# Interactive Brokers Canada (IB Canada)



## m3s (Apr 3, 2010)

It sounds like IB Canada is about to be severed from its IB LLC (US) backbone. Current users will get a new account number soon and 2 tax forms for the year 2013.

The only benefits they list are not having to meet US margin requirements or pattern day trading requirements and simplified statements... None of that really matters to me. IB Canada was known to have a lot of US quirks though, such as the tax forms.

Any drawbacks are to be determined ourselves apparently... I have to wonder what will happen to the $1 USD commission... I still don't see any mention of registered accounts either




> As background, IB Canada has traditionally relied upon Interactive Brokers LLC, it’s U.S. affiliate, to provide various operational and back office services. This arrangement, while advantageous from the standpoint of internal operational efficiencies, introduces a number of drawbacks to clients which, as our Canadian presence has expanded, we seek to eliminate by managing these services directly through IB Canada. In particular, the benefits of this change include the following:
> 
> -	Elimination of the Pattern Day Trading requirement;
> - Reg. T margin rule will no longer apply (i.e., no distinct initial and maintenance margin requirements or SMA calculation;
> ...


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## andrewf (Mar 1, 2010)

Are they prepping for sale?


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## james4beach (Nov 15, 2012)

I'm much more curious about the financial situation... I wonder how this affects capitalization and ability to access money from the parent operation, i.e. liquidity and solvency


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## humble_pie (Jun 7, 2009)

several years ago canada modified its regulations so that US online brokerages could operate canadian subsidiaries serving canadian investors, entirely from locations within domestic US of A.

thus cmf member lephturn had a chicago-based options firm that he liked very much, no doubt many here remember. It suddenly sold its business to virtual brokers perhaps a year ago. Lepht vowed he'd never become a VB client & began making his way to Interactive brokers canada.

word has it that IB's head office in the US had also - for several years, in fact - been considering closing its small canada-based office & running its canadian operations entirely out of the US.

i think what might have happened is that one of the montreal IB managers, possibly together with other backers, may have bought IB's canadian operation instead.

i have a few sources each: i'll see what i can find out


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## humble_pie (Jun 7, 2009)

james4 i'd imagine no ability to access $$ from the former parent company

but nobody in cmf forum ever seems to worry about private ownership, unknown capitalization of brokerage, extent of banking relationships etc when talking about questrade ... so why should the same worry anybody about the new & future IB?


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## james4beach (Nov 15, 2012)

I _do_ worry about questrade

I liked that IB (similar to the big bank brokerages) had access to capital & liquidity of a large parent institution.


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## avrex (Nov 14, 2010)

.... so it sounds like the 'new' Interactive Brokers Canada is splitting off and going private.
This does concern me as I have good chunk of money here.

Interactive Brokers Canada is part of the,
Canadian Investor Protection Fund (Current CIPF Members)
so I guess I shouldn't worry..... or should I?



> It’s important to note that this change will have no impact upon the products offered, commissions...


They had better not mess with their commission structure. 
Options commissions are the big reason that I'm with IB.


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## humble_pie (Jun 7, 2009)

a couple ottomh hypotheses:

- i think one can safely assume that the profits weren't there in the IB canadian operation, hence the parent was seeking either to 1) cut costs by eliminating the physical canadian office or 2) sell if a decent buyer price would be presented.

- might one also conjecture that canadian origin option volume is declining? i don't mean options in canadian stocks, many of these are principally traded in US markets anyhow. I don't mean volume of options traded on the sole canadian option exchange, either.

what i mean are option orders arising from clients who are registered with the broker as canadian resident institutions or individuals. Might these have been declining in recent years?

from time to time one does hear that canadian option order volume is declining. I imagine this rumour would also have to include institutional option trading. If i look at the 2 online firms where i have accounts, one struggles to maintain the early option expertise that it used to deliberately encourage in its staff. The other never had any option expertise to begin with.

- moving on, one asks oneself whether logarithmic trading has not taken centre stage, whether day-trading by retail clients is now the top focus for online brokers, for the good reason that such trades are 100% automated & therefore easier & more profitable for the broker to handle?

- to be able to dance is awesome, but in the short space of time that my partner & i foxtrotted back & forth across the dance floor last week, the broker's system could have handled 500 or 1000 simple buy or sell automated transactions.

- the constant rise in foreign exchange (FX) fees over the past few years is telling me that online brokers' costs have been rising precipitously. But what is causing this rise?

- system costs have been declining. Increased cost has to come more from the HR side of the business. I am aware, for example, that it's difficult for online brokers to find experienced staff. A highly-specialized broker like Interactive does not have a large staff, but it definitely has to be a knowledgeable staff. In its search for talent, IB canada has even been known to recruit staff from other cities, at times.

- IB canada has a large business clearing canadian-origin option orders through its sister company Timber Hill canada, which is directly owned by the US Interactive parent. It's not known whether Timber Hill is continuing this business as usual.

- not that the opinion of a poor pie would matter in the least, but i think that IB canada is making a serious mistake in not announcing its news properly. The company should disclose the names of its new owners as well as whether or not US-owned Timber Hill is continuing its clearing operations out of the same physical office, which is situated in montreal, quebec.


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## avrex (Nov 14, 2010)

humble_pie said:


> ... i think that IB canada is making a serious mistake in not announcing its news properly. The company should disclose the names of its new owners as well as whether or not US-owned Timber Hill is continuing its clearing operations out of the same physical office, which is situated in montreal, quebec.


+1


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## humble_pie (Jun 7, 2009)

turns out there has been no "severing" of IB canada from its parent in the US, nor any sale. 

here's the full text of the message sent to IB clients. It's actually about administration of the accounts:


_Dear IB Customer,

We are sending you this communication to inform you of an upcoming change to Interactive Brokers Canada Inc.’s (IB Canada) operations, which will have minimal impact in terms of changes required of you, but offers a number of benefits intended to simplify the management of your account. 

As background, IB Canada has traditionally relied upon Interactive Brokers LLC, it’s U.S. affiliate, to provide various operational and back office services. This arrangement, while advantageous from the standpoint of internal operational efficiencies, introduces a number of drawbacks to clients which, as our Canadian presence has expanded, we seek to eliminate by managing these services directly through IB Canada. In particular, the benefits of this change include the following:

Elimination of the Pattern Day Trading requirement;
Reg. T margin rule will no longer apply (i.e., no distinct initial and maintenance margin requirements or SMA calculation;
Opportunity for more favorable interest debit/credit calculations as balances currently segmented between securities and commodities will now be consolidated;
Simplified statement presentation due to consolidation of security and commodity segments;

It’s important to note that this change will have no impact upon the products offered, commissions or the manner in which you access your account and enter orders. As part of the conversion, which is scheduled to begin mid-September, you will be provided with an updated account ID (note that your user name will remain unchanged) at 2013 year end will receive two sets of annual statements and tax forms.

We look forward to providing you with the benefits of this conversion and invite you to contact our Canadian Customer Service Center toll free at 1-877-745-4222 or direct at 1-514-847-3499 with any questions regarding this matter_


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## m3s (Apr 3, 2010)

Yes that is the same announcement I had.

I hadn't even thought about them selling, I was worried they might have severed the accounts so they could now apply "Canadian" prices in CAD. At $1 USD per trade presently that is 5-10 times cheaper than even Questrade and up to 30 times cheaper than the standard Big Bank commish. Not to mention exchange rates and margin.

To be honest I wouldn't really mind if they tripled their rate to a whopping $3 CAD so long as they added Canadian registered accounts as well.


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## andrewf (Mar 1, 2010)

Yes, I would like registered accounts there as well.

I don't even mind paying slightly higher commissions, because I'm not an active trader. Low forex costs are more important.


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## Fain (Oct 11, 2009)

james4beach said:


> I _do_ worry about questrade
> 
> I liked that IB (similar to the big bank brokerages) had access to capital & liquidity of a large parent institution.


Questrade is not going anywhere. They are expanding very quick and have tons of liquidity


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## Fain (Oct 11, 2009)

The elimination of the pattern day trading rule and SMA margin rules are American is nature and removing them only made sense when their Canadian Presence was of enough scale for the move to make sense. IB is gaining 2,000 new accounts per month at an average of 140k per account. This isn't a move to take the company private again.


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## humble_pie (Jun 7, 2009)

Fain said:


> Questrade [has] tons of liquidity


tell us more!

afaik the firm is privately owned & doesn't disclose ...


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## humble_pie (Jun 7, 2009)

Fain said:


> The elimination of the pattern day trading rule and SMA margin rules are American is nature and removing them only made sense when their Canadian Presence was of enough scale for the move to make sense. IB is gaining 2,000 new accounts per month at an average of 140k per account. This isn't a move to take the company private again.



such marvellous insider information! 2000 new accounts per month! averaging 140k each! i thought IB had severely strict rules against employees ever posting anything - by that i mean Any. Little. Thing - on public forums or chat boards!

afaik IB canada has always been privately held. The organigramme shows this subsidiary, along with other foreign or overseas subsidiaries, tracking directly upwards to founder thomas peterffy? it's another arm of the empire that holds IB USA? that was the brokerage that was indeed partially sold to the public? but IB canada is still 100% privately owned?


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## m3s (Apr 3, 2010)

Fain said:


> The elimination of the pattern day trading rule and SMA margin rules are American is nature and removing them only made sense


Yes it was only an idiosyncrasy of using an American backbone. Questrade also ditched their backbone Penson that used to require a second login. Other than the account number change and funding the acct, it was fairly seamless switchover to me. At the time there was a lot of discussion about Penson going bankrupt. If I own shares of stocks, what risk is it if the brokerage collapses? Wouldn't it be the same if I bought a house and my laywer went out of practice? I still own the house/shares, right?


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## humble_pie (Jun 7, 2009)

1) questrade didn't ditch penson, penson went bankrupt.

http://www.bloomberg.com/news/2013-01-11/penson-worldwide-inc-files-for-bankruptcy-in-delaware.html

2) the house illustration doesn't fly. A house owner owns a house, holds title, his name goes on the tax rolls.

investors holding shares in street or nominee form at brokers don't have title to their shares. Only the broker has title. It's up to each broker to keep order among all the shares in its name & all the UBOs (ultimate beneficial owners).

i for one wouldn't trust fain's remarks for one second. If he's an employee of either questrade or IB, he's inviting the sack. No broker tolerates employees who are foolish enough to discuss, in public, critical private information.

if he's not an employee, he'd have no real knowledge about the vague, unsourced assertions he's making.

if he's reporting rumour or hearsay, good journalism practice requires him to state this.


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## james4beach (Nov 15, 2012)

About assets being safe in a brokerage account ... not nearly as safe as you might think.

For one, cash amounts are _unsecured loans_ to the broker. Cash can easily disappear in the case of a broker's collapse. Read about the cases with Refco and MF Global. This is why forex and futures accounts can be so dangerous, because they involve large cash positions. MF Global customers lost around $1 billion as cash from client accounts was used to cover the firm's losses.

You should never leave significant cash balances sitting in a brokerage.

Stock holdings are safer, yes. But it's not at all like the house analogy ... a house is a uniquely identifiable asset like the home at 123 Elm St owned by Joe Blo. Stocks & bonds on the other hand are held in the broker's name, and the broker just has a big list of assets. Who owns what (your account) is just an electronic record.

And that list is very dynamic and electronic. Fraud and mistakes also happen.

Leaving aside fraud, there are still threats to your account "holdings". If you're employing margin, then securities can be taken away in securities lending operations for instance. Again it's not really a matter of them being taken "out" of your account... they never are "in" your account to begin with!

If you're at all concerned about a broker collapse, then avoid any use of margin. You should have fully paid for shares. When I opened my parents' account, I opened a cash settled (non margin) account just to make absolutely sure there wasn't any margin possibility.

Read about Opes Prime in Australia to see how bad customer losses can get when dealing with margin during a broker collapse...

So if you have fully paid for shares, don't use margin, or are using a non-margin account I think that's your best hope of keeping your shares safe. Even then it's just a matter of broker record keeping and you just pray there is no fraud


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## humble_pie (Jun 7, 2009)

james4 the interesting thing is that, in a margin account, long stock with options held against it is not usually available for the broker to borrow against (brokers borrow stock in order to lend it out to other clients who are shorting).

ie what is preventing the brokers (there are 2) from borrowing my shares is the fact that my shares are, generally speaking, already out on call to the options exchanges.

the options exchanges themselves are the counterparties to each option contract. Risk in options does not proceed onwards, past the exchanges, to the ultimate counterparties. Thus i have more faith in organized options exchanges than i do in futures or forward markets, where there is direct counterparty risk.

do i have more faith in the options exchanges than i do in the brokers? perhaps slightly more.

may i mention that, in spite of the prohibition against borrowing clients' shares when these are already pledged to option contracts, nevertheless the brokers do practice a little bit of this, from time to time. Tch.

at rare intervals, i've noticed that the brokers are borrowing part of a short optioned stock holding, usually no more than 10-15%. Tch. This usually happens in a canadian bank stock. The shares are always returned within a few days or weeks at the most.

who knows, james4? maybe these episodes happened because you were indulging in one of your short sprees & you had cornered the short market in canadian banks :biggrin:


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## m3s (Apr 3, 2010)

So Penson went bankrupt and luckily my registered accounts are still intact as far as I can tell.

I do see the concern though. I think I'm going to need a bigger mattress. Not even my Swiss bank is safe anymore.


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## Fain (Oct 11, 2009)

humble_pie said:


> such marvellous insider information! 2000 new accounts per month! averaging 140k each! i thought IB had severely strict rules against employees ever posting anything - by that i mean Any. Little. Thing - on public forums or chat boards!
> 
> afaik IB canada has always been privately held. The organigramme shows this subsidiary, along with other foreign or overseas subsidiaries, tracking directly upwards to founder thomas peterffy? it's another arm of the empire that holds IB USA? that was the brokerage that was indeed partially sold to the public? but IB canada is still 100% privately owned?


This is public information. Do a little research when you post. Your 5092 rants betrays your inexperiance to investing/trading. The "employee" posting the information was the CEO. . . DARTS and net new clients are revealed monthly. . .


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## humble_pie (Jun 7, 2009)

sure, i'm inexperienced.
& fain is the king of prussia.
& the IB ceo is in connecticut.


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## Fain (Oct 11, 2009)

humble_pie said:


> james4 the interesting thing is that, in a margin account, long stock with options held against it is not usually available for the broker to borrow against (brokers borrow stock in order to lend it out to other clients who are shorting).
> 
> ie what is preventing the brokers (there are 2) from borrowing my shares is the fact that my shares are, generally speaking, already out on call to the options exchanges.
> 
> ...


This is also wrong information. Exchange traded Future contracts are guarranteed by the clearing corporation. All brokerages pay fees to contribute to the pooled fund that protects against counterparty risk. OTC options/futures/forwards have counterparty risk but thats why most OTC contracts are done using a dealer that insures against counterparty risk to protect against default. . . Fully paid for securities are in segregation and only securities bought on margin(not in a margin account) can be lent out. Whether or not you you have hedged with options doesn't change this.


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## humble_pie (Jun 7, 2009)

hey fain, delaware corporation coming along good yet? clients beating down your door just begging you to manage their $$?

it's a scandal that king fain doesn't even understand the taxation of option trades in canada yet. But sleaze is what those delaware corps are known for.


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## humble_pie (Jun 7, 2009)

Fain said:


> This is also wrong information.


no, it's not wrong information. King fain is being such a pest tonight.


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## Fain (Oct 11, 2009)

humble_pie said:


> no, it's not wrong information. King fain is being such a pest tonight.


Yes it is


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## andrewf (Mar 1, 2010)

Seems we have a stalemate.


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## james4beach (Nov 15, 2012)

I closed my Interactive Brokers account today.
See this thread (reason)


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## m3s (Apr 3, 2010)

Moving where?


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## james4beach (Nov 15, 2012)

I'll let the money sit in a savings account for now. I don't see anything I want to trade right now


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## m3s (Apr 3, 2010)

Heads up for taxes.. IB issued 2 x T5 and T5008 this year if you had an account when IB Canada split (2 account numbers in 2013). The new web site fixed the Canadian tax form issue before the split afaik and it looks the same to me this year.


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## Park (Sep 11, 2010)

Canadian discount brokerages usually have high interest savings accounts (HISA), where a client can leave cash. I don't think Interactive Brokers Canada has such accounts. What alternatives are there, if you want to leave cash in an IB Canada account?


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## janus10 (Nov 7, 2013)

m3s said:


> Heads up for taxes.. IB issued 2 x T5 and T5008 this year if you had an account when IB Canada split (2 account numbers in 2013). The new web site fixed the Canadian tax form issue before the split afaik and it looks the same to me this year.


I just wasted a couple of hours yesterday trying to figure out my T5008 totals from IB. Turns out that they made a mistake and reissued the T5008. Sometimes it DOES pay to wait...


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## avrex (Nov 14, 2010)

Park said:


> Canadian discount brokerages usually have high interest savings accounts (HISA), where a client can leave cash. I don't think Interactive Brokers Canada has such accounts. What alternatives are there, if you want to leave cash in an IB Canada account?


I don't think there is an HISA at IB Canada.

I have two non-registered accounts, IB and Scotia. 
Any excess cash, that I know will be sitting idle for awhile, gets sent from my IB account to my Scotia account and into an HISA.


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