Migration to IB Australia Pty Ltd: Margin Restrictions for Retail Accounts

[GlenPeake]

Not sure if this will affect others on the course, but looks like this will directly affect me and my ability to use margin.

Welcome any comments from the community.

(I may need to go back to the drawing board as my MOC will not be ‘economical viable’ without margin).

---

Important Notice – Migration to Interactive Brokers Australia Pty Ltd

Offering margin under IBKR Australia
IBKR Australia has decided that they will NOT be offering margin accounts to a corporate entity which is designated as a retail client. We have identified that currently you have an account with IBLLC that has margin capabilities and according to our records you may not qualify as either a wholesale investor or professional investor.

As a result, If you think that you qualify as either a wholesale client or a professional investor, and you would like to retain the benefits of a margin account with IBKR Australia, it is imperative that you complete and submit the required documentation as soon as possible and preferably prior to the date in which this transfer will occur, which is expected to be by 14th December 2018.

https://ibkr.info/article/3291

What is a Wholesale Investor?
The most common way to be classified as a wholesale investor is to obtain a qualified accountant’s
certificate stating that you have net assets or net worth of at least $2.5 million AUD OR have a gross
annual income of at least $250,000 AUD in each of the last two financial years. The qualified
accountant’s certificate is only valid for two years before it needs to be renewed. We have prepared a
wholesale investor booklet, including a pro forma certificate for your accountant to complete, that
can be downloaded [here].

What is a Professional Investor?
In order to qualify as a professional investor, you must have an AFSL, be a body regulated by APRA,
be a superannuation fund (but not a SMSF) and/or have net worth or liquid net worth of at least $10
million AUD. If you meet one of these criteria, you will need to complete and submit to IB Australia
the professional investor declaration contained within the professional investor booklet that we have
prepared, which can be downloaded [here].

What If I Choose Not To Transfer My Account To IBKR Australia? What If I Do Nothing?
You are not required to transfer your account to IBKR Australia. However, you should be aware that IBKR LLC (U.S.) intends to cease providing you financial services in Australia very soon.

This will impact you as follows:

If you have not opened a new account with IBKR Australia by 14th December 2018 , then IBKR LLC (U.S.) may, under the terms of its Customer Agreement with you, transfer your account to IBKR Australia and/or impose trading restrictions on your account, including prohibiting you from opening new positions.

[ZachSwann]

I am in the same boat I am trying to think of a way around it.
Current options for are-
Trade in my wifes name as she is Thai and has a Thai Address
I did have a conversation with IB about changing company principal address to outside of Australia but I haven’t had a chat with Accountant to see if this is possible.

The other option maybe is bin my MOC, trade a trend strategy with options and the leftover cash use for leverage on my MR system

[Nick Radge]

I spoke with IB yesterday. It appears this will be applied to every Australian account, i.e. unless you’re a professional or wholesale investor the access to margin will be removed.

Fucking nanny state…

[RobGiles]

Agree with you sentiments entirely Nick. There’s a disturbing trend in this country of the average person in the street having an expectation that ‘the govt’ will look after them. Taking responsibility for one’s own actions is a dying trait. The irony is that all they are doing is preventing intelligent people, with a strong ethos of personal accountability, the ability to have a crack ,whilst those who are already relatively well off continue to get ahead. Pathetic policies like this just serve to widen the wealth gap.

[ScottMcNab]

Zach Swann wrote:

I am in the same boat I am trying to think of a way around it.
Current options for are-
Trade in my wifes name as she is Thai and has a Thai Address
I did have a conversation with IB about changing company principal address to outside of Australia but I haven’t had a chat with Accountant to see if this is possible.

The other option maybe is bin my MOC, trade a trend strategy with options and the leftover cash use for leverage on my MR system

Worth exploring other brokers ? Is Tradestation a possibility ? Getting the api to work for Tradestation platform rather than TWS may be worth it if we are all forced to migrate (assuming they don’t turn around and do the same thing)

[Anonymous]

Do we know if this is a case of “IB complying to Australian Govt regulations” or is it “IB choosing to do so as a calculated business measure” ?

If it is Aus govt forcing their hand, shame on them. All it is going to do is have operators like us go and set up shop in another country and therefore feed the tax coffers of those other countries.

If it is a business measure by IB, not much I guess we can do about it.

[Nick Radge]

Scott,
TradeStation has already pulled out of Australia. My understanding is that they do not allow Australian clients anymore. They certainly don’t allow margin to Australians.

Matt,
It’s ASIC regulations. Basically only sophisticated or wholesale investors can get margin. Everyone else is being relegated to a cash only account.

[Anonymous]

Nick, thanks for the clarification.

Do you know if it is being driven as a result of the general tightening of regulations surrounding the availability of credit to average Joe? As we all know the banks are tightening their belts on providing credit for home/property investment loans etc so I would assume this issue is falling somewhat into the same boat?

[Nick Radge]

I think its continued fallout from the GFC margin lending problems, i.e. Storm and the likes of those operators.

[LachlanPhillips]

I am getting message from IG; where i had couple short positions to be become a wholesale client.”Change to your ASIC protections as a wholesale client”
Such protections include (but not limited to) the issuing of product disclosure statement…and the Corporations Act 2001 (Cth) may be not be afforded to me anymore
Whats that mean, and why i have to be a wholesale client???
If anyone have some information about that a really appreciate if share with me.
Thnx

[Nick Radge]

Well, that’s exactly what this thread is about Tamas.

[LachlanPhillips]

Well i thought here in Australia they cannot change the law back, so if i had account more than 5 years or some case 10 years, and i am paying tax on my investment almost every year; how the goverment can make a change and tell me You cannot do it anymore, or just tell my CFD provider or my broker they cannot provide me the service what i am using multiple years.
I understand they want to protect people, but this rule should apply only for new accounts (lets say what they opening after 01/01/2019). I am not quite sure they can do it legaly or they can do whatever they want?!
This is lose-lose situation for everyone (client, brokerage firm or CFD provider and also the goverment(tax)).

[Nick Radge]

Spoke with IB today. All Australian account will be migrated eventually. My trust accounts aren’t scheduled as yet but they did I would be advised in due course.

I’ll make some suggestions on another thread on how to handle any MOC or leveraged systems if you do not meet the Wholesale or Professional Investor requirements.

[GlenPeake]

Nick Radge wrote:

I’ll make some suggestions on another thread on how to handle any MOC or leveraged systems if you do not meet the Wholesale or Professional Investor requirements.

Look forward to reading your thoughts on the MOC/Leverage alternatives/suggestions Nick.

When I remove the leverage from my MOC and adjust position sizing then backtest etc, the returns are mediocre compared to the levered backtested results. I’ve started to convert/test my system into a multi day MR (non-leveraged) to assess the results there etc.

I’d still like to trade some form of short term system to diversify strategies etc.

It’s a shame that ASIC/IB don’t have another option to qualify for use of leverage via a REG-T, that is, if you’ve completed the Trading System Mentor Course and have the Amibroker Backtests to prove your system is simple/robust/has a positive edge. :cheer:

You said it yourself on last weeks monthly call Nick, we’ve got a number of students using different varieties of systems that use leverage and none of use blew up our accounts (not even close to blowing up) in extremely volatile market conditions….. where all still in the game and can continue to pull the trigger the next day!!!! Which is something we can all be quite proud of and a testament to the quality of the Mentor Course material and the Mentors themselves!!!!!!

[ScottMcNab]

Glen Peake wrote:

Nick Radge wrote:

I’ll make some suggestions on another thread on how to handle any MOC or leveraged systems if you do not meet the Wholesale or Professional Investor requirements.

Look forward to reading your thoughts on the MOC/Leverage alternatives/suggestions Nick.

When I remove the leverage from my MOC and adjust position sizing then backtest etc, the returns are mediocre compared to the levered backtested results. I’ve started to convert/test my system into a multi day MR (non-leveraged) to assess the results there etc.

I’ve found (after added in settlement delay) acceptable MRV results for RUA (turnover >1.5)..not so much XAO or even RUI…

[Author]

Posts