Beta Forums
Enhancement Requests (Implement ASAP)
OmniVest and IRA Accounts
45 replies, 3517 viewings
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Beta Forums
Enhancement Requests (Implement ASAP)
OmniVest and IRA Accounts
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Last Activity 1/7/2015 8:27 PM 45 replies, 3517 viewings |
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Fred Gordon Legend   Posts: 481 Joined: 10/11/2012 Location: Fayetteville, Ga  User Profile |
Have been trading an IRA with IB right along and had no idea margin for an IRA was available in any form. thank you, | ||
| Jim Dean Elite  Posts: 1059 Joined: 10/11/2012 Location: L'ville, GA User Profile |
When you build in logic for the Reg-T 3-day IRA rule (which I hope by now is a given), please also maintain an option for OVest to factor in MARGIN if the user says that it's avail for that IRA account. This is very useful to keep the account more fully vested and to avoid missing watershed market events. Here is a scenario to consider as you design the logic: Even WITH a 100% margin availability, it would be possible to be hit by the Reg-T rule - if OVest decides to "flip" 50% of my money on day one, then "flips" 40% on day two (while 50% is still Reg-T restricted) then attempts to "flip" another 30% (when 90% is still Reg-T) - I'll run into trouble … By "flip" I mean close some positions and open new ones. Thanks. [Edited by Jim Dean on 3/26/2013 6:03 AM] | ||
| JeffW Member Posts: 47 Joined: 10/21/2012 Location: Dallas, TX User Profile |
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| Steve2 Elite  Posts: 750 Joined: 10/11/2012 Location: Annapolis, MD User Profile |
"Cash proceeds from unsettled sales are available for trading as long as the subsequent purchase order does not settle prior to the sale order" Thus, you can flip things as often as you want but if you're fully leveraged, you need to ensure that the closing order completes execution before submitting an opening order. I called IB and confirmed that this is the way it works (assuming the person on the phone knew what they were talking about). Steve | ||
| Jim Dean Elite Posts: 1059 Joined: 10/11/2012 Location: L'ville, GA User Profile |
And btw ... your final comment drew a wry chuckle from me ... thus the question above :~) | ||
| Steve2 Elite Posts: 750 Joined: 10/11/2012 Location: Annapolis, MD User Profile |
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| John W Elite Posts: 654 Joined: 10/11/2012 Location: Sydney, NSW, Australia User Profile |
John [Edited by John W on 3/26/2013 4:20 PM] | ||
| Jim Dean Elite Posts: 1059 Joined: 10/11/2012 Location: L'ville, GA User Profile |
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| John W Elite Posts: 654 Joined: 10/11/2012 Location: Sydney, NSW, Australia User Profile |
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| Ed Downs Elite Posts: 645 Joined: 2/7/2007 Location: Austin, Texas User Profile |
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| John W Elite Posts: 654 Joined: 10/11/2012 Location: Sydney, NSW, Australia User Profile |
May I respectfully suggest that since you are the boss of Nirvana and you shepherd a lot of customers to IB, could you write to IB's legal counsel and ask them definitively why they are not in breach of guidelines? John | ||
| Charles Biggs Member Posts: 47 Joined: 2/28/2013 Location: TX User Profile |
http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Loans Is there something I am missing? | ||
| Jim Dean Elite Posts: 1059 Joined: 10/11/2012 Location: L'ville, GA User Profile |
So ... GUESSING here ... it appears to me that the referenced IRS document is referring to a SECURED loan. That is, a loan which might given that is secured by the IRA, like a home mortgage ... or more accurately, a home equity line of credit. My guess is that broker margin can be viewed as a "promissary" note ... ie not backed by anything in particular other than the good word and faith of the customer ... much like a revolving credit card account. So ... since margin is not a loan that uses an IRA as its backing (after all, by definition, the margin extends your exposure well BEYOND the total value of the IRA) ... then possibly that is how they are getting around it. [Edited by Jim Dean on 4/16/2013 5:43 AM] | ||
| Steve2 Elite Posts: 750 Joined: 10/11/2012 Location: Annapolis, MD User Profile |
https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD845.pdf I have been unsuccessful in finding any IRS or SEC related documentation that comments one way or the other on IRA margin accounts. I did find one website that documented some of the history of this. Here's the link http://www.traderstatus.com/faq.htm Scroll down to FAQ 5.9. Note that I can't vouch for the website or the accuracy of the information. I would definitely check with you tax advisor before proceeding. I talked with mine and he initially said "no way" but after looking at the documentation said that it met IRS requirements. My only concern would be how well the broker is setup to prevent you from violating the rules (like shorting stocks or having an incorrect sequence of trades that results in a negative account balance). Hopefully that would be bullet proof but I'm not sure. Steve [Edited by Steve2 on 4/16/2013 9:32 AM] | ||
| Steve2 Elite Posts: 750 Joined: 10/11/2012 Location: Annapolis, MD User Profile |
Q: Thanks for the response but the information provided was not what I was after. I've read the material on the website and understand how your IRA Margin account works. I'm trying to ensure that this type of account meets IRS rules for IRAs and that there is no risk of rolling an IRA into an IB IRA margin account and then losing the tax deferred status of the funds. This could happen if the IRS has not approved this type of account or if there is anyway that IB software might allow me to borrow funds if I enter an incorrect trade sequence (e.g., buying before selling when I'm already fully invested) or enter a prohibited trade (e.g., shorting a stock). If I accidently attempt something like this will the IB software prohibit me from doing this? Also, could you tell me how many years you all have offered IRA margin accounts? IB Response: Thank you for your follow up question. Interactive Broker's software does not allow leverage in the IRA Margin accounts. The feature of this type of IRA is the immediate release of funds, instead of waiting for a normal cash settlement of T+3 on an Equity trade, and T+1 on an Option trade. The IRA Margin account has been offered for over 5 years now at IB. I hope this helps. So, they still haven't provided any evidence that this type of account has been approved by the IRS. But given that they have offered it for 5 years, the IRS and SEC have had plenty of time to whack them if it violates any rules. So, I think this is just a clever (and legal) way of getting around T+3. | ||
| Charles Biggs Member Posts: 47 Joined: 2/28/2013 Location: TX User Profile |
http://ibkb.interactivebrokers.com/article/188 Their "IRA Margin Account" is a bit of a misnomer since leverage is not allowed ("pseudo-margin account" may be a better name), but the account does allow the use of unsettled funds for trading "as long as the subsequent purchase order does not settle prior to the sale order." I assume IB's software assures compliance to Reg T rules. | ||
| GordonG Regular Posts: 76 Joined: 10/11/2012 Location: Sydney, Australia User Profile |
How best to handle T+3 settlement though? If using RTM strategies then timing is important, so can't reliably delay a trade, and signals may not fire when equity becomes free... I'd want to see trades taken with what equity is available at the time, or skip the trade. This issue cuts a bit to the architecture OV has around liquidity management as this is more closely monitored by the Trade Processor. However it is something that can be calculated purely from within OV (and hence also simulated which is the main thing). | ||
| Jim Dean Elite Posts: 1059 Joined: 10/11/2012 Location: L'ville, GA User Profile |
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| SteveJ Veteran Posts: 105 Joined: 10/11/2012 Location: UK User Profile |
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| BrianD Legend Posts: 302 Joined: 2/23/2013 Location: Grand Rapids, MI User Profile |
What often happens when an IRA account is close to fully vested is IB will reject Buy orders until all Close orders have completed. IB never allows all Buy(s) to be placed if value is > Current Buying Power, and Current Buying Power is not ‘recharged’ until all closing positions are closed. Logical order management by IB, but you can never really have a clean comparison/expectation in a simulation of an IRA account (unless maybe you only assume maybe 70% or less vested?). Defines a need (that I believe has been requested) for TP to provide a user selection allowing resubmission of an order, at some time after the Open, if the original entry order was cancelled prior to Open. | ||
| Barry Cohen Icon Posts: 1844 Joined: 10/11/2012 User Profile |
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