Why am I required to disclose my employment with a financial institution?
FINRA Rule 3210 requires applicants associated with a member firm (Employer Members) to obtain the written consent of the Employer Member prior to opening an account with IBKR (Executing Member). The rule also requires persons to notify IBKR of their association with the Employer Member. IBKR may also be subject to similar non-US regulations.
Applicants employed by or affiliated with another broker or financial institution may be required to submit a document containing the contact information of their employer organization in order for IBKR to provide transaction data to the employer firm upon request. If the applicant is employed with a financial institution and no document is submitted, IBKR may contact the applicant in order to confirm that FINRA Rule 3210 does not apply.
Rule 611 of SEC Regulation NMS
Overview:
Executions in equities will sometimes be listed as R6, which is short for Rule 611 of SEC Regulation NMS. This condition code indicates that the execution(s) in question is not subject to trade-through rules. R6 trades are given an SEC exemption.
Rule 611, which is the Trade Through Exemption of SEC Regulation NMS, is very lengthy to cover in detail. Parties interested in reading the rule in its entirely should type "SEC Rule 611" into an internet search engine. This is the portion of the document that is pertinent to IB traders, in a nutshell:
Typically the trades involved are a multi-component trade involving orders for a security and a related derivative, or, in the alternative, orders for related securities, that are executed at or near the same time. The SIA (Securities Industry Association) notes that the economics of a contingent trade are based on the relationship between the prices of the security and the related derivative or security, and that the execution of one order is contingent upon the execution of the other order.
The bottom line is that when a trade is ruled R6 the SEC has granted a trade-through exemption. This means that these execution reports do not affect the resting orders in-between the market at the time, and the R6 execution. For example, the real market is quoting 10.50 at 10.51, and an execution is reported at 10.90. This execution was given an R6 exemption. A sell limit order at 10.75, an an example, would not be executed because the 10.90 execution was given an R6 status.
I receive a rejection on my futures option orders for DAX which says "No Trading Regulation", why?
U.S. residents are unable to trade options on futures for most foreign indicies, such as the DAX.
Determining SIPC coverage where multiple accounts exist
Multiple accounts maintained in the same name and taxpayer ID number are grouped for purposes of applying the maximum per client protection limits of $500,000 by SIPC and $29.5 million under Lloyd’s supplementary protection. However, if you hold accounts with IBKR in separate capacities (for example, an account in your name, a trust account of which you are the trustee or a beneficiary, or a joint account), then each account would be protected by SIPC and the supplementary protection up to the stated limits.
Links:
How can my employer get set up in order to receive duplicate copies of my trade confirmations and statements?
In order for an employer to be set up so as to received this information, you will need to have them prepare and email to newaccounts@interactivebrokers.com a Rule 407 letter which confirms your employment and which serves as their request to receive duplicate statements and trade confirms. Assuming that your employer is a financial institution which, for in-house compliance purposes and/or as a result of regulatory mandate monitors the trading activities of their employees, they should be familiar with the preparation and contents of this letter.
You may also want to first verify with your employer whether they are a participant in the IBEmployeeTrackSM program which automatically identifies new IB accounts opened by employees and organizes into a single daily transmission the reports required for all.
Note that once established, this reporting cannot be terminated without confirmation from the employer that the delivery of statements and confirms is no longer required.
NOTE:
If this request is being driven by a change in the account holder's employment, the account holder should update their employment information within Account Management. In addition, if the account holder selects the Applicant Information and then Regulatory Information menu options within Account Management they will be presented with the following question:
Is the account holder or any immediate family member who resides in the same household, registered as a broker-dealer or an employee, director or owner of a securities or commodities brokerage firm?
Answering 'Yes' to that question will prompt a series of questions and generate a sample Rule 407 letter.
Overview of Regulation SHO
Regulation SHO, adopted by the SEC in January 2005, sets forth the regulatory framework governing short sales. Two key provisions, intended to address problems associated with persistent fails to deliver and potentially abusive naked short selling, involve locate and close-out requirements.
Under the locate requirement, a broker-dealer must have reasonable grounds to believe that the security can be borrowed so that it can be delivered on the delivery due date before effecting a short sale order.
The close-out requirement requires that the clearing broker take immediate action to close out a fail to deliver position in a threshold security that has persisted for 13 consecutive settlement days by purchasing securities of like kind and quantity. Until the position is closed out, the broker may not effect further short sales in that threshold security without borrowing or entering into a bona fide agreement to borrow the security (known as the "pre-borrowing" requirement)
IMPORTANT NOTE:
In October 2008, the SEC amended Regulation SHO with temporary Rule 204T (in place until July 31, 2009) which requires that any broker having a fail to deliver position at NSCC on the settlement date immediately borrow or purchase securities to close out the amount of the fail to deliver position by no later than the beginning of regular trading hours on the following settlement date (the “Close-Out Date”). This close-out requirement requires that the broker take affirmative action to purchase or borrow securities and not offset the fail to deliver position with shares it will receive on the Close-Out Date. Rule 204T applies to all securities not just threshold securities.
Glossary terms:
Is a US Single Stock Future a security or commodity product?
Overview:
US Single tock Futures (SSF) are a hybrid product, regulated jointly by the SEC and CFTC and allowed to be carried in either a securities account or commodities account. IBKR elects to carry all SSFs in the security side of an account as this is the only way that margin offset can be provided against other security products (i.e., stock, options).
US SSFs are listed at the OneChicago exchange and are cleared through OCC.
