Interactive Brokers Account In AUD or USD for Trading Overseas Markets?

Hi Guys.

I currently trading SPI Futures & plan on trading US Futures (ES & YM) Currencies (AUD:USD, EUR:USD) & Options On Futures as well with IB account currently in AUD.

I've heard through someone else I will have to pay a margin if I dont convert, but he was unclear on what and how this happens, so...

Would or do I have to convert all or part off my account in USD and what are the advantages n disadvantages if any.?

SevenFX

Hoping someone can be of assistance here as IB HK havent been very helpful.!!!

SevenFX said:

I currently trading SPI Futures & plan on trading US Futures (ES & YM) Currencies (AUD:USD, EUR:USD) & Options On Futures as well with IB account currently in AUD.

I've heard through someone else I will have to pay a margin if I dont convert, but he was unclear on what and how this happens, so...

Would or do I have to convert all or part off my account in USD and what are the advantages n disadvantages if any.?

SevenFX

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If you have non-base currency amounts in your account then a margin is applied but it is relatively small. You will see the margin on your account page.

Note however that a margin is not "paid" - it is retained in your account and reduces the amount otherwise available for trading.

You do not have to convert non-base currencies. The disadvantages of not converting is that you will be exposed to some FX risk. Interest rate differentials also apply between currencies.

All of this is explained on the IB website.

SevenFX said:

Hi Guys.

I currently trading SPI Futures & plan on trading US Futures (ES & YM) Currencies (AUD:USD, EUR:USD) & Options On Futures as well with IB account currently in AUD.

I've heard through someone else I will have to pay a margin if I dont convert, but he was unclear on what and how this happens, so...

Would or do I have to convert all or part off my account in USD and what are the advantages n disadvantages if any.?

SevenFX

Click to expand...

Keep your base currency in AUD, or your reporting currency if not an Australian resident, otherwise all reporting will not be usable..

Has anyone had any recent experience (more recent than this thread's last post) with changing the IB base currency from AUD to USD?

I trade mostly US Futures in a cash account, and margin is currently held in cash in AUD in the IB account. I am aware of the Australian tax rules regarding futures trading, and converting each transaction to AUD. I currently do all this in a spreadsheet, because IB reporting (in my mind) hasn't kept up with the AU tax rules, especially in relation to the $250k balance election.

Have you made this change in base currency from AUD to USD recently? If so, was there any difficulty, or problems, in doing this?

Thanks,
KH

KevinBB said:

Has anyone had any recent experience (more recent than this thread's last post) with changing the IB base currency from AUD to USD?

I trade mostly US Futures in a cash account, and margin is currently held in cash in AUD in the IB account. I am aware of the Australian tax rules regarding futures trading, and converting each transaction to AUD. I currently do all this in a spreadsheet, because IB reporting (in my mind) hasn't kept up with the AU tax rules, especially in relation to the $250k balance election.

Have you made this change in base currency from AUD to USD recently? If so, was there any difficulty, or problems, in doing this?

Thanks,
KH

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Hi Kevin, if you find out more about this I'd be very interested. I'm thinking of changing over to IB at some point after my development phase and prior to increasing my trading funds.

I ended up with two IB accounts, both using AUD as the base currency. One account for trading futures in USD, the other account for trading / investing in Australian stocks.

The reason for this is that IB converts all US futures transactions to AUD on the day the futures contract is closed, including both sides of commission. I was able to take the totals from the futures part of this report, all converted to AUD, and use that in my tax return. Anything to do with foreign currency conversion / translation / whatever you want to call it in this account I ignored (see next paragraph).

The one thing I wasn't happy with in IB reporting was how they treated currency conversion when say, for example, more money was needed in USD to cover the MTM, or when I converted back from USD to AUD. There is a provision in our tax law that says if your foreign cash balance (not account balance) doesn't go over $250k (its called a $250k balance election) then you can ignore currency translation MTM gains and losses for tax purposes. This is what I did, so I didn't have to worry about how IB treated that cash conversion.

As far as the stocks account goes, everything is in AUD, so, again, I used report totals for closed trades, and reported under the capital gains provisions, and not the trading provisions. Worked for me.

As always, don't take my word on this. Talk to your tax accountant who will advise you how to set things up according to your particular circumstances.

KH

I should have added, too, that the reason I was able to just take totals from the futures part of the report was because the figures for each closed futures trade in the report were converted to AUD, because the base currency is AUD, and I guess that's the whole point of this thread.
KH

KevinBB said:

I should have added, too, that the reason I was able to just take totals from the futures part of the report was because the figures for each closed futures trade in the report were converted to AUD, because the base currency is AUD, and I guess that's the whole point of this thread.
KH

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When I traded futures years ago, I did the trading part of my tax by simply converting the account balance to $Aus on 30Jun previous year and the same for the current tax year 30Jun. I also added any account deposits and withdrawals, expenses, and that worked fine with the tax department. I was only trading futures though.

DaveTrade said:

When I traded futures years ago, I did the trading part of my tax by simply converting the account balance to $Aus on 30Jun previous year and the same for the current tax year 30Jun. I also added any account deposits and withdrawals, expenses, and that worked fine with the tax department. I was only trading futures though.

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As long as the ATO was happy, that's the main thing.
The only problem with that method that I can see is that, for most people, including traders, mark-to-market on futures is neither assessable or deductible. In other words, it just carries over to the next year when your open contracts are closed.
KH