Interactive Brokers Ireland Limited – MiFID Categorisation

Introduction
 
The European Union legislative act known as the Markets in Financial Instruments Directive, or MiFID, as amended by MiFID II, requires Interactive Brokers Ireland Limited (IBIE) to classify each Client according to their knowledge, experience and expertise: "Retail", "Professional" or "Eligible Counterparty". 
 
In accordance with MiFID II rules, IBIE categorises most clients as Retail clients, providing them with a higher degree of protection.
 
Only those clients that are either regulated entities or funds managed by regulated fund managers, are categorised as Per Se Professional Clients.
 
The main differences in regulatory protections afforded to Professional Clients as compared with Retails Clients are:
 
1. Description of the nature and risks of packaged investments: A firm that offers an investment service with another service or product or as a condition of the same agreement with a retail client must: (i) inform retail clients if the risks resulting from the agreement are likely to be different from the risks associated with the components when taken separately; and (ii) provide retail clients with an adequate description of the different components of the agreement and the way in which its interaction modifies the risks. The above requirements do not apply in respect of professional clients. However, IBIE will not make such differentiation apart from the case specified under point 3 below.
 
2. Investor protection measures on the provision of Contracts for Differences (“CFDs”): The European Securities and Markets Authority (“ESMA”) introduced product intervention measures on the provision of CFDs to retail investors. The measures include: (i) New leverage limits on the opening of a position, which vary according to the volatility of the underlying; (ii) A margin close out rule on a per account basis that standardises the percentage of margin at which providers are required to close out one or more open CFDs; (iii) Negative balance protection on a per account basis;
(iv) A restriction on the incentives offered to trade CFDs; and (v) A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts. The above requirements do not apply in respect of professional clients.
 
3. Communication with clients: A firm must ensure that its communications with all clients are fair, clear and not misleading. However, the way in which a firm may communicate with professional clients (about itself, its services and products, and its remuneration) may be different from the way in which the firm communicates with retail clients. A firm’s obligations in respect of the level of details, medium and timing of the provision of information are different depending on whether the client is a retail or professional client. The requirements to deliver certain product-specific documents, such as Key Information Documents (“KID”) for Packaged Retail and Insurance-based Investment Products (“PRIIPs”), are not applied to professional clients.
 
4. Depreciation in value reporting: A firm that holds a retail client account that includes positions in leveraged financial instruments or contingent liability transactions must inform the retail client, where the initial value of each instrument depreciates by 10 per cent and thereafter at multiples of 10 per cent. The above requirements do not apply in respect of professional clients.
 
5. Appropriateness: When assessing appropriateness for non-advised services, a firm may be required to determine whether the client has the necessary experience and knowledge in order to understand the risks involved in relation to the product or service offered or demanded. Where such an appropriateness assessment requirement applies in respect of a client, the firm may assume that a professional client has the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions, or types of transaction or product, for which the client is classified as a professional client. A firm may not make such an assumption for a retail client and must determine that a retail client does have the necessary level of experience and knowledge.  
 
IBIE provides non-advised services and is not required to request information or adhere to the assessment procedures for a professional client when assessing the appropriateness of a given service or product as with a retail client, and IBIE may not be required to give warnings to the professional client if it cannot determine appropriateness with respect to a given service or product. 
 
6. The Financial Services and Pensions Ombudsman (FSPO): The services of the FSPO in Ireland may not be available to professional clients, unless they are, for example, a consumer, or a limited company, sole trader, a trust, a club, a charity or a partnership, subject to certain turnover limitations.
 
7. Compensation: IBIE is a member of the Irish Investor Compensation Scheme. You may be entitled to claim compensation from that scheme if IBIE cannot meet its obligations to you. This will depend on the type of business and the circumstances of the claim; compensation is only available for certain types of claimants and claims in respect of certain types of business. Eligibility for compensation from the scheme is determined under the rules applicable to the scheme.
 
Re-categorisation as Professional Client
 
IBIE allows its Retail Clients to request to be re-categorised as Professional Clients. Clients are notified of their Client Category and can check it at any time from Account Management, under Settings> Account Settings> MiFID Client Category. From this same screen, Clients can also request to change their MiFID Category.
 
IBIE will consider re-categorising Retail Clients to Professional Clients in two instances:
 
1. Per Se Professional Clients can notify IBIE that they consider that they should have been categorised as Per Se Professionals under the MiFID II rules, because at least one of the following conditions applies:

(i) authorised or regulated to operate in the financial markets; or

(ii) a large undertaking meeting two of the following size requirements on a company basis:

(a) balance sheet total of EUR 20,000,000;
(b) net turnover of EUR 40,000,000;
(c) own funds of EUR 2,000,000;

(iii) an institutional investor whose main activity is to invest in financial instruments. This includes entities dedicated to the securitisation of assets or other financing transactions.
 
2. IBIE may treat Clients as Elective Professional Clients if, based on an assessment of the Client’s expertise, experience, and knowledge, IBIE is reasonably assured that, in light of the nature of the transactions or services envisaged, the Client is capable of making its own investment decisions and understand the risks involved. Clients who do not meet the requirements to be categorised as Per Se Professional Clients can still request to be categorised as Elective Professional Clients.
 
To obtain such re-categorisation, Retail Clients must provide evidence that they satisfy at least two (2) of the following criteria:
 
1. Over the last four (4) quarters, the Client conducted trades in financial instruments in significant size at an average frequency of ten (10) per quarter.
 
To determine the significant size IBIE considers the following:
 
a. During the last four quarters, there were at least forty (40) trades; and
b. During each of the last four (4) quarters, there was at least one (1) trade; and
c. The total notional value of the top forty (40) trades of the last four (4) quarters is greater than EUR 200,000; and
d. The account has a net asset value greater than EUR 50,000.
 
Trades in Spot FX are not considered for the purpose of this calculation.
 
2. The Client holds a portfolio of financial instruments (including cash) that exceeds EUR 500,000 (or equivalent);
 
3. The Client is an individual accountholder or a trader of an organisation account who works or has worked in the financial sector for at least one year in a professional position which requires knowledge of products it trades in.
 
Upon review and verification of the information and supporting evidence provided, IBIE will re-categorise clients if all relevant conditions are met to satisfaction.

Retail Clients requesting to be re-categorised as Professional Accounts must read and understand the warning provided by IBIE before the relevant request is submitted.
 
Re-categorisation as Retail Client
 
Professional Clients can request IBIE to be re-categorised as Retail Clients, from the same Account Management page described above (under Settings> Account Settings> MiFID Client Category).
 
With the sole exception of regulated entities or funds managed by regulated fund managers, which are categorised as Per Se Professional Clients, IBIE accepts all such requests.
 
THIS INFORMATION IS GUIDANCE FOR INTERACTIVE BROKERS FULLY DISCLOSED CLEARED CUSTOMERS ONLY.
NOTE: THE INFORMATION ABOVE IS NOT INTENDED TO BE A COMPREHENSIVE, EXHAUSTIVE NOR A DEFINITIVE INTERPRETATION OF THE REGULATION, BUT A SUMMARY OF IBIE’s APPROACH TO CLIENT CATEGORISATION AND RE-CATEGORISATION POLICY.
 

Interactive Brokers Central Europe Zrt. – MiFID Categorisation

Introduction

The European Union legislative act known as the Markets in Financial Instruments Directive, or MiFID, as amended by MiFID II, requires Interactive Brokers Central Europe Zrt. (IBCE) to classify each Client according to their knowledge, experience and expertise: "Retail", "Professional" or "Eligible Counterparty". 
 
In accordance with MiFID II rules, IBCE categorises most clients as Retail clients, providing them with a higher degree of protection.
 
Only those clients that are either regulated entities or funds managed by regulated fund managers, are categorised as Per Se Professional Clients.
 
The main differences in regulatory protections afforded to Professional Clients as compared with Retails Clients are:
 
1. Description of the nature and risks of packaged investments: A firm that offers an investment service with another service or product or as a condition of the same agreement with a retail client must: (i) inform retail clients if the risks resulting from the agreement are likely to be different from the risks associated with the components when taken separately; and (ii) provide retail clients with an adequate description of the different components of the agreement and the way in which its interaction modifies the risks. The above requirements do not apply in respect of professional clients. However, IBCE will not make such differentiation apart from the case specified under point 3 below.
 
2. Investor protection measures on the provision of Contracts for Differences (“CFDs”): The European Securities and Markets Authority (“ESMA”) introduced product intervention measures on the provision of CFDs to retail investors. The measures include: (i) New leverage limits on the opening of a position, which vary according to the volatility of the underlying; (ii) A margin close out rule on a per account basis that standardises the percentage of margin at which providers are required to close out one or more open CFDs; (iii) Negative balance protection on a per account basis;
(iv) A restriction on the incentives offered to trade CFDs; and (v) A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts. The above requirements do not apply in respect of professional clients.
 
3. Communication with clients: A firm must ensure that its communications with all clients are fair, clear and not misleading. However, the way in which a firm may communicate with professional clients (about itself, its services and products, and its remuneration) may be different from the way in which the firm communicates with retail clients. A firm’s obligations in respect of the level of details, medium and timing of the provision of information are different depending on whether the client is a retail or professional client. The requirements to deliver certain product-specific documents, such as Key Information Documents (“KID”) for Packaged Retail and Insurance-based Investment Products (“PRIIPs”), are not applied to professional clients.
 
4. Depreciation in value reporting: A firm that holds a retail client account that includes positions in leveraged financial instruments or contingent liability transactions must inform the retail client, where the initial value of each instrument depreciates by 10 per cent and thereafter at multiples of 10 per cent. The above requirements do not apply in respect of professional clients.
 
5. Appropriateness: When assessing appropriateness for non-advised services, a firm may be required to determine whether the client has the necessary experience and knowledge in order to understand the risks involved in relation to the product or service offered or demanded. Where such an appropriateness assessment requirement applies in respect of a client, the firm may assume that a professional client has the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions, or types of transaction or product, for which the client is classified as a professional client. A firm may not make such an assumption for a retail client and must determine that a retail client does have the necessary level of experience and knowledge.  
 
IBCE provides non-advised services and is not required to request information or adhere to the assessment procedures for a professional client when assessing the appropriateness of a given service or product as with a retail client, and IBCE may not be required to give warnings to the professional client if it cannot determine appropriateness with respect to a given service or product. 
 
6. Compensation: IBCE is a member of the Hungarian Investor Protection Funds. Retail Clients may be entitled to claim compensation from the Fund in the event that i/ the Central Bank of Hungary initiates liquidation proceedings of IBCE or ii/ a court orders the liquidation of IBCE. The compensation provided by the Fund cover claims arising from contracts entered into within the agreement with IBCE of brokerage activity, securities custody, securities account management and client account management activities performed by IBCE. Eligibility for compensation from the Fund is determined under the rules applicable to the scheme.
 
Re-categorisation as Professional Client
 
IBCE allows its Retail Clients to request to be re-categorised as Professional Clients. Clients are notified of their Client Category and can check it at any time from Account Management, under Settings> Account Settings> MiFID Client Category. From this same screen, Clients can also request to change their MiFID Category.
 
IBCE will consider re-categorising Retail Clients to Professional Clients in two instances:
 
1. Per Se Professional Clients can notify IBCE that they consider that they should have been categorised as Per Se Professionals under the MiFID II rules, because at least one of the following conditions applies:

(i) authorised or regulated to operate in the financial markets; or

(ii) a large undertaking meeting two of the following size requirements on a company basis:

(a) balance sheet total of EUR 20,000,000;
(b) net turnover of EUR 40,000,000;
(c) own funds of EUR 2,000,000;

(iii) an institutional investor whose main activity is to invest in financial instruments. This includes entities dedicated to the securitisation of assets or other financing transactions.
 
2. IBCE may treat Clients as Elective Professional Clients if, based on an assessment of the Client’s expertise, experience, and knowledge, IBCE is reasonably assured that, in light of the nature of the transactions or services envisaged, the Client is capable of making its own investment decisions and understand the risks involved. Clients who do not meet the requirements to be categorised as Per Se Professional Clients can still request to be categorised as Elective Professional Clients.
 
To obtain such re-categorisation, Retail Clients must provide evidence that they satisfy at least two (2) of the following criteria:
 
1. Over the last four (4) quarters, the Client conducted trades in financial instruments in significant size at an average frequency of ten (10) per quarter.
 
To determine the significant size IBCE considers the following:
 
a. During the last four quarters, there were at least forty (40) trades; and
b. During each of the last four (4) quarters, there was at least one (1) trade; and
c. The total notional value of the top forty (40) trades of the last four (4) quarters is greater than EUR 200,000; and
d. The account has a net asset value greater than EUR 50,000.
 
Trades in Spot FX are not considered for the purpose of this calculation.
 
2. The Client holds a portfolio of financial instruments (including cash) that exceeds EUR 500,000 (or equivalent);
 
3. The Client is an individual accountholder or a trader of an organisation account who works or has worked in the financial sector for at least one year in a professional position which requires knowledge of products it trades in.
 
Upon review and verification of the information and supporting evidence provided, IBCE will re-categorise clients if all relevant conditions are met to satisfaction.

Retail Clients requesting to be re-categorised as Professional Accounts must read and understand the warning provided by IBCE before the relevant request is submitted.
 
Re-categorisation as Retail Client
 
Professional Clients can request IBCE to be re-categorised as Retail Clients, from the same Account Management page described above (under Settings> Account Settings> MiFID Client Category).
 
With the sole exception of regulated entities or funds managed by regulated fund managers, which are categorised as Per Se Professional Clients, IBCE accepts all such requests.
 
THIS INFORMATION IS GUIDANCE FOR INTERACTIVE BROKERS FULLY DISCLOSED CLEARED CUSTOMERS ONLY.
NOTE: THE INFORMATION ABOVE IS NOT INTENDED TO BE A COMPREHENSIVE, EXHAUSTIVE NOR A DEFINITIVE INTERPRETATION OF THE REGULATION, BUT A SUMMARY OF IBCE’s APPROACH TO CLIENT CATEGORISATION AND RE-CATEGORISATION POLICY.
 

FAQs - Brexit

Answers to the most commonly asked questions relating to Brexit, including the transfer of an account to one of our European brokers and account operation following the transfer can be found through this page.

To start, select the IBKR entity below that your account will be maintained with post-Brexit.

FAQS: IBCE Brexit Account Migration

Overview: 

This is an important document regarding the proposed transfer of your account from IBUK and IBLLC to IBCE that requires your attention. Please read the entirety of this document ahead of taking any action referred to in the Covering Letter sent to you via email.

 

Background: 

Please take time to read this FAQs, which summarises some of the key changes to the regulatory framework which will be brought about by the Proposed Transfer (as described below) and provides answers to some of the more general questions that you may have. The FAQs should be read in conjunction with the Covering Letter and the documents that are attached to the Covering Letter. If you require any further information, please get in touch with us using the contact details provided in the Covering Letter. This FAQs supersedes the one previously made available to you titled “FAQs: Brexit Account Migration” (“Original FAQs”) as it reflects new information, and we ask that you read it carefully. To the extent there is any inconsistency between this FAQs and the Original FAQs, please rely on the information contained in this FAQs.

 

Discussion: 

This FAQs is split into three parts. 

  • Part A sets outs key information in relation to the Proposed Transfer (as described below).
  • Part B covers key legal and regulatory topics that arise as a result of the Proposed Transfer (as described below).
  • Part C aims to answer any other questions that you may have and provides some further and more practical information in relation to what will and will not be changing following the Proposed Transfer (as described below). 

 

PART A – THE PROPOSED TRANSFER

 1. What is the situation currently and why do things have to change?

As you will be aware, at present, your relationship with Interactive Brokers is led by our entity based in the United Kingdom, specifically Interactive Brokers (U.K.) Limited (“IBUK”) and the services provided to you are provided by IBUK and, depending on the products you do business in, our US affiliate Interactive Brokers LLC (“IBLLC”).  At present IBUK utilises what is known as a financial services passport to be able to perform its part of the service provision across continental Europe. Our working assumption is that following the end of the Brexit transitional period later this year, IBUK will lose its financial services passport and that from 1 January 2021 Interactive Brokers will need to make some changes in relation to which legal entity does business with you. 

 

2. What are the “changes” envisaged above?

We have established a new Interactive Brokers legal entity in Hungary, namely, Interactive Brokers Central Europe Zrt.  (“IBCE”).  We propose to transfer the business that you currently conduct with IBUK and IBLLC to IBCE.  In other words, it is our intention that all of your accounts, investments and services currently provided to you by IBUK and IBLLC will instead be singularly provided by IBCE (for convenience we will refer to this as the “Proposed Transfer”).

 

3. When will the Proposed Transfer occur? 

We will write to you again ahead of the Proposed Transfer. 

 

4. Who is IBCE? What sort of a firm is it?

IBCE, an investment service provider, is licensed and authorized by the Central Bank of Hungary.  IBCE’s regulatory status and profile is very similar to IBUK’s.  This is because both IBCE and IBUK are authorised pursuant to the second Markets in Financial Instruments Directive (Directive 2014/65/EU). This is an EU-wide piece of legislation the purpose of which is to, as much as possible, harmonise how investment firms are regulated across the EU. 

This does not mean there are not some differences between the legislation that applies to your relationship with IBUK and IBLLC at present and that which will apply once your account is transferred to IBCE.  We explain this in more detail in Part B of this FAQs. 

 

5. What are IBCE’s legal details? 

Interactive Brokers Central Europe Zrt. is registered as a private company limited by shares (registration number 01-10-141029) and is listed in the Register of Companies maintained by the  Metropolitan Court of Registration. Its registered address is Budapest, Madách Imre út 13-14, 1075.

 

6. Who will regulate IBCE and what are their contact details? 

The Central Bank of Hungary will be the competent regulator for IBCE (in the same way that the Financial Conduct Authority is the competent regulator for IBUK).  The  Central Bank of Hungary’s contact details are set out below: 

Location

Central Bank of Hungary

1054 Budapest

Szabadság tér 9.

Hungary

 

Postal Address

Magyar Nemzeti Bank

BKKP Pf. 777

 

Client Service, client complaints 

Address: 1013 Budapest, Krisztina krt. 39.

E-mail: ugyfelszolgalat@mnb.hu

Phone:  +36 80 203 776

 

 7. Where does IBCE fit with respect to the broader Interactive Brokers Group? 

IBCE is a wholly-owned subsidiary that sits within the broader Interactive Brokers Group.

 

8. What does the Proposed Transfer mean for me? Will there be any material impacts? 

The Proposed Transfer may have a material impact if you currently trade products that you will be restricted from trading following the transfer.  It is very important that you read these FAQs carefully, and in full, and make sure that you understand what the changes are for you.

 

9. What do I have to do if I want to continue doing business with Interactive Brokers? 

If you would like to continue to do business with Interactive Brokers, we require your cooperation and action. 

Specifically, we need you to consent and agree to the Proposed Transfer and the Customer Agreement and other Documents available under the Important Information section of the Proposed Transfer process and to the regulatory matters outlined in the Covering Letter, the Important Information and Consent sections of the Proposed Transfer process.  You can do this by following the instructions in the Covering Letter. 

To be clear, you do not have to consent to the Proposed Transfer if you feel that you may be adversely affected by it.  However, you should be aware that if you decide to decline, IBUK may not be able to keep servicing your account at the end of the Brexit transition period.  If that happens, your account will be restricted from opening new transactions or transferring new assets.  You always have the ability to transfer your account to another broker.  If you wish to decline, please follow the instructions in the Covering Letter. 

In either case, we ask that you read the entirety of this FAQs and the Covering Letter before deciding to consent to or decline the Proposed Transfer.

 

10. What happens next? 

If you consent to the transfer, please complete all actions detailed in the Covering Letter and we will prepare your account for the Proposed Transfer.  Following the Proposed Transfer, IBCE will write to you with further information about your new relationship with them.

 

PART B – LEGAL AND REGULATORY CHANGES THAT YOU SHOULD BE AWARE OF

 

1. What terms and conditions will govern my relationship with IBCE following the Proposed Transfer? Are these different to the ones that currently apply? 

Trades that you conduct after the Proposed Transfer will be governed by the new Customer Agreement between you and IBCE.  A copy of the new Customer Agreement is available in the Important Information section of the Proposed Transfer process.  Please see the response to Question A3 above in relation to the timing for the Proposed Transfer.

 

2. What conduct of business rules (including best execution) will apply to my relationship with IBCE? Are there any material differences that will apply to my relationship with IBCE compared to those that apply to my existing relationship with IBUK? 

There are some changes to be aware of, which we explain below. 

If you do business with IBUK on a “carried” basis (in other words, you trade index options, futures and futures options and IBUK carries your account and custodies your assets) then the Financial Conduct Authority’s conduct of business rules currently apply to you.  These rules are based heavily on the recast Markets in Financial Instruments Directive, the Markets in Financial Regulation and various delegated directives and regulations (collectively, “MiFID”).  In relation to best execution, where it applies, IBUK must take all sufficient steps to achieve the best possible result for you when we execute your order. 

If you currently do business with IBUK on an “introduced” basis (in other words, you trade products outside of those mentioned in the previous paragraph and you have a relationship with both IBUK and its US affiliate, IBLLC) a mix of conduct of business rules will currently apply to you. For instance, with respect to the introduction of your business to IBLLC, the Financial Conduct Authority’s conduct of business rules will apply (see above in relation to these).  Once introduced to IBLLC, the relevant U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission rules and regulations (among others) will apply to IBLLC’s role (including its obligations in relation to best execution and custody). 

Please note that it is of course possible that your business is split across these two scenarios (in other words some of your business is conducted on a “carried” basis while some of it is conducted on an “introduced” basis). 

Going forward, the distinction between “carried” and “introduced” business will no longer apply and in each case set out above, Hungarian conduct of business rules will exclusively apply to your relationship with IBCE.  Similar to the UK Financial Conduct Authority’s rules, the Hungarian conduct of business rules are based on MiFID and IBCE’s obligations in relation to best execution will largely mirror those that currently apply to IBUK. 

In our view, while the rules that apply to our relationship will change, we do not consider such changes to be material or to result in a lesser degree of protection being afforded to you.

 

3. How will my investments that I custody with IBCE be held from a legal/regulatory perspective? Are there any material differences that will apply to my relationship with IBCE compared to those that apply to my existing relationship with IBUK? 

The rules that currently apply depends on the sort of business that you presently have with IBUK (please see the response to Question B2 above).  Where you conduct “carried” business with IBUK, the Financial Conduct Authority’s client asset (or “CASS”) rules will apply.  These rules are based heavily on MiFID.  Where you conduct “introduced” business with IBUK and IBLLC, the US custody rules will apply to your custody assets. 

Going forward, as set out above, the distinction between “carried” and “introduced” business will no longer apply and in each case set out above, Hungarian custody rules will exclusively apply to your relationship with IBCE.  Like the UK Financial Conduct Authority’s rules, the Hungarian conduct of business rules are based on MiFID. 

 

4. How am I protected against loss? Are there any material differences that will apply to my relationship with IBCE compared to those that apply to my existing relationship with IBUK? 

Currently, your eligible assets are protected from loss either under the US Securities Investor Protection Corporation at an amount of up to USD 500,000 (subject to a cash sublimit of USD 250,000) or the UK Financial Services Compensation Scheme at an amount up to £50,000 (which regime applies depends on the relevant segment of your IBUK account, as explained in the response to Question B2 above).  After the Proposed Transfer, the Hungarian Investor Protection Fund according to Act CXX of 2001 on the Capital Market may protect your assets from loss, at an amount up to a maximum of EUR 100,000, should IBCE default and be unable to meet its obligations to you. 

Hungary's compensation scheme is similar to the compensation scheme you have access to in the UK,   The purpose of the Fund is to pay compensation to you in the event that:

  • the Central Bank of Hungary initiates liquidation proceedings of IBCE , or
  • a court orders the liquidation of IBCE. 

 IBCE is a member of the Fund. 

The compensation provided by the Fund covers claims arising from contracts entered into within the agreement with IBCE of brokerage activity, securities custody, securities account management and client account management activities performed by IBCE.

You can only make a claim after a firm goes out of business and its assets have been liquidated and distributed to those who are owed money. Please check the details of the schemes for any limits that apply – not all losses will be covered as there are maximum levels of compensation.   The Fund will pay you compensation for the amount you have lost up to a maximum of EUR 100,000. The amount paid by the Fund is:

  • 100% up to the limit of the EUR equivalent of one million forints (EUR 2,800 on 12th December 2020),
  • above one million forints: 1 million forints and 90% of the part above one million forints to a maximum of EUR 100,000.

 

5. How do I make a complaint to IBCE? Are there any material differences that will apply to my relationship with IBCE compared to those that apply to my existing relationship with IBUK? What if my complaint relates to something that happened while I was a customer of IBUK? 

The General Business Rules of IBCE sets out how to lodge a complaint with IBCE.  The complaints handling procedures are materially similar to those that apply to your existing relationship with IBUK.  If the substance of your complaint relates to something that happened prior to the Proposed Transfer, then you should address your complaint to IBUK.  IBUK will remain authorised as an investment firm post-Brexit.  Its current contact information will stay the same should you need to contact IBUK.

 

6. After the Proposed Transfer, will I still have access to the Financial Ombudsman Service? 

In case of complaint, investors should follow the complaints procedure as referred to in the Customer Agreement.  As explained in the Original FAQs, once the Proposed Transfer has taken place, the UK Financial Ombudsman Service will cease to have jurisdiction over any complaints that you may have in respect of IBUK.  However, please be aware that Hungary has a dispute resolution scheme operated by the Central Bank of Hungary in the form of the Financial Arbitration Board (“FAB”). The FAB is a free and independent statutory dispute resolution scheme for financial services. You may be eligible to make a complaint to the FAB if you are a retail customer.  Details of FAB can be found on https://www.mnb.hu/en/hungarian-financial-arbitration-board

 The FAB can be contacted at: 

Postal Address

Financial Arbitration Board

1525 Budapest

Pf. 172

 

Email

ugyfelszolgalat@mnb.hu

 

7. How will my personal data be processed and protected? Are there any material differences that will apply to my relationship with IBCE compared to those that apply to my existing relationship with IBUK in this context? 

Please see the Original FAQs for further information. In summary there will be no material change.

 

PART C – OTHER PRACTICAL QUESTIONS AND NEXT STEPS

 

1. Who should I contact before the Proposed Transfer takes place and after the Proposed Transfer if I have any questions in the ordinary course? 

Generally speaking, you should contact IBUK with any questions that you may have prior to the Proposed Transfer, and you should contact IBCE with any questions that you may have following the Proposed Transfer taking place.  Regardless of who you contact at Interactive Brokers, we will ensure your query is promptly dealt with and we will help you to connect with the right person or department.

 

2. Will the range of products offered be the same? 

IBCE and IBUK offer the same range of products for all categories except metals and forex. The differences in the offerings are as follows: 

  • Metals CFDs are offered by IBCE but spot and OTC metals futures are not.
  • Trading securities and derivatives in all the same markets you can now but if you trade outside of the Allowed Deposit Currencies (see #7) and the transaction results in a long cash balance we will auto-convert to your base currency.  If the transaction results in a short cash balance there will be no further action by IBCE as you can borrow in all available IBKR global currencies.
  • Foreign exchange spot trades at IBCE must be connected to an investment service transaction and its resulting cash flows.  To comply with this regulation, you will no longer be able to trade currencies on a speculative basis. 

For further information please see  “IBCE Multi-Currency Account Foreign Exchange Restrictions Disclosure”.

 

 

3. Will the range of services be the same? 

There are two changes to the services you are currently offered: 

  • IBCE offers financing for securities and commodities trades but cannot support withdrawals of borrowed funds.  You will be free to withdraw any free cash not needed to support your open positions.  If you would like to withdraw additional funds, you can sell positions and withdraw the proceeds.
  • GFIS investment research will not be available to clients of IBCE; however GFIS market data and news service offerings are unaffected.

 

4. I currently trade OTC derivatives with IBUK – what will happen to my open positions? 

Your open positions will be transferred to IBCE and you will face IBCE rather than IBUK.  You will no longer have any legal relationship with IBUK in relation to those positions.  We will separately provide you with an updated Key Investor Information Document (please follow the link to the PRIIPs KID landing page in the Covering Letter).

 

5. What happens to any security I have granted to IBUK/IBLLC as part of a margin loan? 

If you have granted security or collateral to IBUK/IBLLC, this will transfer to IBCE - upon the Proposed Transfer taking place. You will be presented with two new contracts for your existing margin loan:

  • Investment Loan contract
  • Securities Lending Framework contract

These will operate similarly to your existing margin loan account with the only difference being you will pay service fees to IBCE for entering into the stock borrow transaction on your behalf instead of paying interest.  This may have tax consequences depending on your country of residence.

 

6. Will I have access to the same trading platform or be subject to any software changes following migrations? 

The migration will have no impact upon the software you use to trade or administer your account.  The technology will remain the same as it is today.

 

7. Will all account balances be transferred at the same time and what is the timing? 

IBCE will support a limited number of deposit currencies.  The following ten cash deposit currencies, the “Allowed Deposit Currencies” are:

  • EUR, USD, GBP, CHF, DKK, NOK, SEK, HUF, CZK and PLN

You will be required to nominate a base currency from the Allowed Deposit Currencies and if you hold long cash balances in other currencies, you will be required to convert those balances to one of the Allowed Deposit Currencies before migration.

 

In accordance with the client asset protection rules in Hungary, client funds must  be protected in the same form that they were received by the broker.  This contrasts with your previous broker, IBUK and/or IBL, whose regulatory client asset rules allowed them to protect your funds in equivalent value in another currency.  

Short currency balances are unaffected.  You may borrow in any currency that the IBKR group offers.

All cash balances, with the exception of accruals (e.g., interest, dividends) will be transferred at the same time. Once accruals have been settled and posted to cash, they will automatically be swept to IBCE. Once all accruals have been swept, your current account at IBUK or IBLLC will be closed and inaccessible for trading purposes. You will still be able to access this closed account via the Client Portal for purposes of viewing and printing historical statements.

 

8. Will all security, derivative and commodity positions be transferred at the same time? 

All positions will be transferred to your new account at the same time except for OTC metals futures and spot metals.  You will be requested to trade out of those positions before conversion to an IBCE account.

 

9. What will happen to my current account following migration? 

Your current account will close once all accruals have been posted to cash and transferred to the migrated account.  Once closed, it will be inaccessible for trading purposes, however, it will remain accessible via an account selector from the Client Portal for purposes of viewing and printing historical statements.

 

10. Will IBKR’s commissions, interest and fees change when my account is migrated? 

IBKR commissions and fees on trading products do not vary by the broker your account is maintained with.

There are changes to the interest and fees on cash balances. IBCE will not pay interest on credit balances as Hungarian law that governs investment service companies prohibits the payment of interest.  IBCE will charge a currency handling fee for cash balances in currencies that have negative interest rates.

 

11. Will my trading permissions change when my account is migrated? 

No. Your trading permissions will not change when your account is migrated for products that IBCE supports. As discussed in (2) above, spot metals and OTC metal futures will not be available.

 

12. Will open orders (e.g., Good-til-Canceled) be carried over when my account is migrated? 

Open orders will not be carried over to the new account and we recommend that clients review their orders immediately following the migration to ensure that the open orders are consistent with their trading intentions.

 

13. Will I be subject to the U.S. Pattern Day Trading ("PDT") Rule once my account is migrated? 

No. You will no longer be subject to the PDT rule.

 

14. Will I receive a single, combined annual activity statement reflecting the activity in both my IBUK and IBCE accounts? 

No.  Separate daily, monthly and annual activity statements will be provided for each of your IBUK and IBCE accounts covering activity during the period each was open. Activity statements will be posted to the Client Portal under the Reports/Tax Docs menu option and you will need to toggle between the two accounts to access their respective statements.

 

15. Will the current cost basis of positions be carried over when my account is migrated? 

Yes, this migration will have no impact upon the cost basis of your positions.

 

16. Will the migrated account retain the same configuration as the current account? 

The configuration of the account following migration will match that of the current account to the extent permissible by regulation.  This includes attributes such as margin capability, market data, additional users, and alerts.  Client’s holding restricted products (with the exception of OTC metals futures and spot metals), may migrate such positions but won’t be allowed to increase the position.

OTC metals futures and spot metals must be closed in your current IBUK account.

 

17. Will my login credential change? 

No.  Your username, password, and any 2-factor authentication process in place for your existing account will remain active following migration. You will, however, be assigned a new account ID for your migrated account.

FAQS: IBIE Brexit Account Migration

Overview: 

This is an important document regarding the proposed transfer of your account from IBUK and IBLLC to IBIE that requires your attention. Please read the entirety of this document ahead of taking any action referred to in the Covering Letter sent to you via email.

Background: 

Please take time to read this FAQs, which summarises some of the key changes to the regulatory framework which will be brought about by the Proposed Transfer (as described below) and provides answers to some of the more general questions that you may have. The FAQs should be read in conjunction with the Covering Letter and the documents that are attached to the Covering Letter. If you require any further information, please get in touch with us using the contact details provided in the Covering Letter. This FAQs supersedes the one previously made available to you titled “FAQs: Brexit Account Migration” (“Original FAQs”) as it reflects new information, and we ask that you read it carefully. To the extent there is any inconsistency between this FAQs and the Original FAQs, please rely on the information contained in this FAQs.

Discussion:

This FAQs is split into three parts.

  • Part A sets outs key information in relation to the Proposed Transfer (as described below).
  • Part B covers key legal and regulatory topics that arise as a result of the Proposed Transfer (as described below).
  • Part C aims to answer any other questions that you may have and provides some further and more practical information in relation to what will and will not be changing following the Proposed Transfer (as described below).

PART A – THE PROPOSED TRANSFER

1. What is the situation currently and why do things have to change?

As you will be aware, at present, your relationship with Interactive Brokers is led by our entity based in the United Kingdom, specifically Interactive Brokers (U.K.) Limited (“IBUK”) and the services provided to you are provided by IBUK and, depending on the products you do business in, our US affiliate Interactive Brokers LLC (“IBLLC”). At present IBUK utilises what is known as a financial services passport to be able to perform its part of the service provision across continental Europe. Our working assumption is that following the end of the Brexit transitional period later this year, IBUK will lose its financial services passport and that from 1 January 2021 Interactive Brokers will need to make some changes in relation to which legal entity does business with you.

2. What are the “changes” envisaged above?

We have established a new Interactive Brokers legal entity in Ireland, namely, Interactive Brokers Ireland Limited (“IBIE”). We propose to transfer the business that you currently conduct with IBUK and IBLLC to IBIE. In other words, it is our intention that all of your accounts, investments and services currently provided to you by IBUK and IBLLC will instead be singularly provided by IBIE (for convenience we will refer to this as the “Proposed Transfer”).

3. When will the Proposed Transfer occur?

We will write to you again ahead of the Proposed Transfer.

4. Who is IBIE? What sort of a firm is it?

Effective 22 December 2020, IBIE became authorised as an investment firm by the Central Bank of Ireland. Its regulatory status and profile will be very similar to IBUK’s. This is because both IBIE and IBUK will be authorised pursuant to the second Markets in Financial Instruments Directive (Directive 2014/65/EU). This is an EU-wide piece of legislation the purpose of which is to, as much as possible, harmonise how investment firms are regulated across the EU

This does not mean there are not some differences between the legislation that applies to your relationship with IBUK and IBLLC at present and that which will apply once your account is transferred to IBIE. We explain this in more detail in Part B of this FAQs.

5. What are IBIE’s legal details?

Interactive Brokers Ireland Limited is registered as a private company limited by shares (registration number 657406) and is listed in the Register of Companies maintained by the Irish Companies Registration Office. Its registered address is 10 Earlsfort Terrace, Dublin 2, D02 T380, Ireland. We are still finalising IBIE’s day-to-day contact details and we will be in touch with these details in due course.

6. Who will regulate IBIE and what are their contact details?

The Central Bank of Ireland will be the competent regulator for IBIE (in the same way that the Financial Conduct Authority is the competent regulator for IBUK). The Central Bank of Ireland’s contact details are set out below:

Location

The Central Bank of Ireland

New Wapping Street

North Wall Quay

Dublin 1

D01 F7X3

Contact Numbers

Phone: +353 (0)1 224 6000

Fax: +353 (0)1 224 5550

Postal Address

Central Bank of Ireland

P.O. Box 559

Dublin 1

Public Helpline

E-mail: enquiries@centralbank.ie

Lo-Call: 1890 777 777

Phone: +353 (0)1 224 5800

 

7. Where does IBIE fit with respect to the broader Interactive Brokers group?

IBIE is a wholly-owned subsidiary that sits within the broader Interactive Brokers Group.

8. What does the Proposed Transfer mean for me? Will there be any material impacts?

We do not anticipate any material impacts for you as a result of the Proposed Transfer. Nonetheless, it is very important that you read this FAQs carefully and in full and make sure that you understand what the changes are for you.

9. What do I have to do if I want to continue doing business with Interactive Brokers?

If you would like to continue to do business with Interactive Brokers, we require your cooperation and action.

Specifically, we need you to consent and agree to the Customer Agreement and other Documents available under the Important Information section of the Proposed Transfer process and to the regulatory matters outlined in the Covering Letter, the Important Information and Consent sections of the Proposed Transfer process. You can do this by following the instructions in the Covering Letter.

To be clear, you do not have to consent to the Proposed Transfer if you feel that you may be adversely affected by it. However, you should be aware that if you decide to decline, IBUK may not be able to keep servicing your account at the end of the Brexit transition period. If that happens, your account will be restricted from opening new transactions or transferring new assets. You always have the ability to transfer your account to another broker. If you wish to decline, please follow the instructions in the Covering Letter.

In either case, we ask that you read the entirety of this FAQs and the Covering Letter before deciding to consent to or decline the Proposed Transfer.

10. What happens next?

If you consent to the transfer, please complete all actions detailed in the Covering Letter and we will prepare your account for the Proposed Transfer. Following the Proposed Transfer, IBIE will write to you with further information about your new relationship with them.

 

PART B – LEGAL AND REGULATORY CHANGES THAT YOU SHOULD BE AWARE OF

1. What terms and conditions will govern my relationship with IBIE following the Proposed Transfer? Are these different to the ones that currently apply?

Trades that you conduct after the Proposed Transfer will be governed by the new Customer Agreement between you and IBIE. A copy of the new Customer Agreement is available in the Important Information section of the Proposed Transfer process. Please see the response to Question A3 above in relation to the timing for the Proposed Transfer.

2. What conduct of business rules (including best execution) will apply to my relationship with IBIE? Are there any material differences that will apply to my relationship with IBIE compared to those that apply to my existing relationship with IBUK?

There are some changes to be aware of, which we explain below.

If you do business with IBUK on a “carried” basis (in other words, you trade index options, futures and futures options and IBUK carries your account and custodies your assets) then the Financial Conduct Authority’s conduct of business rules currently apply to you. These rules are based heavily on the recast Markets in Financial Instruments Directive, the Markets in Financial Regulation and various delegated directives and regulations (collectively, “MiFID”). In relation to best execution, where it applies, IBUK must take all sufficient steps to achieve the best possible result for you when we execute your order.

If you currently do business with IBUK on an “introduced” basis (in other words, you trade products outside of those mentioned in the previous paragraph and you have a relationship with both IBUK and its US affiliate, IBLLC), a mix of conduct of business rules will currently apply to you. For instance, with respect to the introduction of your business to IBLLC, the Financial Conduct Authority’s conduct of business rules will apply (see above in relation to these). Once introduced to IBLLC, the relevant U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission rules and regulations (among others) will apply to IBLLC’s role (including its obligations in relation to best execution and custody).

Please note that it is of course possible that your business is split across these two scenarios (in other words some of your business is conducted on a “carried” basis while some of it is conducted on an “introduced” basis).

Going forward, the distinction between “carried” and “introduced” business will no longer apply and in each case set out above, Irish conduct of business rules will exclusively apply to your relationship with IBIE. Similar to the UK Financial Conduct Authority’s rules, the Irish conduct of business rules are based on MiFID and IBIE’s obligations in relation to best execution will largely mirror those that currently apply to IBUK.

In our view, while the rules that apply to our relationship will change, we do not consider such changes to be material or to result in a lesser degree of protection being afforded to you.

3. How will my investments that I custody with IBIE be held from a legal/regulatory perspective? Are there any material differences that will apply to my relationship with IBIE compared to those that apply to my existing relationship with IBUK?

The rules that currently apply depends on the sort of business that you presently have with IBUK (please see the response to Question B2 above). Where you conduct “carried” business with IBUK, the Financial Conduct Authority’s client asset (or “CASS”) rules will apply. These rules are based heavily on MiFID. Where you conduct “introduced” business with IBUK and IBLLC, the US custody rules will apply to your custody assets.

Going forward, as set out above, the distinction between “carried” and “introduced” business will no longer apply and in each case set out above, Irish custody rules will exclusively apply to your relationship with IBIE. Like the UK Financial Conduct Authority’s rules, the Irish conduct of business rules are based on MiFID. Please consult the Client Assets Key Information Document attached in the Important Information section in relation to the Irish custody regime.

4. How am I protected against loss? Are there any material differences that will apply to my relationship with IBIE compared to those that apply to my existing relationship with IBUK?

Currently, your eligible assets are protected from loss either under the US Securities Investor Protection Corporation at an amount of up to USD 500,000 (subject to a cash sublimit of USD 250,000) or the UK Financial Services Compensation Scheme at an amount up to £50,000 (which regime applies depends on the relevant segment of your IBUK account, as explained in the response to Question B2 above). After the Proposed Transfer, the Irish Investor Compensation Scheme, which is administered by The Investor Compensation Company DAC, may protect your assets from loss should IBIE default and be unable to meet its obligations to you.

Ireland’s compensation scheme is similar to the compensation scheme you have access to in the UK, albeit with a lower limit. The purpose of the Irish Investor Compensation Scheme is to pay compensation to you (subject to certain limits) if you have invested money or investment instruments in either of the following cases:

  • A firm goes out of business and cannot return your investments or money; and
  • A Central Bank of Ireland determination or a court ruling has been made under the Investor Compensation Act 1998;

The Investor Compensation Company DAC (ICCL) administers the scheme. IBIE will be a member of the scheme.

The scheme covers investment products including:

  • Public and private company shares
  • Units in collective investment schemes
  • Life insurance policies (including unit-linked funds)
  • Non-life insurance policies
  • Tracker bonds
  • Futures and options

Usually, you can only make a claim after a firm goes out of business and its assets have been liquidated and distributed to those who are owed money. Please check the details of the schemes for any limits that apply – not all losses will be covered as there are maximum levels of compensation. The ICCL will pay you compensation for 90% of the amount you have lost, up to a maximum of €20,000.

5. How do I make a complaint to IBIE? Are there any material differences that will apply to my relationship with IBIE compared to those that apply to my existing relationship with IBUK? What if my complaint relates to something that happened while I was a customer of IBUK?

The new Customer Agreement sets out how to lodge a complaint with IBIE. The complaints handling procedures are materially similar to those that apply to your existing relationship with IBUK. If the substance of your complaint relates to something that happened prior to the Proposed Transfer, then you should address your complaint to IBUK. IBUK will remain authorised as an investment firm post-Brexit. Its current contact information will stay the same should you need to contact IBUK.

6. After the Proposed Transfer, will I still have access to the Financial Ombudsman Service?

In case of complaint, investors should follow the complaints procedure as referred to in the Customer Agreement. As explained in the Original FAQs, once the Proposed Transfer has taken place, the UK Financial Ombudsman Service will cease to have jurisdiction over any complaints that you may have in respect of IBUK. However, please be aware that Ireland has a dispute resolution scheme in the form of the Financial Services and Pensions Ombudsman (“FSPO”) The FSPO is a free and independent statutory dispute resolution scheme for financial services. You may be eligible to make a complaint to the FSPO if you are an “eligible complainant”. Details of who are “eligible complainants” can be found on www.fspo.ie. The FSPO can be contacted at:

Postal Address

Financial Services and Pensions Ombudsman

Lincoln House,

Lincoln Place

Dublin 2

D02 VH29

Telephone

+353 (0)1 567 7000

Email

Info@fspo.ie

7. How will my personal data be processed and protected? Are there any material differences that will apply to my relationship with IBIE compared to those that apply to my existing relationship with IBUK in this context?

Please see the Original FAQs for further information. In summary there will be no material change.

 

PART C – OTHER PRACTICAL QUESTIONS AND NEXT STEPS

1. Who should I contact before the Proposed Transfer takes place and after the Proposed Transfer if I have any questions in the ordinary course?

Generally speaking, you should contact IBUK with any questions that you may have prior to the Proposed Transfer, and you should contact IBIE with any questions that you may have following the Proposed Transfer taking place. Regardless of who you contact at Interactive Brokers, we will ensure your query is promptly dealt with and we will help you to connect with the right person or department.

2. Will the range of products offered be the same?

Our current expectation is that the same range of products will be offered by IBIE as are offered by IBUK.

There might be a restriction on Foreign Exchange transactions that would create a negative balance or would increase a preexisting negative balance in either component currency (i.e., "Leveraged Forex"). However, the same currency pairs can be traded as a Forex CFD. Contracts For Difference are complex instruments, and we invite you to carefully review the CFD risk warnings before trading these instruments following the transfer of your account.

Please note that IBIE offers financing for securities and commodities trades but cannot support withdrawals of borrowed funds. You will be free to withdraw any free cash not needed to support your open positions. If you would like to withdraw additional funds, you can sell positions and withdraw the proceeds.

3. I currently trade OTC derivatives with IBUK – what will happen to my open positions?

Your open positions will be transferred to IBIE and you will face IBIE rather than IBUK. You will no longer have any legal relationship with IBUK in relation to those positions. We will separately provide you with an updated Key Investor Information Document (please follow the link to the PRIIPs KID landing page in the Covering Letter).

4. What happens to any security I have granted to IBUK/IBLLC as part of a margin loan?

If you have granted security or collateral to IBUK/IBLLC this will transfer to the new Irish entity – IBIE - upon the Proposed Transfer taking place.

We do not anticipate you needing to take any steps to reflect the change in beneficiary, although we may need to take some administrative steps of our own to update security registers with the change in details. This should, however, not affect our priority or otherwise affect the date from which the security is valid.

5. Will I have access to the same trading platform or be subject to any software changes following migrations?

The migration will have no impact upon the software you use to trade or administer your account. The technology will remain the same as it is today.

6. Will all account balances be transferred at the same time?

All balances, with the exception of accruals (e.g., interest, dividends) will be transferred at the same time. Once accruals have been posted to cash, they will automatically be swept to the migrated account. 

7. What will happen to my current account following migration?

Once all accruals have been  swept, your current account will be closed and inaccessible for trading purposes. You will still be able to access this closed account via the Client Portal for purposes of viewing and printing archived activity and tax statements.

8. Will IBKR’s commissions and fees change when my account is migrated?

No. IBKR commissions and fees do not vary by the broker your account is maintained with.

9. Will my trading permissions change when my account is migrated?

Subject to the Leveraged Forex limitation discussed in (2) above, we do not expect any changes to your trading permissions when your account is migrated.

10. Will open orders (e.g., Good-til-Canceled) be carried over when my account is migrated?

Open orders will be not carried over to the new account and we recommend that clients review their orders immediately following the migration to ensure that the open orders are consistent with their trading intentions.

11. Will I be subject to the U.S. Pattern Day Trading Rule once my account is migrated?

Accounts maintained with IBUK are subject to the U.S. Pattern Day Trading (PDT) rule as the accounts are introduced to and carried by IBLLC, a U.S. broker. The PDT rules restricts accounts with equity below USD 25,000 to no more than 3 Day Trades within any 5-business day period.

As accounts migrated to IBIE will not be introduced to IBLLC, they will not be subject to the PDT rule.

12. Will I receive a single, combined annual activity statement at year end?

No. You will receive an annual statement of your existing account which will cover the period starting January 1, 2020 through the date of migration and a second annual statement for your new account which will cover the period starting from the migration date through the end of the year.

13. Will the current cost basis of positions be carried over when my account is migrated?

Yes, this migration will have no impact upon the cost basis of your positions.

14. Will the migrated account retain the same configuration as the current account?

The configuration of the account following migration will match that of the current account to the extent permissible by regulation. This includes attributes such as margin capability, market data, additional users, and alerts. In limited instances, an account will be migrated to a jurisdiction where the full scope of product eligibility cannot be offered. Client’s holding restricted products may migrate and maintain or close such positions but won’t be allowed to increase the position.

15. Will my login credentials change?

No. Your username, password, and any 2-factor authentication process in place for your existing account will remain active following migration. You will, however, be assigned a new account ID for your migrated account.

 

FAQS: IBLUX Brexit Account Migration

Overview: 

This is an important document regarding the proposed transfer of your account from IBUK and IBLLC to IBLUX that requires your attention. Please read the entirety of this document ahead of taking any action referred to in the Covering Letter sent to you via email.

Background: 

Please take time to read this article, which summarises some of the key changes to the regulatory framework brought about by the Proposed Transfer (as described below) and provides answers to some more general questions you may have. It should be read in conjunction with the Covering Letter sent to you via email and to which it was linked. If you require any further information, please get in touch with us using the contact details provided in that Covering Letter. This article supersedes the one previously made available to you titled “FAQs: Brexit Account Migration” (“Original FAQs”) as it reflects new information and we ask that you read it carefully. To the extent there is any inconsistency between this article and the Original FAQs, please rely on the information contained in this article.

Discussion:

This Information Leaflet is split into three parts.

  • Part A sets outs key information in relation to our proposal to transfer your business.
  • Part B covers key legal and regulatory topics that arise as a result of the arrangements covered in Part A.
  • Part C aims to answer any other questions you may have and provide some further and more practical information in relation to what will and will not be changing following the Proposed Transfer.

 PART A – THE PROPOSED TRANSFER

1. What is the situation currently and why do things have to change?

As you would be aware, at present, your relationship with Interactive Brokers is led by our entity based in the United Kingdom, specifically Interactive Brokers (U.K.) Limited (“IBUK”) and the services provided to you are provided by IBUK and, depending on the products you do business in, our US affiliate Interactive Brokers LLC (“IBLLC”). At present IBUK utilises what is known as a financial services passport to be able to perform its part of the service provision across continental Europe. Our working assumption is that following the end of the Brexit transitional period later this year, IBUK will lose the ability to do so and that from 1 January 2021 Interactive Brokers will need to make some changes in relation to which legal entity does business with you. 

2. What are the “changes” envisaged above?

We have established a new Interactive Brokers legal entity in Luxembourg, specifically, Interactive Brokers Luxembourg SARL (“IBLUX”). The proposal is to transfer the business that you currently conduct with IBUK and IBLLC to IBLUX. In other words, it is our intention that all of your accounts, investments and services currently provided by IBUK and IBLLC will instead be singularly provided by IBLUX (for convenience we will refer to this as the “Proposed Transfer”). 

3. When will the Proposed Transfer occur?

We will write to you again ahead of the Proposed Transfer.

4. Who is IBLUX? What sort of a firm is it?

IBLUX was granted authorisation by the Luxembourg Financial Sector Supervisory Commission (Commission de Surveillance du Secteur Financier, CSSF) to operate as an investment firm in November 2019. IBLUX’s regulatory status and profile is very similar to IBUK’s. This is because both IBLUX and IBUK are authorised pursuant to the second Markets in Financial Instruments Directive. This is an EU-wide piece of legislation whose purpose is to, as much as possible, harmonise how investment firms are regulated. 

This does not mean there are not some differences between the regulations that apply to your relationship at present and those that will apply once your account is transferred. We explain these in more detail in Part B of this article. 

5. What are IBLUX’s legal details?

Interactive Brokers Luxembourg SARL is registered as a private company limited by shares (société à responsabilité limitée)  (registration number B229091) in the register of companies for Luxembourg. Its registered address is 4, rue Robert Stümper, L - 2557 Luxembourg. We are still finalising IBLUX’s day-to-day contact details and will be in touch with these in due course.   

6. Who will regulate IBLUX and what are their contact details?

The Luxembourg Financial Sector Supervisory Commission (CSSF) is the competent regulator for IBLUX (in the same way that the Financial Conduct Authority is the competent regulator for IBUK). The Luxembourg Financial Sector Supervisory Commission’s (CSSF) contact details are set out below:

Location

Commission de Surveillance du Secteur Financier

283, route d’ArlonL-1150

Luxembourg 

Postal Address

Commission de Surveillance du Secteur Financier

L-2991 Luxembourg

 

7. Where does IBLUX fit with respect to the broader Interactive Brokers group?

IBLUX is a wholly-owned subsidiary that sits within the broader Interactive Brokers Group.

8. What does the Proposed Transfer mean for me? Will there be any material impacts?

We do not anticipate any material impacts. Nonetheless, it is very important you read this article and make sure you understand what the changes are.

9. What do I have to do if I want to continue doing business with Interactive Brokers?

If you would like to continue to do business with Interactive Brokers we require your cooperation and action.

Specifically, we need you to consent and agree to the Customer Agreement and other Documents attached to the Covering Letter and to the regulatory matters outlined in the Covering Letter. You can do this by following the instructions in the Covering Letter.

To be clear, you do not have to consent to the Proposed Transfer if you feel you may be adversely affected by it. However, you should be aware that if you decide to decline, IBUK will likely not be able to keep servicing your account at the end of the Brexit transition period. If that happens, your account will be put in liquidation and we will ask you to transfer your assets to another broker. If you wish to decline, please follow the instructions in the Covering Letter.

In either case, we ask that you read the entirety of this Information Leaflet and the Covering Letter before deciding to consent to or decline to the Proposed Transfer.

10. What happens next?

If you consent to the transfer, please complete all actions detailed in the Covering Letter and we will prepare your account for the Proposed Transfer. Following the Proposed Transfer, IBLUX will write to you with further information about your new relationship with them.

 

PART B – LEGAL AND REGULATORY CHANGES THAT YOU SHOULD BE AWARE OF

1. What terms and conditions will govern your relationship following the Proposed Transfer? Are these different to the ones that currently apply?

Trades that you conduct after the Proposed Transfer will be governed by the new Customer Agreement between you and IBLUX. A copy of the new Customer Agreement will be presented to you online when you are provided with an opportunity to consent. Please see question A3 above in relation to the timing for the Proposed Transfer.

2. What conduct of business rules (including best execution) will apply to my relationship with IBLUX? Are there any material differences that apply to my relationship with IBLUX when compared to my existing relationship led by IBUK in this context?

There are some changes to be aware of, which we explain below.

If you do business with IBUK on a “carried” basis (in other words, you trade index options, futures and futures options and IBUK carries your account and custodies your assets) then the Financial Conduct Authority’s conduct of business rules currently apply to you. These rules are based heavily on the recast Markets in Financial Instruments Directive, the Markets in Financial Regulation and various delegated directives and regulation (collectively “MiFID”). In relation to best execution, where it applies, IBUK must take all sufficient steps to achieve the best possible result for you when we execute your order.

If you currently do business with IBUK on an “introduced” basis (in other words, you trade products outside of those mentioned in the previous paragraph and you have a relationship with both IBUK and its US affiliate, IBLLC) a mix of conduct of business rules currently apply to you. For instance, with respect to the introduction of your business to IBLLC, the Financial Conduct Authority’s conduct of business rules apply (see above in relation to these). Once introduced to IBLLC, the relevant U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission rules and regulations (among others) apply to IBLLC’s role (including its obligations in relation to best execution and custody).

Note more generally that it is of course possible that your business is split across these two scenarios (in other words, some of your business is conducted on a “carried” basis while some of it is conducted on an “introduced” basis).

Going forward, the distinction between “carried” and “introduced” business will no longer apply and in each case set out above, Luxembourg conduct of business rules will exclusively apply to your relationship with IBLUX. Like the UK Financial Conduct Authority’s rules, these are based heavily on MiFID and IBLUX’s obligations in relation to best execution mirror those that currently apply to IBUK.

In our view, while the rules that apply to our relationship will change, we do not consider such changes to be material or to result in a lesser degree of protection being afforded to you.

3. How will my investments that I custody with IBLUX be held from a legal/regulatory perspective? Are there any material differences that apply to my relationship with IBLUX when compared to my existing relationship led by IBUK in this context?

The rules that currently apply depends on the sort of business you presently have with IBUK (see B2 above). Where you conduct “carried” business with IBUK the, Financial Conduct Authority’s client asset (or “CASS”) rules will apply. These are based heavily on MiFID. Where you conduct “introduced” business with IBUK and IBLLC, the US custody rules will apply to your custody assets.

Going forward, as set out above, the distinction between “carried” and “introduced” business will no longer apply and in each case set out above, Luxembourg custody rules will exclusively apply to your relationship with IBLUX. Like the UK Financial Conduct Authority’s rules, these are based heavily on MiFID.

4. How am I protected against loss? Are there any material differences that apply to my relationship with IBLUX when compared to my existing relationship led by IBUK in this context?

Currently your eligible assets are protected from loss either under the US Securities Investor Protection Corporation or the UK Financial Services Compensation Scheme (which regime applies depends on the relevant segment of your IBUK account, as explained above in B2). After the Proposed Transfer, the Luxembourg Investor Compensation Scheme (Système d’indemnisation des investisseurs, SIIL) will protect your assets from loss should IBLUX default and be unable to meet its obligations to you.

Luxembourg’s compensation scheme is similar to the compensation scheme you have access to in the UK, albeit with a lower limit. The purpose of the Luxembourg Investor Compensation Scheme (Système d’indemnisation des investisseurs, SIIL) is to pay compensation to you (subject to certain limits) if you have invested money or investment instruments in either of the following cases:

  • An authorised firm that the CSSF has decided is not in a position to repay investors/meet its obligations, or
  • A court ruling prevents the firm from returning your investment.

The scheme is operated by the Luxembourg financial markets authority (Commission de Surveillance du Secteur Financier, CSSF) and managed by the Council of protection of depositors and investors (Conseil de protection des déposants et des investisseurs, CPDI). If a member firm of the scheme goes out of business and cannot return your money or investment instruments, you may be able to claim compensation from the scheme.

IBLUX is a member of the scheme.

The scheme covers investment products including:

  • Public and private company shares
  • Units in collective investment schemes
  • Tracker bonds
  • Futures and options

Usually you can only make a claim after a firm goes out of business and its assets have been liquidated and distributed to those who are owed money. Check the details of the schemes for any limits that apply – not all losses will be covered as there are maximum levels of compensation. The Luxembourg Investor Compensation Scheme (Système d’indemnisation des investisseurs, SIIL) will pay you compensation for the amount you have lost, up to a maximum of €20,000.

5. How do I make a complaint to IBLUX? Are there any material differences that apply to my relationship with IBLUX when compared to my existing relationship led by IBUK in this context? What if my complaint relates to something that happened while I was a customer of IBUK?

The new Customer Agreement sets out how to lodge a complaint with IBLUX. The procedures are materially similar to those that apply to your existing relationship with IBUK. If the substance of your complaint relates to something that happened prior to the Proposed Transfer, then you should address your complain to IBUK. IBUK will remain authorised as an investment firm post-Brexit. Its current contact information will stay the same should you need to contact IBUK.

6. Will I still have access to the Financial Ombudsman?

In case of a complaint, investors should follow the complaints procedure as referred to in the Customer Agreement. Once the Proposed Transfer has taken place, the UK Financial Ombudsman Service will cease to have jurisdiction over any complaints.

7. How will my personal data be processed and protected? Are there any material differences that apply to my relationship with IBLUX when compared to my existing relationship led by IBUK in this context?

There will be no material change.

 

PART C – OTHER PRACTICAL QUESTIONS AND NEXT STEPS

 

1. Who should I contact before the Proposed Transfer takes place and after the Proposed Transfer if I have any questions in the ordinary course?

Generally speaking, you should contact IBUK with any questions prior to the Proposed Transfer and you should contact IBLUX with any questions following the Proposed Transfer. Regardless of who you contact at Interactive Brokers, we will ensure your query is promptly dealt with and will help you to connect to the right person or department.

2. Will the range of products and services offered be the same?

Our current expectation is that the majority of products that can be traded in the IBUK account will be offered by IBLUX. However, there are some limitations.  However, IBLUX will not offer the ability to transact leveraged foreign exchange or to adhere to the Stock Yield Enhancement Programme that is currently available to you. Clients that are residents of Luxembourg will also be restricted from trading Bonds.

Please note that IBLUX offers financing for securities and commodities trades but cannot support withdrawals of borrowed funds. You will be free to withdraw any free cash not needed to support your open positions. If you would like to withdraw additional funds, you can sell positions and withdraw the proceeds

To the extent you are impacted by this, we will separately get in touch with you.

3. I currently trade OTC derivatives with IBUK – what will happen to my open positions?

Your open positions will be transferred to IBLUX and your position will face IBLUX rather than IBUK. You will no longer have any legal relationship with IBUK in relation to those positions.

We will separately provide to you an updated  Key Information Document (please follow the link to the PRIIPs KID landing page in the Covering Letter).

4. What happens to any security I have granted IBUK as part of a margin loan?

If you have granted security or collateral to IBUK/IBLLC, it will transfer to IBLUX upon the Proposed Transfer. We do not anticipate you needing to take any steps to reflect the change in beneficiary, although we may need to take some administrative steps of our own to update security registers with the change in details. This should, however, not affect our priority or otherwise affect the date from which the security is valid.

5. Will I have access to the same trading platform or be subject to any software changes following migration?

The migration will have no impact upon the software you use to trade or administer your account. The technology will remain the same as it is today.

6. Will all account balances be transferred at the same time? What will happen to my current account following migration?

All balances, with the exception of accruals (e.g., interest, dividends) will be transferred at the same time. Once accruals have been posted to cash, they will automatically be swept to the migrated account

7. What will happen to my current account following migration?

Once all accruals have been  swept, your current account will be closed and inaccessible for trading purposes. You will still be able to access this closed account via the Client Portal for purposes of viewing and printing archived activity and tax statements.

8. Will IBKR’s commissions and fees change when my account is migrated?

No. IBKR commissions and fees do not vary by the broker your account is maintained with.

9. Will my trading permissions change when my account is migrated?

Following migration, you will be restricted from engaging in leveraged forex transactions.

10. Will open orders (e.g., Good-til-Canceled) be carried over when my account is migrated?

Open orders will not be carried over to the new account, and we recommend that clients review their orders immediately following the migration to ensure that the open orders are consistent with their trading intentions.

11. Will I be subject to the U.S. Pattern Day Trading Rule once my account is migrated?

Accounts maintained with IBUK are subject to the U.S. Pattern Day Trading (PDT) rule as the accounts are introduced to and carried by IBLLC, a U.S. broker. The PDT rule restricts accounts with equity below USD 25,000 to no more than 3 Day Trades within any 5-business day period.
 
As accounts migrated to IBLUX will not be introduced to IBLLC, they will not be subject to the PDT rule.

12. Will I receive a single, combined annual activity statement at year end?

No. You will receive an annual statement for your existing account which will cover the period starting January 1, 2020 through the date of migration and a second annual statement for your new account which will cover the period starting from the migration date through December 31, 2020.

13. Will the current cost basis of positions be carried over when my account is migrated?

Yes, this migration will have no impact upon the cost basis of your positions.

14. Will the migrated account retain the same configuration as the current account?

The configuration of the account following migration will match that of the current account to the extent permissible by regulation. This includes attributes such as margin capability, market data, additional users and alerts.  In limited instances, an account will be migrated to a jurisdiction where the full scope of product eligibility cannot be offered. Client’s holding restricted products may migrate and maintain or close such positions but won’t be allowed to increase the position. 

15. Will my login credentials change? 
A: No. Your user name, password and any 2-factor authentication process in place for your existing account will remain active following migration. You will, however, be assigned a new account ID for your migrated account.

 

EDD Requests for Information (RFI)

Overview: 

These FAQs are meant to serve as guidelines for answering customer questions with regard to recent communications that have been sent to a large number of IBKR account holders, requesting specific information. If there are further questions not addressed in this guide, please contact the EDD department.

FOR ALL ACCOUNTS:
 
Is this a legitimate email?
Yes; IBKR recently sent out communications to customers requesting that customers update specific data and documentation.
 
Why has the customer received this notification?
IBKR is conducting a routine review of our clients for the purpose of ensuring that we maintain accurate and up to date information and conduct due diligence on clients from places or of type that present heightened AML risk. As a regulated financial institution, we are required to “know our customers”, and this is part of that effort.
 
Is updating this information required?
Yes; all customers who have received a notification are required to provide the requested information.
 
What is Source of Wealth?
Source of Wealth means any way in which the customer has derived their wealth. Examples include employment income, business income, property sale, inheritance, etc. A client’s sources of wealth should add up to 100%.
 
What documents are acceptable to prove Source of Wealth?
The documents we provided include a list of what you can submit to confirm your source of wealth. Each source of wealth must be accompanied by supporting documentation (e.g., a bank statement for employment income, a bill of sale for property sale, etc.).
 
FOR ORG ACCOUNTS:
 
Why is beneficial ownership information required?
Under US regulations, we are required to collect information about an organization’s beneficial ownership. It is also part of our obligation to “know our customers.”
 
What is a beneficial owner? How is that different from a regular owner?
A beneficial owner refers to the actual people who ultimately own the entity. This differs from regular owners, who could be a combination of other businesses, trusts, custodians, etc. Under relevant regulations, we require any entity that is an account holder to identify any natural person who owns 10% or more of the entity. We then need to verify those peoples’ identities through identification verification documents and confirm their sources of wealth.
 
Do I need to complete the Ultimate Beneficial Owner form if I indicated on the Certification of Beneficial Owners form that there are no 10%+ owners ?
No – you do not have to complete the Ultimate Beneficial Owner form if you have certified there are no 10%+ owners. 
 
FOR CAFFIS, IBROKERS, COLLECTIVE INVESTMENT VEHICLES, AND HEDGE FUNDS:
 
What is a Wolfsberg Questionnaire?
The Wolfsberg Questionnaire is an Anti-Money Laundering (AML) Questionnaire designed by the Wolfsberg Group, which aims to provide a standardized overview of a financial institution's AML policies and practices.
 
*The form must be completed in its entirety and dated within the last 12 months.*
 
Why do I need to provide one?
The questionnaire is to help ensure that we know the organization implemented certain standards and practices associated with preventing money laundering, terrorist financing, and other financial crimes.
 
Note: If the business is a hedge fund, we are seeking a completed Wolfsberg Q from their fund manager/investment advisor.
 
Is there a link to the Wolfsberg Questionnaire form?
Yes, the blank form is available to download in Account Management – please review the document task. 
 
You can also download the form here: 
 
I am being asked to submit documentation regarding Fund Status. What documentation do I need to submit?
Please provide a proof of existence document for the fund, and proof of regulatory status for the fund manager and the fund administrator.
 
FOR FOREIGN BANKS:
 
Why do I need to provide a Foreign Bank Certification?
Under the USA Patriot Act, any foreign bank that maintains a correspondent relationship with any US-based bank or broker/dealer must provide a foreign bank certification. 
 
*The form must be completed in its entirety and dated within the last 36 months.*
 
What is the purpose of a Foreign Bank Certification?
The purpose of the foreign bank certification is to help ensure that the bank is complying with all required US regulations with regards to money laundering, terrorist financing, and other financial crimes.

 

Shareholders Rights Directive II

On 3 September 2020, a new European Directive, the Shareholders Rights Directive II ("SRD II"), will enter into force introducing important regulatory changes for intermediaries. SRD II aims to encourage long-term shareholder engagement in European shares by introducing new requirements, including:

  • Obligations for all intermediaries in the chain of custody to provide shareholders information to issuers on demand and no later than the business day immediately following the date of receipt of the request;
  • Requirements for intermediaries to make available meeting announcements or any other information which an issuer is required to provide to shareholders to enable a shareholder to exercise its rights
  • Requirements for intermediaries to facilitate the ability of shareholders to participate in meetings by passing on a shareholder's participation instructions (for example a vote or request to attend the meeting), without delay.

Note that the Directive applies to any intermediary, whether based in the EEA or not. Accordingly, IBKR may in the future forward any request to provide shareholders information that IBKR may receive from issuers (or other appointed entities) whose share is owned through the IBKR accounts of an intermediary or their clients.

Upon receipt of these requests, intermediaries will be required to provide shareholders information directly to the issuers no later than the business day immediately following the date of receipt of the request.

Information to Disclose

  • Full name;
  • Contact details (address, email address);
  • Unique identifiers;
  • Number of shares held;
  • Category/classes of shares held (Only if explicitly requested);
  • Dates from which the shares are held (Only if explicitly requested);
  • Depository location;
  • Vote-eligible shares.

Requests Thresholds

Member states can establish that the right of the issuer to obtain the shareholders information is only effective with regard to holding of a minimum percentage of voting rights, which where set cannot exceed 0.5%.

Requests Handling

IBKR will send these requests in a standardised electronic format. Shareholders information shall be provided directly to the issuer (or other third party entity appointed) in the format prescribed by SRD II. We recommend that intermediaries review the Commission Implementing Regulation (EU) 2018 1212, which details the regulatory formats.

IBKR has appointed a third party provider, Mediant, to facilitate the requests handling. To use their services, they can be contacted directly at SRDTabulations@mediantonline.com.

Alternatively, intermediaries should ensure that they have alternative ways to reply to these requests for information after 3 September 2020.

SFTR: Reporting to Trade Repository Obligations and Interactive Brokers Delegated Service to help meet your obligations

Background: Securities Financing Transactions Regulation (“SFTR”) is a European regulation aimed at mitigating the risk of shadow banking. SFT's have been identified as being one of the central causes of the financial crisis and during and post crisis, regulators have struggled with anticipating the risks associated with securities financing. This led to the introduction of a reporting requirement for these SFTs.

Transactions that are reportable under SFTR: Repurchase agreements (repos), stock loans, margin loans, sell/buy-back transactions and collateral management transactions.

Whom do SFTR reporting obligations apply to: Reporting obligations normally apply to all clients established in the EU with the exception of natural persons. They apply to:

  • Financial counterparties ("FC"): include investment firms, credit institutions, insurance and reinsurance undertakings, UCITS and UCITS management companies, Alternative Investment Fund managed by an AIFM authorised under the Alternative Investment Fund Managers Directive ("AIFMD"), institutions for occupational retirement provision, central counterparties and central securities depositories.
  • Non-Financial Counterparty ("NFC"): Undertakings established in the Union or in a third country that do not fall under the definition of financial counterparty.
  • Small Non- Financial Counterparty ("NFC-"): A small non-financial counterparty is one which does not exceed the limits of at least two of three criteria: a balance sheet total of EUR 20m, net turnover of EUR 40m, and average number of 250 employees during the financial year. Under SFTR, small NFC's reporting obligations are automatically delegated to the financial counterparty with which they execute an SFT.

What must be reported?
The types of SFTs in scope of the requirements include:

Transaction level reporting:

  • Securities and commodities lending / borrowing transactions
  • Buy-sell backs / sell-buy backs
  • Repo transactions

Position Level reporting:

  • Margin lending

In-scope entities will be required to report details of an SFT which is in scope if that SFT:

  • is concluded after the date on which the Regulatory Technical Standards apply to the entity
  • has a remaining maturity of over 180 days on the date on which the RTS apply to the entity
  • is an open / rolling transaction that has been outstanding for more than 180 days on the date on which the RTS apply to the entity

When must it be reported?
SFTR is a two-sided reporting requirement, with both collateral provider (borrower) and collateral receiver (lender) required to report their side of the SFT to an approved Trade Repository on trade date +1 (T+1).

All new SFTs, modifications of open SFT’s and terminations of existing SFTs must be reported daily. Collateral is reported on T+1 or value date +1 (S+1) dependent on the method of collateralisation used.

What do reports include?
Reporting will be done using a combination of 153 fields, depending on product and report type.

  • 18 counterparty data fields - which includes information about the counterparty such as LEI and country of legal residence.
  • 99 Transaction fields – which includes the loan and collateral data information on the type of SFT which has been involved in the transaction
  • 20 Margin fields – which includes information on margin such as the portfolio code and currency.
  • 18 Reuse fields – which includes cash reinvestment and funding source data

What must match between reports?
The SFTR reporting format includes 153 reportable fields, some of which must match between reports of the two counterparties. There will be two phases of the trade repositories’ reconciliation process, with the first phase consisting of 62 matching fields which are required for the initial SFTR implementation. A second phase, starting 2 years after the start of the reporting obligation, will contain another 34 fields which are required to match, bringing the total number of matching fields to 96.

In this context, it is particularly important that the globally unique transaction identifier - a UTI, be used and shared between the parties to the trade. The parties should agree who is to generate the UTI. If no such agreement is in place, the regulation describes a waterfall model for who would be the generating party. The generating party is obligated to share the UTI with the counterpart in an electronic format in a timely manner for both parties to be able to fulfil their T+1 reporting obligation.

INTERACTIVE BROKERS DELEGATED REPORTING SERVICE TO HELP MEET YOUR REPORTING OBLIGATIONS

FCs, NFCs and NFC-s must report details of their transactions to authorised Trade Repositories. This obligation can be discharged directly through a Trade Repository, or by delegating the operational aspects of reporting to the counterparty or a third party (who submits reports on their behalf).

As mentioned above, when executing an SFT with an FC, an NFC- does not have to submit relevant reports, as these are submitted by the FC on the NFC-‘s behalf.
However, NFC-s who do not execute SFTs with an FC are required to submit reports.
Depending on the different setups available, Interactive Brokers clients’ may not be executing an SFT with an FC, and therefore Interactive Brokers offers a delegated reporting service, to ensure its clients can report all SFTs they execute.

As mentioned above, SFTR reports submitted by the two counterparties of an SFT must contain the same UTI. To ensure this requirement is satisfied, Interactive Brokers suggests that all of its clients in scope delegate reporting to Interactive Brokers.
Interactive Brokers will take care of generating matching UTIs when submitting its own reports and those of its clients on whose behalf it submits reports.

Validating Explicit Permissions - The European Securities and Markets Authority (ESMA) have introduced a mandate whereby trade repositories need to confirm a delegated reporting agreement is in place between the two parties before accepting and sending on any reports to the regulator. Due to this, the Trade Repository that Interactive Brokers works with - UnaVista, has introduced a process to collect this information. As a client of Interactive Brokers, if you opt for delegated reporting, this mandate will apply.

UnaVista will collect this information by sending clients an email asking for confirmation from the client that they have delegated their SFTR reporting to Interactive Brokers. – This will be a one-time process for each client. Once confirmed, UnaVista will accept the reports and send them onto the regulator.

Securities Financing Transactions: Currently, Interactive Brokers clients can execute two types of SFTs: margin lending and stock loans. SFTR also requires reporting information on funding sources and collateral reuse.

Trade repository Interactive Brokers use: Interactive Brokers (U.K.) Limited will use the services of Unavista Trade Repository which is part of the London Stock Exchange Group PLC ("LSEG"), based in the United Kingdom.

Timetable to report to Trade repositories: The reporting start date is 13 July 2020:
July 2020: Report Phase 1 – July 13 2020 reporting go-live for banks, investment firms & Credit Institutions and CCPs & CSDs
Oct 2020: Report Phase 2 - Insurance, UCITS, AIF & Pensions
Jan 2021: Report phase 3 - Reporting go-live for Non-Financial Companies

THIS INFORMATION IS GUIDANCE FOR INTERACTIVE BROKERS CLEARED CUSTOMERS ONLY.
NOTE: THE INFORMATION ABOVE IS NOT INTENDED TO BE A COMPREHENSIVE OR EXHAUSTIVE NOR A DEFINITIVE INTERPRETATION OF THE REGULATION, BUT A SUMMARY OF ESMA'S SFTR REGULATION AND RESULTING TRADE REPOSITORY REPORTING OBLIGATIONS

IBKR Australia Short Position Reporting

Introduction

You can request IBKR Australia perform your Australian short position reporting obligations on your behalf.

What is a short position?

A short position arises where the quantity of an eligible product that you hold is less than the quantity of the eligible product that you have an obligation to deliver, such as when you engaged in short selling an ASX-listed security and borrowed securities from IBKR to cover your delivery obligation.

When do I have a reporting obligation?

Short sellers have an obligation to report certain short positions to the Australian Securities & Investments Commission (ASIC). Reporting on short positions that are below the thresholds set by ASIC is optional. A short position does not need to be reported to ASIC when:

  • The value of the position is AUD 100,000 or less; and
  • The position is 0.01% or less of the total quantity of securities or products on issue for that security or product.

Otherwise, the short position must be reported.

The following table provides a convenient summary of when a short position must be reported (“Reportable Short Position”):

What you need to know about short position reporting:

It is important that any clients trading or wishing to trade eligible products understand that they may have an obligation to report their Reportable Short Positions to ASIC daily.

This obligation applies to any short sellers with a Reportable Short Position under the rules whether inside or outside of Australia. By default, IBKR Australia does not report Reportable Short Positions on your behalf, so you must arrange for the reporting of your short positions (if required).

IBKR Australia, along with many third-party firms, can provide this service to you subject to applicable terms and conditions.

If you would like IBKR Australia to perform your short position reporting for eligible products held in your IBKR account, please enrol in the service via Client Portal. Currently, this service is offered at no additional cost to IBKR Australia clients.

Please note:

  • If your account does not allow shorting of securities, there is no need to sign up for this service.
  • IBKR Australia will only offer the option to report all short positions and not only your Reportable Short Positions.

If you enroll in the IBKR short position reporting service:

  • You must not hold any other eligible products with any other bank, broker or custodian because our systems use the positions in your IBKR account to determine whether you have a reportable short position. We cannot accurately calculate your short position if you hold eligible positions elsewhere.
  • You must ensure that the information you provide us is complete and accurate in all respects, as we are required to provide ASIC with certain personal information about you.
  • The obligation to report your short positions is always yours and is not transferred to IBKR under any circumstance (i.e. IBKR does not become responsible for your short position reporting obligations);
  • If, for any reason, we are unable to report your short positions to ASIC before the deadline or at all, we will endeavour to inform you as early as possible so that you can make alternative arrangements. However, we make no warranties that you will receive the notification prior to the reporting deadline.

How do I apply?

To apply, all you need to do is log in to your account via the Client Portal, navigate to the Settings > Account Settings menu, click on the “ASIC Short Position Reporting” icon and follow the prompts.

As part of this process, you will need a unique identifier. For Australian applicants, this can be your ACN or ARBN. For overseas clients this can be your SWIFT BIC. Alternatively, you may register with ASIC to obtain a unique identity code.

Upon electing IBKR Australia to perform this short position reporting obligation on your behalf, you must warrant that the reportable short positions held with IBKR Australia represent your entire portfolio in applicable Reportable Short Positions and acknowledge that IBKR Australia will rely on this representation and warranty in good faith on each occasion that it makes a short position report to ASIC on your behalf.

Where can I get more information?

Clients seeking more information on their short position reporting obligations should refer to the following resources:

  • ASIC Regulatory Guide 196, which contains an overview of the applicable short selling rules and disclosure requirements.
  • ASIC Info Sheet 98, which provides an overview of how to submit short position reports to ASIC via FIX and a list of vendors who may be able to assist you with your short position reporting obligations if you don’t elect to enrol in the IBKR short position reporting service.

 

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