Interactive Brokers introduces automatic currency conversion

Michael

Member
IBKR sent a mail today (haven't found the info online yet), that from tomorrow, they will enable automatic currency conversion for cash accounts if they put an order where they do have enough money but not in the needed currency.

As far as I understand, this is can be quite convenient, as it automizes the step of first exchanging CHF to USD (e.g. to buy VT). It however only makes sense if it is one big order and not many small orders, as otherwise the 2$ conversion fee hits hard.

What are your thoughts about this?

Here the text from the announcement email:
Dear Client,

We are writing to inform you of an important change in our trading policies that will take effect after US market close on April 18, 2024. At IBKR, we strive to provide our clients with a seamless and efficient trading experience, and this update is designed to enhance your trading experience further.

Effective after US market close on April 18, 2024, IBKR will no longer require clients with cash (or IRA) accounts to have cash in the trading currency of the stock they are purchasing in order to place their stock order.

Under the new policy, clients can have the necessary amount of cash in any IBKR-supported currency (e.g., a US stock trade can be executed versus a EUR cash balance), and IBKR will coordinate the necessary forex trade in the amount required to settle the trade on your behalf.

For example, if you wish to purchase a US stock and you only hold a EUR cash balance, IBKR will execute the stock trade against your EUR balance. After you place your US stock trade order, we will execute a EUR/USD forex trade to convert the necessary amount of your EUR balance to USD to settle the stock trade.

The automatic currency conversion required to settle your stock trade will be performed by IBKR using a conversion rate that is determined based on the prevailing foreign exchange market rates at the time of execution. However, please note that the conversion rate applied by IBKR may be adjusted from the standard market rate to account for any differences between the settlement cycle for your stock trade and the typical settlement cycle for that currency pair. This rate adjustment allows IBKR to manage the associated risk and costs.

The specific costs and charges applied by IBKR for these automatic currency conversion trades are transparently outlined on the Commission and Fees page of our website. We encourage you to review this information to understand the applicable rates and fees for your trades fully. This change will streamline the trading process for our clients, eliminating the need for pre-trade currency conversions and ensuring a more convenient and hassle-free trading experience. Clients preferring to avoid the new functionality should maintain a sufficient balance settled in their account of the trading currency of the stock they are purchasing.
 
Hi

I think it's a double-edged sword as you pointed out. If you do a single operation per month, it will be fine. But if you do several, you will pay more in fees. I am not sure whether I will recommend it or not.
 
I noticed something weird: if I hold CHF and USD in my IBKR account and I put a limit order on an USD-dominated ETF like VT, it changes automicaly my CHF in case the order is triggered. That's surprising and inconvenient. Can I IBKR tell somehow they should use my already converted USD first?
Thanks for help
 
I noticed something weird: if I hold CHF and USD in my IBKR account and I put a limit order on an USD-dominated ETF like VT, it changes automicaly my CHF in case the order is triggered. That's surprising and inconvenient. Can I IBKR tell somehow they should use my already converted USD first?
Thanks for help
Normally, they should always use the USD you already have as long as you have enough, as its settled and it can cover the fees and the price.
 
Maybe it helps:
Übersicht: Exchange issues
I have a CHF denominated cash account. And I have noticed something weird today: if I hold (plenty of) CHF and USD in my IBKR account and I put a limit order on an USD-dominated ETF (like VT), it changes automicaly some CHF when the order is triggered to buy the etf, instead of using the already converted funds. That's surprising and inconvenient. Can I IBKR tell somehow they should use my already converted USD first?
And also: I have theese weird back and forth changes of currencies, when I buy positions (see attachment). Is this normal? Why I don't get ONE (1) notification for the whole trade or for the currency exchange instead?
Thanks for help



IBCS 2024/08/07 18:38:10
Dear Mr.,

"Please note that when you convert from one currency to another, it follows settlement of T+2 business day. Since you have a cash account, you can trade only with settled cash balance. The settled cash balance on 06 August was 0 USD and you had placed several buy orders in USD.Therefore, the system automatically converted your CHF to USD at a settlement period of T+1 so that your trades could be executed.

You can refer to the Trade Confirmation report to check the settlement by login into Client Portal > Performance & Reports > Statements > Trade Confirmation.

Effective after US market close on May 8, 2024, IBKR will no longer require clients with cash accounts to have cash in the trading currency of the stock they are purchasing in order to place their stock order.

Under the new policy, clients can have the necessary amount of cash in any IBKR-supported currency (e.g., a US stock trade can be executed versus a EUR cash balance), and IBKR will coordinate the necessary forex trade in the amount required to settle the trade on your behalf. In the meantime you may notice a currency conversion done by the system to sweep out prior small nominal balances less than a penny in the account. For details please refer to your activity statements.

For example, if you wish to purchase a US stock and you only hold a EUR cash balance, IBKR will execute the stock trade against your EUR balance. After you place your US stock trade order, we will execute a EUR/USD forex trade to convert the necessary amount of your EUR balance to USD to settle the stock trade.

The automatic currency conversion required to settle your stock trade will be performed by IBKR using a conversion rate that is determined based on the prevailing foreign exchange market rates at the time of execution. However, please note that the conversion rate applied by IBKR may be adjusted from the standard market rate to account for any differences between the settlement cycle for your stock trade and the typical settlement cycle for that currency pair. This rate adjustment allows IBKR to manage the associated risk and costs."
 
Their answers from the support are always a bit low effort/standardized/unpersonalized.
I always have to write "simple" questions and only *one* question per message, as otherwise they ignore half of my request and give me some terms and conditions to read instead.

I actually wonder whether these messages are answered by humans or mostly by AI now.
 
Even though their answers is very verbose, it is relatively clear on the time necessary to settle for a currency conversion.
 
Back
Top