IBKR allows US clients to convert currency, but limits the trading permissions for Forex trading (leveraged FX). US Clients with IBLLC accounts and Fully Disclosed Broker Clients from the US generally must be Eligible Contract Participants (ECP) to be eligible to trade Leveraged Forex. An Eligible Contract Participant is generally an individual or organization with assets of over USD 10 MM (or USD 5 MM if trades are hedging). The complete definition is located in Section 1a(18) of the Commodity Exchange Act.
If you are a US Client and not an approved Eligible Contract Participant (ECP) or you do not have approved Leveraged Forex trading permissions, your FX order could be rejected if the execution would create a Leveraged Forex balance in your account. There would be a Leveraged Forex balance if your account held a net short absolute value amount in terms of your account's base currency.
In order for a "Forex" transaction to be considered leveraged there must be one of the following:
- A short balance in a non-base currency position
- The sum of all short non-base currency positions (absolute value in base equivalent) must exceed the sum of all positive non-cash asset values
- The sum of all short non-base currency positions (absolute value in base equivalent) less the sum of all positive non-cash asset values exceeds the account's Net Liquidation Value.
For example, if a margin account held only USD 100,000 and it bought EUR 25,000 worth of a EUR-denominated stock, then IBKR would loan the account some EUR cash to pay for the stock purchase. That negative EUR cash alone does not create a Leveraged Forex balance as the total absolute value in terms of the account's base currency would still be positive. IBKR margin accounts that do not have approved "Leveraged Forex" trading permissions can trade in products denominated in non-base currencies, but a new order would be rejected if a non-ECP or an account without approved Leveraged Forex permissions were to hold a Leveraged Forex Balance after the previewed order executed.
Please find the definition of Eligible Contract Participant in our Knowledge Base. If you think you may qualify to be an Eligible Contract Participant (ECP), please see instructions on how to complete the required questionnaire to trade Leveraged Forex .
For more information about the Commodity Exchange Act, see the U.S. Commodity Futures Trading Commission website, or read the complete definition here.
Additional Information
