What does the Cash FX Translation Gain/Loss line on my Daily Activity Statement represent and how is it calculated?
Overview:
In order to provide a comprehensive snapshot of your account equity for statement generation purposes, any long or short cash balance in your account which is denominated in a currency other than that which you have designated as your Base Currency must be converted at the then prevailing exchange rate. As exchange rates tend to vary from one period to another, this conversion process is likely to result in a Cash FX Translation balance that is either positive (i.e., a gain) or negative (i.e., a loss). It should be noted that these gains or losses represent a mark to market calculation (i.e., as if all non-Base Currency balances had been closed out at the end of day exchange rate) and the actual gain or loss, if any, cannot be determined until such time the non-Base Currency balance has been closed.
The Cash FX Translation Gain/Loss for any given non-Base Currency is determined by first calculating the difference between the Base Currency exchange rates as of the current and prior daily statement periods (exchange rateC – exchange rateP , where rates are made available in the Base Currency Exchange Rate section of each statement;). This difference, positive or negative, is then multiplied by the Starting Cash balance for the current statement period to determine the Cash FX Translation gain (if positive) or loss (if negative). As all other non-Base Currency details (e.g., net trade sales and purchases, commissions, interest, etc.) are booked as of the end of day for currency translation purposes, they have, by definition, no translation gain or loss.
Glossary terms:
What is the Mark-to-Market calculation method and how does it work?
Overview:
Mark-to-market (MTM) is a method of valuing positions and determining profit and loss which is used by IBKR for TWS and statement reporting purposes. Under MTM, positions are valued in the Market Value section of the TWS Account Window based upon the price which they would currently realize in the open market. Positions are also valued using the MTM method for statement purposes and it is one of the methods by which profit or loss is computed. Other methods available include First In, First Out (FIFO), Last In, First Out (LIFO), and Maximum Loss.
MTM P&L shows how much profit or loss was made over the statement period, regardless of whether positions are open or closed and with no requirement that closing transactions be matched to an opening transaction. The MTM methodology rather assumes that all open positions and transactions are settled at the end of each day and new positions are opened the next day. For purposes of simplification, MTM calculations are split into two calculations: 1) calculations for transactions which took place during the statement period, referred to as Transaction MTM on the statement; and 2) calculations for positions which were open prior to the start of the period, referred to as Prior Period MTM on the statement.
Background:
For example, assume 100 shares of hypothetical stock XYZ are purchased at $50.00 on Day 1; another 200 shares are purchased on Day 2 at $52.00; 200 shares are sold on Day 3 at $53.00 and another 100 on Day 4 at $53.50. Also assume that the closing prices for XYZ on Days 1, 2, 3 and 4 are $50.50, $51.50, $54.00 and $54.00, respectively. The MTM statement calculations for each day are as follows:
Day 1
Transaction MTM - $50.00 ((50.50 – 50.00) * 100 )
Prior Period MTM - $0.00
Total MTM - $50.00
Day 2
Transaction MTM - ($100.00) ((51.50 – 52.00) * 200 )
Prior Period MTM - $100.00 ((51.50 – 50.50) * 100 )
Total MTM - $0.00
Day 3
Transaction MTM - ($200.00) ((54.00 – 53.00) * -200 )
Prior Period MTM - $750.00 ((54.00 – 51.50) * 300 )
Total MTM - $550.00
Day 4
Transaction MTM - ($50.00) ((53.50 – 54.00) * 100 )
Prior Period MTM - $0.00 ((54.00 – 54.00) * 100 )
Total MTM - ($50.00)
Total - $550.00
IMPORTANT NOTICE
Account holders should note that profit and loss calculations are calculated for statement reporting purposes solely and should consult with their tax advisor regarding their obligations with respect to reporting gains and losses for tax reporting purposes.
Why am I not informed of the assignment on my US securities option position until the following day?
Overview:
The processing of exercise notices for American style options on days other than the expiration date is not performed on a real-time basis, but rather as part of a nightly batch process by the Options Clearing Corporation (OCC). The processing sequence, which by definition results in a notification lag of at least one day to the assigned client, is as follows:
- OCC generally allows its clearing members to submit exercise notices on behalf of the clients holding a long position electronically throughout the day, but generally no later than the start of their critical processing in the evening (Day E).
- As part of its evening position processing sequence, OCC randomly assigns the exercise notices it has received to the open interest of its clearing members. That information is then made available by OCC to its clearing members early in the morning on the following day (Day E+1).
- At the point in which that information has been made available, clearing firms such as IBKR have already completed their processing of that day’s trade activity in order to provide timely statements, margin and settlement information to their clients. Also, since OCC carries the client positions of its clearing members in an omnibus manner (i.e., they do not know the identity of the clients, only the clearing firm), the clearing member must, in turn, execute a random process to assign those exercise notices to clients holding a short position in that particular option series.
- Once IBKR receives notice of the assignment from OCC and completes its random assignment process, the assignments will be readily posted to the Trader Workstation of the impacted accounts and reflected on the Daily Activity Statement as of that day’s close (E+1).
In addition, due to this processing sequence and the fact that a long option may have remaining time value, IBKR cannot automatically provide an exercise notice to OCC for any long option spread against the assigned short option as a means of offsetting the ensuing delivery obligation.
Account holders should refer to the Characteristics and Risks of Standardized Options disclosure document which is provided by IBKR to every option eligible client at the point of application and which clearly spells out the risks of assignment. This document is also available online at OCC's web site.
What are the key dates relating to stock Dividends?
Overview:
Key dates relating to stock dividends are as follows:
1. Declaration Date - date at which company's board of directors approves dividend payment and designates the Payment Date and Record Date.
2. Record Date - the date which determines which stockholders are entitled to receive the dividend payment. You need to own the shares as of the close of the Record Date in order to receive the dividend.
3. Ex-Dividend Date - the date on or after which the stock will be traded without the right to receive the dividend. Because most stock trades in the US settle regular way; that is, one business day after the trade, an individual must purchase the stock one business day before the Record Date to qualify for the dividend. The Ex-Dividend Date is therefore the same day as the Record Date.
4. Payment Date - the date on which the declared dividend is paid to all stockholders owning shares on the record date.
* Please note these key dates may be different for special dividends. Please reference KB 3043 for information regarding special dividends.
Are non-US residents subject to withholding for tax purposes?
Overview:
Information relating to tax obligations is reported as required to the tax authorities within your country of residence as well as other countries if trading products subject to any local withholding requirements. Unless specifically directed by a taxing authority, IBKR does not withhold taxes on proceeds from security sales. We are required by US tax law, for example, to withhold US taxes on dividends paid by US corporations to foreign persons at a rate of 30%. This rate may be lower if the US has entered into a tax treaty with your country. In addition, investment interest income is not subject to US withholding. All withholdings for non-US persons and most entities will be reported on Form 1042-S at the close of each year. For further information refer to IRS publication 901 and/or your tax advisor.
Why does the Cash Report section of my statement reflect a reduction in cash despite no trade activity or withdrawals?
Overview:
The Cash Report section details how each period's cash balance changes from beginning to end. If your account holds a long or short balance in a non-base currency, such balances will be translated (but not converted) into your base currency for statement reporting and account equity aggregation purposes. The rates at which these non-base balances have been converted are detailed in the Exchange Rates section located towards the bottom of your Daily Activity Statement. All other things being equal, any change in an exchange rate from one statement period to another will result in either an increase or decrease in your ending cash balance with the net change across all non-Base currencies being reflected in the Cash FX Translation Gain/Loss line. This does not reflect a realized gain or loss on these open currency positions but rather a mark-to-market calculation across statement periods.
Glossary terms:
What timeframe of activity statements is made available online and how can archived statements be obtained?
Overview:
Daily activity statements for the past 6 years are available online through Client Portal. Monthly activity statements for the past 84 months and annual statements for the past 7 years are also available. Archived statements are available on a best efforts basis and are available in electronic format only (delivered via email). Charges vary by currency, and the fee schedule can be found on our website under the Pricing menu followed by Other Fees.
Note: IBKR does not typically provide daily statements in lieu of monthly or annual statements.
Payment may be made in the form of check, or in the case of active accounts a debit to the account cash balance. Requests for archived statements may be made via web ticket and checks are to be mailed to Interactive Brokers, Attn: Funds & Banking, 209 S La Salle St. Suite 1000, Chicago, IL 60604 USA
Background:
IMPORTANT NOTE
Cashier’s Checks, Official Checks, Teller’s Checks and Banker’s checks issued by banks are the recommended forms of payment. Personal checks and checks issued by a credit union or bill payment service are subject to a seven business day hold period, after which the requested statements will be issued.
My account was debited for a dividend payment (Payment in Lieu) for a short stock position which I don’t recognize. How did this occur?
Overview:
A short stock position may originate from an option position which you held in your account. For example, if you hold a long put position in your account, that position may be subject to automatic exercise by the clearinghouse if it is in-the-money by a defined threshold at expiration. This put exercise will generate a short stock position in your account (assuming you do not have an offsetting long position), and you are obligated to pay any dividends should you maintain a short stock position on the ex-dividend date.
Similarly, a short call position in your account is subject to assignment should a call purchaser elect to exercise their right to purchase the stock and your account be allocated through the random clearinghouse and broker assignment process. This call assignment will generate a short stock position in your account (assuming you do not have an offsetting long position), and you are obligated to pay any dividends should you maintain a short stock position on the ex-dividend date.
These payments will be reflected on your Activity Statement as a 'Payment In Lieu Of Dividend'.
What does Payment in Lieu refer to?
Overview:
A Payment in Lieu, or Pil, typically refers to a cash debit or credit made to an account in recognition of a stock dividend. A Pil in the form of a debit will be made when an account is holding a short position in a stock on its ex-dividend date. This debit occurs as the lender of the shares which facilitated the short sale remains entitled to all dividends paid throughout the duration of the loan period.
Conversely, a Pil in the form of a credit is made when a long stock position in an account has been loaned out on its ex-dividend date. Account holders should note that shares which are held long and which are the subject of a margin lien may be eligible to be loaned by the broker. In this situation the credit originates from payment by the borrower of the shares rather than from a dividend by the share issuer. U.S. taxpayers who are recipients of Pil credits should discuss the tax implications of Pils and non-qualified dividends with their tax adviser.
