19). Can anybody help understand?
This is what my transaction history looks like:
1741638336064.png

TIA
 
It seems to make sense to me. Without fees and simplifying the numbers, we get:

Code: 
(117*6-347)*0.88=312
551-312=239

Which is what remains in your account in CHF.

You should not subtract the price from the QTY. The price is the price per USD in CHF. So, you should multiply 355.07 by 0.88.
 
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Ah! So the math is:
ETF stock unit price * amount of stocks = USD total (what I have to pay, without fees - 702).
Then from the USD total the money is first taken from my USD cash account (347.27).
Next the remaining part (702-347.27 = 354.73 USD) is taken from my CHF cash account using the FX conversion rate "price" of 0.88 --> 312.1624
The difference (in my case) between 312.4225423 and 312.1624 is probably the converted fee (0.26 CHF)?!
 
OxygeN said:
The difference (in my case) between 312.4225423 and 312.1624 is probably the converted fee (0.26 CHF)?!
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Yes, and possibly the real currency conversion was not exactly 0.88 but something with more decimal points. They may be some rounding. So, the difference is small.
 
So finally - after all this - I have just paid USD 0.35 to buy the shares and that's it, right? Thus, doing DCA from now on (I did "lump sum" last year when I moved all my assets from UBS to IBKR) is not more expensive as going "lump sum" once a year (even though "lump sum beats DCA in long term").
 
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