Margin Loan Restrictions

Overview: 

Note: This article only concerns Australian resident clients that continue to contract with IB LLC and DO NOT apply to Australian resident clients that contract with IB Australia ("IBAU").

As a result of recently imposed regulatory restrictions, IB has implemented a margin change, the effect of which is to restrict Australian residents from creating or increasing a margin loan. While this change is intended to be temporary in duration, IB is currently unable to confirm the date at which margin lending will be restored for Australian residents. In the meantime, clients are encouraged to log into Account Management, if they have not already done so, to review the Regulatory Notice which provides more detailed information.

Key implications of this change are as follows:

- The change only impacts accounts belonging to natural persons and organizations that are categorized as retail clients

- The change applies to securities transactions and does not directly impact futures or forex transactions

In addition, outlined below are a series of FAQs relating to this topic.

 

AUSTRALIAN MARGIN RESTRICTION FAQS

1. Does this margin restriction mean that account holders can no longer trade?

No. Account holders who log into Account Management and affirm the Customer Agreement may continue to trade securities using cash (i.e., must pay for securities transactions in full) and, if approved, futures and forex.

 

2. What happens if an account holder attempts to enter an opening order which would create or increase a margin loan balance?

Opening orders which serve to create or increase the loan balance will prompt the following alert message when transmitted and will be rejected:

 

3. Will this restriction prevent account holders from entering closing orders?

No. Account holders who experience problems transmitting orders which close positions should contact their local Customer Service Center.

 

4. Does this margin restriction apply to all Australian residents?

No. This restriction applies solely to accounts associated with a natural personal and organizations that are categorized as retail clients. In the case of trust accounts, the restriction applies if any of the trustees are natural persons.

 

5. Does this margin restriction apply to all products?

No. The restriction applies to securities transactions and not futures or forex. Note, however, cash may not be transferred from the securities segment to support the margin required on a futures transaction if that transfer would serve to create or increase a margin loan within the securities segment.

 

6. Does this restriction require that I immediately pay back my current margin loan?

No. The restriction does not impose any time condition with respect to the payment of existing margin loans. Such loans may be sustained at their current level as long as client continues to remain margin compliant.  The margin loan balance, however, may not be increased.

 

7. If I repay a margin loan either in whole or in part will I later be able to obtain a loan for portion which has been repaid?

No. Reductions to a margin loan made subsequent to the implementation of this restriction serve to place a new cap on the size of the loan allowed. In other words, no order will be accepted which would serve to create or increase the loan balance in effect at the point of its entry.

 

8. Does this margin restriction impact cash withdrawals?

If after giving effect to the withdrawal a margin loan would be created or increased, then the withdrawal will not be allowed.

 

9. Where can I get additional information or direct my questions?

IB has set up a special email address for inquiries relating to the Australian margin restriction. Please forward such inquiries to: auclients@interactivebrokers.com