Odd Lot Handling on the Stock Exchange of Hong Kong (“SEHK/HKEX”)

Overview: 

On HKEX, stocks trade via the auto-matching system in units of board lots that are determined by the issuer. Securities trading for a quantity less than one board lot or a fractional multiple of whole board lots are considered odd lots. Only securities trading in multiples of board lots are eligible to be routed to the HKEX automatic order matching engine. Odd lots can only route to a special-order book at HKEX which requires manual order matching. The odd lot book does not follow price or time priority and executions cannot be guaranteed.

How to close out and execute an odd lot?

Odd lots can be entered via the IBKR platform, where they will be routed to the odd lot book at HKEX. If you place an odd lot order greater than a board lot, your order will be rejected. IBKR also offers the ability to call in to our trade desk to close an odd lot position, but orders phoned in to our trade desk will incur a handling fee*.

Can I see the odd lot book?

No, IBKR does not have the ability to supply odd lot book quotations. We can only report executions.

Expected Execution/Market Price

Odd lot sell orders generally execute at prices below the prevailing main auto-matching market on HKEX. To increase the likelihood of a fill, you may consider placing an order several spreads lower than the last price traded on the main board.

Market Orders

Due to the lack of liquidity, IBKR converts any odd lot market orders to limit orders at a price that is through the board lot market with a maximum of (3% or 5 minimum ticks), but no more than 9 ticks from the prevailing bid on the main board auto-matching engine. We will not update the price unless the main board bid trades move through your offer. If that should occur, we will (on a best-efforts basis) update your price a further 3% or 5 minimum ticks lower. For example, assume the main board bid/ask is 4.03 at 4.04, last 4.03. If you send a market order, we will create an order to sell at 3.91 (3%), but it will be capped and adjusted to 3.98 (5 ticks). Should the security trade through to 3.98, we will endeavor to lower your bid another 5 ticks to 3.93.

Price Restrictions

While orders are expected to trade lower than the prevailing market price, both limit orders and market orders we convert to limit orders that are greater than 9 ticks from the market price will be capped to those levels.

Fees

Execution and transaction fees are the same as of trading a board lot*.

 

* For more information, visit our website.

Virtual Asset ETF/ETP Products Offered by IBKR

After considering the relevant regulatory guidance, Interactive Brokers Hong Kong Limited (“IBHK”) will only enable certain Institutional Professional Investors (“IPI”) to trade the Virtual Asset (VA) ETF/ETP products listed below at this time.
 
We will release an enhancement to our trading platform in 2022 that will allow clients who are Professional Investors (“PI”), as defined under the Securities and Futures Ordinance, to request within Client Portal to trade these products. Clients that are Professional Investors (“PI”) and have Complex or Leveraged Exchange Traded Products ("CLP") trading permissions can contact our IBHK office by phone and request the ability to trade VA products.
 
Clients who are not classified as IPI or PI will be restricted from opening positions in these products until further notice.
 
A sample of the Virtual Asset ETF/ETPs restricted by IBHK are listed below. IBHK may add or remove Virtual Asset ETF/ETPs products at any time.
 
  • 21SHARES BITCOIN CASH ETP
  • 21SHARES BITCOIN SINGLE
  • 21SHARES BITCOIN SUISSE ETP
  • 21SHARES CRYPTO BASKET ETP
  • 21SHARES ETHEREUM SINGLE
  • 21SHARES POLKADOT ETP
  • 21SHARES RIPPLE (XRP) ETP
  • 21SHARES SHORT BITCOIN ETP
  • 3IQ COINSHARES BITCOIN ETF
  • ACCELERATE CARBON-NEGATIVE B
  • AMUN CRYPTO BASKET INDEX ETP
  • AMUN BITCOIN CRYPTO SINGLE
  • AMUN ETHEREUM CRYPTO SINGLE
  • AMUN BITCOIN CASH BCH ETP
  • BITCOIN TRACKER ONE
  • BITWISE CRYPTO IND INNOV ETF
  • BLOCKCHAIN TECHNOLOGIES ETF
  • BTCETC BITCOIN ETP
  • CI GALAXY ETHEREUM ETF
  • COINSHARES PHYSICAL BITCOIN
  • COINSHARES PHYSICAL ETHEREUM
  • COINSHARES PHYSICAL LITECOIN
  • FICAS CAPITAL ACTIVE CRYPTO
  • FIDELITY ADVANTAGE BITCOIN
  • FT INDXX INNOOVATIVE TRANS/CA
  • GRAYSCALE BITCOIN CASH TRUST
  • GRAYSCALE BITCOIN TRUST BTC
  • GRAYSCALE DIGITAL LARGE CAP
  • GRAYSCALE ETHEREUM CLASSIC T
  • GRAYSCALE ETHEREUM TRUST
  • GRAYSCALE LITECOIN TRUST
  • GRAYSCALE STELLAR LUMENS TRU
  • GRAYSCALE ZCASH TRUST
  • PROSHARES BITCOIN STRATEGY E
  • PURPOSE BITCOIN ETF
  • VALKYRIE BITCOIN STRATEGY
  • WISDOMTREE BITCOIN
  • XBT PROVIDER ETHEREUM

 

OTC Market (Microcap Stock) – Changes to SEC Rule 15c2-11

INTRODUCTION
 
On September 28, 2021, amendments to Exchange Act Rule 15c2-11 became effective. These regulatory changes prohibit broker-dealers such as IBKR from displaying or submitting quotes (i.e., bids or offers) for securities of issuers that have not met public reporting requirements. The amendments to the Rule effectively eliminate the ability of market makers to quote in OTC securities of issuers that fail to keep certain information current and make that information publicly available. We expect that this will result in a significant reduction in the liquidity of these products. Additionally, certain securities will be reclassified to the OTC “Grey Market” tier. Broker-dealers are prohibited from publishing quotes for Grey Market securities and these securities may become completely illiquid as a result.
 
We provide additional information in the FAQs below.
 
FAQs
 
Q: Why is the SEC mandating these changes?
 
A: The SEC believes that retail investors are the primary participants in the OTC market. While many issuers of quoted OTC securities publicly disclose current information, other issuers publish limited or stale information or do not publish required information at all. The SEC has indicated that a lack of current, publicly available information about these issuers may disadvantage retail investors and the SEC is addressing the issue by eliminating displayed quotes on the affected issuers.
 
Q: How will the amendments to Rule 15c2-11 change the OTC market?
 
A: Effective September 28, 2021, the Rule requires that current information about an issuer be publicly available for a security to become quoted initially and remain quoted on an ongoing basis, subject to certain limited exceptions. Quotations submitted on an “unsolicited” basis will still be permitted under the amended Rule for securities in certain OTC Markets tiers, but insiders and affiliates will be subject to additional limitations discussed below.
 
Q: How are the OTC Markets tiers changing?
 
A: OTC Markets is reclassifying certain issuers in its various market tiers in accordance with the Rule.
  • No change is anticipated for securities that remain classified in the OTCQX, OTCQB, or Pink Current market tiers.
  • Many stocks are being moved to the Pink Limited and Expert Tier and designated by OTC Markets as “unsolicited quotes only.” Clients can close these positions by placing orders online. Opening orders in these positions cannot be accepted online or by phone. 
  • No public quotations are permitted for securities classified in the Grey market tier. 
 
Q: How can I determine if the security I want to trade is "unsolicited quotes only?"
 
A: OTC Markets publishes a daily list of "unsolicited quotes only" stocks at the bottom of their 15c2-11 resource page
 
Q: What if I am holding a security that has been classified to the Grey Market?
 
A:  If you purchased a stock in your IBKR account that becomes “Grey Market” classified, you will be allowed to maintain or transfer the position.  OTC Markets will not publish quotations for securities classified as Grey Market after September 28th and you may be unable either to exit or increase your position online. 
 
Q: How are orders for stocks that are subject to the Rule routed and filled?
 
A: If the order is for a stock designated as “unsolicited quotes only,” the order will not be displayed to the public and will be filled against the best available bid or offer on the market center.  Also, there will be limited liquidity for “unsolicited quotes only” stocks because Interactive Brokers participates in fewer market centers for these stocks.
 
Q: Where can I find relevant information? 
 
A: Please refer to the following links for additional information:
 

FAQs: Securities subject to Special Requirements

We are seeing unprecedented volatility in GME, AMC, BB, EXPR, KOSS and a small number of other U.S. securities that has forced us reduce the leverage previously offered to these securities and, at times, limit trading to risk reducing transactions. Outlined below are a series of FAQs relating to these actions.

 

Q: Are there any current restrictions on my ability to trade GME and the other US securities that have been subject to the recent heightened volatility?

A: IBKR is currently not restricting customers from trading shares of AMC, GME, BB, EXPR, KOSS or the other stocks that have been the subject of extreme market volatility. That includes orders to open new positions or close existing ones.

Like many brokers, IBKR placed limits on opening new positions in certain of these securities for a period of time. Those restrictions have since been lifted.

IBKR has not restricted customers’ ability to close existing positions and does not plan to do so.

 

Q: Can I use margin in trading stocks, options or other derivatives on these products through IBKR?

A: IBKR has increased its margin requirements for securities in GME and the other US securities subject to the recent volatility, including up to 100% margin required for long positions and 300% margin on the short side. You can see these margin requirements in your trading platform prior to submitting an order.

 

Q: Why did IBKR place these restrictions on my ability to open new positions in certain securities?

A: IBKR took these actions for risk management purposes, to protect the firm and its customers from incurring outsized losses due to wild swings in prices in a volatile and unstable marketplace.

IBKR remains concerned about the effect of this unnatural volatility on the clearinghouses, brokers and market participants.

 

Q: Does IBKR or its affiliates have positions in these products that it was protecting by placing these restrictions?

A: No. IBKR itself has no proprietary positions in any of the securities.

 

Q: What allowed IBKR to place those restrictions?

A: Pursuant to its customer agreement, IBKR may decline to accept any customer’s order at IBKR’s discretion.

IBKR also has the right to modify margin requirements for any open or new positions at any time, in its sole discretion. After all, IBKR is the one whose money is being loaned in a margin trade.

 

Q: Did those restrictions apply to all or just some of IBKR’s customers?

A: All restrictions – all limits on opening new positions and margin increases – applied to all IBKR customers. They were placed based on the security, not based on the customer.

 

Q: Is my money at IBKR at risk? Has IBKR suffered material losses?

A: IBKR did not incur substantial losses. Through its prudent risk management, IBKR has navigated this market volatility well. In any event, on a consolidated basis, IBG LLC exceeds $9 billion in equity capital, over $6 billion in excess of regulatory requirements.

 

Q: What will IBKR do going forward? How will I know?

A: IBKR will continue to monitor developments in the market, and will make decisions based on market conditions. For current information, please continue to visit our website.

Disclosure Regarding Interactive Brokers Price Cap Notices

Regulators expect brokerage firms to maintain controls designed to prevent the firm from submitting orders to market centers that create a risk of disruptive trading (e.g., the risk of sudden, transient price moves).

To comply with these expectations, Interactive Brokers implements various price filters on customer orders. Those price filters may, in certain circumstances, price cap customer orders in order to avoid market disruption, and those Price Caps will generally be in a % range from a reference price range calculated by IB. (The range of the Price Cap varies depending on the type of instrument and the current price.)

Although the price caps are intended to balance the objectives of trade certainty and minimized price risk, a trade may be delayed or may not take place as a result of price capping. More information is available in Interactive Broker’s Order Routing and Payment for Order Flow Disclosure.

If a customer’s order(s) are price capped by IB’s systems, that customer will either receive (i) real-time notification of those price cap(s) in Trader Workstation or via the API or FIX tag 58 (for FIX users); and/or (ii) a daily FYI message containing a digest of the first 10 order(s) that were price capped the prior day, the initial price cap(s) for those order(s) (if applicable), and the Price Cap Range(s) for further Price Cap(s) of those order(s). 

Customers may opt out from receiving future FYI Messages by clicking the relevant opt-out link within an FYI Message. By opting out from receiving these future FYI Messages, a customer: 

  • Agrees to waive any further notifications from Interactive Brokers about the application of the firm’s Price Caps to that customer’s order(s); and
  • Acknowledges that he or she understands that his or her orders may be price-capped in the future, but that the customer does not wish to be notified again about the application of any Price Caps to any of his or her orders.

     

Fractional Share Trading

Overview: 

Trading fractional shares allows you to invest in companies which you may not be able to afford the full share price. It also makes it easier for you to diversify your portfolio by allowing you to purchase fractional amounts in multiple companies when you otherwise may have only been able to purchase whole shares in one or two companies.

If you enable your account to trade in fractions, we will buy or sell a fraction of a share based on the amount of cash you specify. For example, if you want to spend $500 but one share of the stock you want to buy is currently $1000 you would end up with 0.5 shares.

Who is eligible for fractional share permissions?

All individual, standalone accounts (except those who reside in Israel, Canadian RRSP/TFSA accounts and Interactive Brokers Securities Japan Inc. ("IBSJ") entity accounts) are eligible for fractional share permissions.

Financial Advisors, Money Managers, and Introducing Brokers may enable their clients on an all-or-none basis.

How do I enable fractional shares?

If you are eligible then you can enable fractional share trading in Client Portal. Click the User menu (head and shoulders icon in the top right corner) followed by Settings. Under Account Settings find the section Trading and click on Trading Permissions. Scroll to "Stocks", click +Add and check the box next to "Global (Trade in Fractions)" and click on SAVE. Then click CONTINUE and follow the prompts on screen. You will then be able to trade in fractions in eligible stocks for which you have permission to trade. To trade fractions of eligible U.S. stocks, you will need to sign up to trade U.S. stocks, and to trade fractions of eligible European stocks, you will need to sign up to trade European stocks.

Please note, TWS Build Version 979 or later is required to trade fractional shares. This feature currently supports most order types.

What products can I trade in fractions?

We offer fractional share trading on eligible U.S. and European stocks and ETFs*.

A list of eligible stocks that can be traded in fractional shares is available via the following link. Please note, this list is subject to change without notice:

http://www.ibkr.com/download/fracshare_stk.csv

*Under EU regulations, EU retail clients generally cannot trade U.S. ETFs, in whole or fractional increments.

Can I short fractional shares?

IBKR does support short sales in fractional shares of eligible stocks as long as you have margin and approved trading permissions to trade fractional shares of stocks listed in the U.S. or in Europe.

What are the fees associated with fractional shares?

There is no additional fee to use fractional share trading. Standard commission rates (both IBKR Lite and IBKR Pro, where applicable) apply.

What order types can I choose for fractional trading?

IBKR will only accept certain types of orders for fractional shares (e.g., market orders, limit orders, stop orders, stop limit orders, etc.). If you choose to place an unmarketable limit order with a fractional share component, the fractional component may not execute until the order becomes marketable (and therefore may not execute at all), even if the order might have executed earlier if submitted for a whole share quantity.

How does IBKR handle fractional shares orders in European stocks?

Depending on the size and nature of the order, IBKR will direct orders in European stocks that include a fractional share component to a pool of execution venues which might be different than those utilized for other order types. You should review the applicable order execution policy for more details.

Can I transfer fractional shares to IBKR?

IBKR does not accept fractional shares through a position transfer.

Are fractional shares eligible for the Dividend Reinvestment Program (DRIP)?

It is not possible to receive fractional shares for a reinvested dividend through the Dividend Reinvestment Program (DRIP) at this time. We hope to offer this in the future.

Please note the above does not apply in the event of mutual fund dividends, which can be re-invested and may result in holding fractional shares of the fund.

Will I receive a fractional share position from a corporate action?

If your account has been approved for trading fractions and a US or European corporate action issues fractional shares, the fractional shares will remain in your account. However, if your account does not have permissions to trade in fractions or the corporate action is issuing non-eligible shares, the fractional shares will be liquidated.

Will I have voting rights for fractional shares in my account?

You will not have voting rights for any of the fractional shares held in your account, you will not be able to make voluntary elections on any corporate action (including, without limitation, any tender offers or rights offerings) with respect to such fractional shares, and we cannot provide you any other shareholder documentation for any holdings of less than one share.

Do I receive dividends on my fractional shares?

Your fractional shares positions are eligible to receive dividends in the same manner as your full positions on the same stocks.

Is fractional trading available for the API?

Fractional trading is not supported via API or FIX/CTCI at this time.
 

PRIIPs Overview

BACKGROUND
In 2018, an EU regulation, intended to protect “Retail” clients by ensuring that they are provided with adequate disclosure when purchasing certain products took effect. This regulation is known as the Packaged Retail and Insurance-based Investment Product Regulation (MiFID II, Directive 2014/65/EU), or PRIIPs, and it covers any investment where the amount payable to the client fluctuates because of exposure to reference values or to the performance of one or more assets not directly purchased by such retail investor. Common examples of such products include options, futures, CFDs, ETFs, ETNs and other structured products.

It’s important to note that a broker cannot allow a Retail client to purchase a product covered by PRIIPs unless the issuer of that product has prepared the required disclosure document for the broker to provide to the client. This disclosure document is referred to as a Key Information Document, or KID, and it contains information such as product description, cost, risk-reward profile and possible performance scenarios. U.S. clients are not impacted by PRIIPs, so the issuers of some of the more popular U.S. listed ETFs often elect not to create a KID. This means that EEA Retail client may not purchase the product.

CLIENT CATEGORISATION
IBKR categorises all individual clients as “Retail” by default as this affords clients the broadest level of protection afforded by MiFID. Client who are categorised as “Professional” do not receive the same level of protection as “Retail” but are not subject to the KIDs requirement. As defined under MiFID II rules, “Professional” clients include regulated entities, large clients and individuals who have asked to be re-categorised as “elective professional clients” and meet the MiFID II requirements based on their knowledge, experience and financial capability.

IB provides an online step-by-step process that allows “Retail” to request that their categorisation be changed to “Professional". The qualifications for re-categorisation along with the steps for requesting that one’s categorisation be considered are outlined in KB3298 or, to directly apply for a change in categorisation, the questionnaire, is available in the Client Portal/Account Management.
 

Clearinghouse Restrictions on Cannabis Securities

Boerse Stuttgart and Clearstream Banking have announced that they will no longer provide services for issues whose main business is connected directly or indirectly to cannabis and other narcotics products.  Consequently, those securities will no longer trade on the Stuttgart (SWB) or Frankfurt (FWB) stock exchanges. Effective as of the 19 September 2018 close, IBKR will take the following actions:

  1. Force close any impacted positions which clients have not acted to close and that are not eligible for transfer to a U.S. listing; and
  2. Force transfer to a U.S. listing any impacted positions which clients have not acted to close and that are eligible for such transfer.

Outlined in the table below are impacted issues as announced by the Boerse Stuttgart and Clearstream Banking  as of 7 August 2018. This table includes a notation as to whether the impacted issue is eligible for transfer to a U.S. listing. Note that the clearinghouses have indicated that this list may not yet be complete and clients are advised to review their respective websites for the most current information.

ISIN NAME EXCHANGE U.S. TRANSFER ELIGIBLE? U.S. SYMBOL
CA00258G1037

ABATTIS BIOCEUTICALS CORP

FWB2 YES

ATTBF

CA05156X1087

AURORA CANNABIS INC

FWB2, SWB2 YES

ACBFF

CA37956B1013

GLOBAL CANNABIS APPLICATIONS

FWB2 YES

FUAPF

US3988451072

GROOVE BOTANICALS INC

FWB YES

GRVE

US45408X3089

INDIA GLOBALIZATION CAPITAL

FWB2, SWB2 YES

ICG

CA4576371062

INMED PHARMACEUTICALS INC

FWB2 YES

IMLFF

CA53224Y1043

LIFESTYLE DELIVERY SYSTEMS I

FWB2, SWB2 YES

LDSYF

CA56575M1086

MARAPHARM VENTURES INC

FWB2, SWB2 YES

MRPHF

CA5768081096

MATICA ENTERPRISES INC

FWB2, SWB2 YES

MQPXF

CA62987D1087

NAMASTE TECHNOLOGIES INC

FWB2, SWB2 YES

NXTTF

CA63902L1004

NATURALLY SPLENDID ENT LTD

FWB2, SWB2 YES

NSPDF

CA88166Y1007

TETRA BIO-PHARMA INC

FWB2 YES

TBPMF

CA92347A1066

VERITAS PHARMA INC

FWB2 YES

VRTHF

CA1377991023

CANNTAB THERAPEUTICS LTD

FWB2 NO  
CA74737N1042

QUADRON CANNATECH CORP

FWB2 NO  
CA84730M1023

SPEAKEASY CANNABIS CLUB LTD

FWB2, SWB2 NO  
CA86860J1066

SUPREME CANNABIS CO INC/THE

FWB2 NO  
CA92858L2021

VODIS PHARMACEUTICALS INC

FWB2 NO  

 IMPORTANT NOTES:

  • Note that the U.S. listings generally trade over-the-counter (PINK) and are denominated in USD not EUR thereby exposing you to exchange rate risk in addition to market risk.
  • Account holders maintaining PINK Sheet securities require United States (Penny Stocks) trading permissions in order to enter opening orders.
  • All users on accounts maintaining United States (Penny Stocks) trading permissions are required use 2 Factor login protection when logging into the account.

China Connect Northbound Investor ID Model

Background
In November 2017, the Securities and Futures Commission (SFC) and China Securities Regulatory Commission (CSRC) announced an agreement to introduce an investor identification regime for Northbound trading under Mainland-Hong Kong Stock Connect. This regime is intended to enhance regulatory surveillance of mainland-listed stock trading from Hong Kong and requires brokers to report the identity of clients submitting orders to either the Shanghai or Shenzhen Stock Exchange.  This regulation will be effective as of September 26, 2018.  Additional information is provided in the series of FAQs below.
 
What is the Stock Connect?
The Stock Connect is a collaboration between the Hong Kong, Shanghai and Shenzhen Stock Exchanges which allows international and Mainland Chinese investors to trade securities in each other's markets through the trading and clearing facilities of their home exchange.
 
What is Northbound trading?
Northbound trading refers to the trading of mainland-listed stocks (e.g., Shanghai and Shenzhen Stock Exchanges) from the Hong Kong Stock Exchange.
 
What information is being collected and reported?
The information collected and reported depends upon the client classification. In the case of individuals, the information is as follows:
  • Name in English and Chinese
  • ID issuing country/jurisdiction
  • ID type (Hong Kong ID card, ID card issued by the government authority of relevant country/region, passport, or any other official identity document e.g. driver's license)
  • ID number (number of ID document)
For Institutional investors, the information is as follows:
  • Entity name
  • Other official incorporation documents (IBKR will attempt to us the documents clients provided at the point of account opening, whenever possible).
  • Legal Entity Identifier (if you do not already have an LEI, you can order one through IBKR when requesting trading permissions for China Connect. Note that obtaining a LEI can take up to three days, is associated with an application fee imposed by the LEI issuing organization, and an annual renewal fee thereafter).
Each Northbound trading client will be assigned a Broker-to-Client Assigned Number (BCAN) which will be associated with the identification information collected and will be tagged to every Northbound order on a real-time basis.
 
Who is IBKR authorized to share this information with?
Clients who wish to access the Stock Connect must provide IBKR with consent to provide their information to the Hong Kong Exchanges and Clearing Ltd and the Chinese regulatory bodies such as:
  • Shanghai and Shenzhen Stock Exchanges
  • China Securities Depository and Clearing (Hong Kong) Company Limited
  • Mainland regulatory authorities and law enforcement agencies
 
How will IBKR collect this information?
Clients with existing Northbound trading permissions will be presented with the online form upon log in to Client Portal. This form will allow IBKR to collect the required information and consent to submit this information upon order submission.
 
When will the identification take place?
The Northbound Investor ID model will be effective as of October 22, 2018. 
 
Will there be a Southbound Investor ID model?
The SFC and the CSRC also agreed to introduce a similar investor identification regime for Southbound trading as soon as possible after the regime for Northbound trading is implemented.
 
What happens if I do not provide the required information?
Once the Northbound Investor ID model is in effect, clients who either fail to provide the required information or elect not to provide consent to report the required information will not be allowed to submit opening Northbound orders but will be allowed to close existing positions.
 
How can I trade China Connect Stocks?
In order to trade China Connect stocks clients are required to login to Client Portal and request the necessary trading permissions. To do so:
  1. Log into Client Portal
  2. Click the User menu (head and shoulders icon in the top right corner) followed by Manage Account
  3. If you manage multiple accounts, select an account by clicking on the account number to popup the Account Selector
  4. Click the Configure (gear) icon next to Trading Experience & Permissions
  5. Click on "Stocks" and check the box next to "Hong Kong/China Stock Connect"
  6. Click CONTINUE and follow the prompts on screen.
After the trading permission has been requested clients will be prompted with the Northbound Trader Disclosure. Once consent has been given, IBKR will assign a BCAN and send the client file to the HKEX before the deadline at 2:45pm HKT. If the request has been approved, clients will be able to trade on the next day.

 

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