Trading Access to the Indian Financial Markets for Non-Residents
By regulation, trading access to the Indian financial markets for individuals residing outside India is currently restricted to "Non-Resident Indians" ("NRIs") and "Financial Institution Intermediaries" ("FIIs") only.
NRI
NRIs are defined in the Indian Foreign Exchange Management Act of 1999 and the Indian Foreign Exchange Management Deposit Regulations of 2000.
In short, to qualify for NRI status you must:
a. Reside outside of India for more than 182 days per year, and;
b. Hold Indian citizenship, or;
c. Be a Person of Indian Origin as defined in the Indian Foreign Exchange Management Deposit Regulations of 2000.
Please note that applicants must satisfy criteria (a) and criteria (b) or (c) and will be prompted to review the aforementioned legislation and confirm their status at the point of application. To trade Indian products as an NRI, new or existing clients may apply for an account through the IBKR website.
FII
Currently not supported.
TWS Message: Order price relative to the market.
The TWS contains two checks to limit the possibility of clients entering trades at prices which are substantially inconsistent with that of the current market.
Under the first check, stock buy orders which are 10% above the prevailing NBBO ask price will be automatically rejected by IBKR as will stock sell orders which are 10% below the prevailing NBBO bid price. In the case of options, IBKR's automatic rejection threshold percentage for both buy and sell orders is 20%. When an order violating these parameters is transmitted, it will be rejected and a TWS pop-up window will be displayed with the following warning message: "Limit price too far outside NBBO" or "This order is not accepted. The limit price cannot be more than 10% through the NBBO.".
The second check relates to orders which are transmitted at prices which do not violate the parameters set by IBKR as outlined above, but which do violate parameters established by the account holder. Here the account holder is able to establish Precautionary Settings by selecting the Order and then Configure Order Presets menu options from the TWS. This will open up a window providing for the creation of price thresholds set in terms of percentage or the number of ticks outside of the NBBO (settings may also be defined in terms of share/contract quantity or total dollar value of trade). When an order violating the account holder's parameters is transmitted, it will be rejected and a TWS pop-up window will be displayed with the following warning message: "The price specified would violate the percentage constraint specified in the default order settings. Do you really want to submit this order?" Unlike in the case of the check set by IBKR, the account holder has the option of overriding their own settings and transmitting the order by clicking on the "Yes" button.
Glossary terms:
Where can I receive additional information on options?
The Options Clearing Corporation (OCC), the central clearinghouse for all US exchange traded securities option, operates a call center to serve the educational needs of individual investors and retail securities brokers. The resource will address the following questions and issues related to OCC cleared options products:
- Options Industry Council information regarding seminars, video and educational materials;
- Basic options-related questions such as definition of terms and product information;
- Responses to strategic and operational questions including specific trade positions and strategies.
The call center can be reached by dialing 1-800-OPTIONS. The hours of operation are Monday through Thursday from 8 a.m. to 5 p.m. (CST) and Friday from 8 a.m. to 4 p.m. (CST). Hours for the monthly expiration Friday will be extended to 5 p.m. (CST).
Why use smart routing?
Interactive Brokers offers its clients a software product referred to as "Smart" order routing. Smart Routing software continually scans competing markets and automatically routes orders directly to the best ECN or market center -- based on price but also taking into account factors such as the availability of automatic order execution.
Each ECN and market center administers its own set of trading rules. Accordingly, clients that do not select Smart Routing should be sure to familiarize themselves with the various trading and order handling rules of those market venues to which they intend to direct route their orders. A complete listing of market venues along with website links is made available on the website under the Products and then Exchange Listings menu options.
In order to Smart Route your order, select SMART in the Destination field when placing the order.
For additional information regarding Smart Routing, select the Technology and then Smart Routing menu options from the website.
What happens if I trade a product denominated in a currency which I do not hold in my account?
The particular currency which is necessary to purchase and settle any given product is determined by the listing exchange, not IBKR. If, for example, you enter into a transaction to purchase a security which is denominated in a currency that you do not hold and assuming that you have a margin account and sufficient margin excess, IBKR will create a loan for those funds. Note that this is necessary as IBKR is obligated to settle that trade with the clearinghouse solely in the designated currency of denomination. If you do not wish to have such a loan created and incur its associated interest costs, you would need to either first deposit funds into your account in the required currency form and amount or convert existing funds in your account using either our IdealPro (for amounts in excess of USD 25,000 or equivalent) or odd lot (for amounts below USD 25,000 or equivalent) venues, both available through the TWS.
Also note that once you close out a security position which is denominated in a given currency, the proceeds will remain in that currency regardless of whether it is the Base Currency you've selected for your account. Accordingly, such proceeds will be subject to exchange rate risk relative to your Base Currency until such time you either perform a currency conversion or use those proceeds for another similarly denominated product.
Glossary terms:
Does IBKR provide broker assistance for trades?
Although the default method for order submission is intended to be direct entry by the client into either the TraderWorkstation, Client Portal or IBKR Mobile execution platforms, IBKR will provide broker assistance for select trades in the circumstances outlined below:
1. Large or Complex Orders - clients who trade large or complex orders having a trade size of at least 100 option contracts or 10,000 shares may wish to use the specialized services of our Broker Assisted Block Desk. The Broker Assisted Block Desk handles both opening and closing orders and is staffed to provide immediate access with no phone queue or wait time. Note that trades executed through this desk are subject to commission rates which are greater than the published rates for self-directed orders. As rates vary by product type and listing exchange, we recommend that you contact the desk directly at 1-203-618-4030 for specific pricing details. For additional information, please refer to the website link titled 'Broker Assistance' below.
2. Emergency Closing Orders - in the event the client is temporarily unable to access the trading platform and needs to close a position, assistance may be obtained by contacting the Closing Order Desk of one of our Client Service Centers. It should be noted that this service is provided solely to accommodate closing trades and is associated with a Telephone Order commission surcharge. The amount of this surcharge varies by the Base Currency of the account with USD based accounts subject to a $30 surcharge (in addition to regular stated commissions).
Glossary terms:
What happens to US security options if the underlying becomes the subject of a full cash merger?
In the case of any stock option associated with a merger in which the underlying security has been converted to 100% cash after December 31, 2007, the OCC will accelerate its expiration. The new expiration date for such options will be accelerated to the nearest standard equity expiration, unless the cash conversion takes place after the Tuesday within an expiration week, in which case the expiration date for all contracts not already expiring that week will be deferred until the following month’s expiration.
Note that this acceleration does not impact the automatic exercise threshold, through which all options having a strike price that is in-the-money by at least $0.01 will be automatically exercised by OCC. Nor does it impact the date of the cash settlement attributable to the exercise which remains at T+2.
Also note that this acceleration does not affect options which were converted to cash on or before December 31, 2007 which will remain valid series until their original expiration date has been reached.
What is the margin on a Butterfly option strategy?
Übersicht:
In order for the software utilized by IB to recognize a position as a Butterfly, it must match the definition of a Butterfly exactly. These are the 3 different types of Butterfly spreads recognized by IBKR, and the margin calculation on each:
Background:
Long Butterfly:
Two short options of the same series (class, multiplier, strike price, expiration) offset by one long option of the same type (put or call) with a higher strike price, and one long option of the same type with a lower strike price. All component options must have the same expiration, same underlying, and intervals between exercise prices must be equal.
There is no margin requirement on this position. The long option cost is subtracted from cash and the short option proceeds are applied to cash.
Short Butterfly Put:
Two long put options of the same series offset by one short put option with a higher strike price and one short put option with a lower strike price. All component options must have the same expiration, same underlying, and intervals between exercise prices must be equal.
The margin requirement for this position is (Aggregate put option highest exercise price - aggregate put option second highest exercise price). Long put cost is subtracted from cash and short put proceeds are applied to cash.
Short Butterfly Call:
Two long call options of the same series offset by one short call option with a higher strike price and one short call option with a lower strike price. All component options must have the same expiration, same underlying, and intervals between exercise prices must be equal.
The margin requirement for this position is (Aggregate call option second lowest exercise price - aggregate call option lowest exercise price). Long option cost is subtracted from cash and short option proceeds are applied to cash.
*Please note that Interactive Brokers utilizes option margin optimization software to try to create the minimum margin requirement. However, due to the system requirements required to determine the optimal solution, we cannot always guarantee the optimal combination in all cases. Other option positions in the account could cause the software to create a strategy you didn't originally intend, and therefore would be subject to a different margin equation.
What is the margin on an Iron Condor option strategy?
Übersicht:
If an iron condor strategy exists in the account, the margin requirement will be the short put strike - the long put strike.
Background:
Example:
10 SPY Dec19 160P
-10 SPY Dec19 170P
-10 SPY Dec19 180C
10 SPY Dec19 190C
The margin requirement is determined by taking the strike of the short put (170) and subtracting the strike of the long put (160)
170-160 = 10
Take the difference and multiply by the number of contracts (10) and the multiplier (100)
10*10*100 = 10,000
In order for an iron condor to be recognized under exchange rules, the options must all be on the same underlying instrument and have the same expiration date, have different strike prices and the strike distance between the puts and the calls must be equal. If the distance between the puts and calls is different the position will be margined as two separate spreads with two separate margin requirements.
*Please note that Interactive Brokers utilizes option margin optimization software to try to create the minimum margin requirement. However, due to the system requirements required to determine the optimal solution, we cannot always guarantee the optimal combination in all cases. It is possible that given the option positions in the account, the iron condor you are trying to create will not be recognized as such.
What formulas do you use to calculate the margin on options?
Übersicht:
There are many different formulas used to calculate the margin requirement on options. Which formula is used will depend on the option type or strategy determined by the system. There are a significant number of detailed formulas that are applied to various strategies. To find this information go to the IBKR home page at www.interactivebrokers.com. Go to the Trading menu and click on Margin. From the Margin Requirements page, click on the Options tab. There is a table on this page which will list all possible strategies, and the various formulas used to calculate margin on each.
Background:
The information above applies to equity options and index options. Options on futures employ an entirely different method known as SPAN margining. For information on SPAN margining, conduct a search on this page for “SPAN” or “Futures options margin”.
