IBKR Australia Margin Accounts

Interactive Brokers Australia Pty Ltd (“IBKR Australia”), which holds an Australian Financial Services License (“AFSL” No. 453554), is headquartered in Sydney provides services to Australian clients. IBKR Australia clients, products and services have some unique characteristics when compared to the Interactive Brokers (“IBKR”) global account and product suite. The purpose of this document is to outline IBKR Australia margin lending offering.

Margin Accounts

IBKR Australia offers two types of margin accounts (i.e. accounts that allow borrowing of funds to buy marketable securities) that will provide all clients excluding SMSF clients with the ability to create leveraged portfolios subject to risk tolerances allowed by IBKR Australia. The two account types are:

  • Leveraged Trading account

    • Available for both natural persons (e.g. individuals) and non-natural persons (e.g. corporate entities), regardless of their regulatory status. However, there are some important differences between the margin accounts available for retail clients and wholesale clients, as outlined below.

  • Professional account

    • Available primarily for non-natural persons that are confirmed as a professional investor.

Refer to this link for information regarding Australian regulatory status under IBKR Australia.

Please take particular note of how IBKR determine natural person v non-natural person for IBKR Australia trust accounts. It is imperative that if you hold a trust account with IBKR Australia and there exists individuals (natural persons) that are nominated as trustees in your account, then even if you have an additional corporate trustee, that trust itself would be considered a natural person trust. The difference between a natural person and non-natural person margin account can be significant as shown below.

Important characteristics of IBKR Australia margin accounts are as follows:

  • All eligible margin accounts employ a risk-based model to calculate margin requirements. Please click here for more details.

  • Interest rates on financing may vary depending on the type of client obtaining margin. Specifically, for all retail clients of IBKR Australia and non-retail (wholesale or professional investor) natural person clients of IBKR Australia with a Standard Margin Lending Facility, an additional surcharge is applied to standard rates (currently set at 1% in AUD borrows and 2% in other currency borrowings). Please click here for more details.

  • For all natural person clients any collateral deposited (cash or marketable securities) must be unborrowed & otherwise free of any mortgage or lien or other encumbrance.

  • For all natural person clients, you may only withdraw funds from the margin facility for the limited purpose of repaying another margin lending facility which was used to acquire financial products.

    • However, if you are classified as retail you will be not permitted to withdraw from the margin facility if you are already borrowing funds via that facility, i.e. if you are already negative cash, or otherwise if the withdrawal would place your account into cash deficit.

  • All retail natural person clients must meet specific financial thresholds in order to be granted a margin account, specifically income must be greater than AUD $40,000 or Liquid net worth must be greater than AUD $100,000. In addition, IBKR Australia is obliged to verify that the information concerning the client’s financial situation that was collected during the application is accurate and complete. If the verified information concerning the client’s financial situation does not meet the thresholds stated above and/or are not comparable to the financials declared by the client during the application, the client will not be granted margin. However, if the client has a valid and recent Statement of Advice (“SOA”) from their registered financial advisor or financial planner that recommends that the client can be issued a margin lending facility and that SOA is made available to IBKR Australia, this additional verification of the client’s personal financial position will not be required.

  • In addition retail natural person clients will not be granted a margin account if their occupation is either retired or unemployed or student.

  • For all retail clients (both natural person and non-natural person clients), margin loans will be capped at a specific amount (currently set at AUD $50,000, subject to change in IBKR Australia’s sole discretion). However, how much a client can borrow depends on a number of factors, including: the value of the money or assets contributed by the client as security; which financial products the client chooses to invest in, as we lend different amounts for different products under our risk-based model; and the maintenance margin requirement for the client’s portfolio. Once a client reaches their borrowing limit they will be prevented from opening any new margin increasing position. Closing or margin-reducing trades will be allowed. Please click here for more details.

  • For all non-retail clients (i.e. wholesale or professional investor clients) that are natural person clients, with a margin account, you will be issued a Non-Standard Margin Lending Facility, which is a loan facility as defined in subsection 761EA(5) of the Corporations Act. Rather than IBKR-Australia simply providing you with credit to acquire securities, which then act as security for the credit provided, margin loans to non-retail natural person clients involve a unique set of risks, including, but not limited to, the transfer of legal ownership of the non-Australian securities you purchase on margin under the facility, from you to IBKR-Australia as consideration for the credit provided to you through the facility. You have the right to be returned equivalent securities. Please click here for more details.

     

Summary of distinguishing features of the IBKR margin model between those offered to retail1 versus wholesale/Professional investor status

  Retail Status Wholesale2 Status
Natural Person Clients

  1. Surcharge over standard interest rates (currently set at 1% AUD, 2% other currencies)

  2. Loan Cap default to AUD $50,000

  3. Additional Onboarding Criteria including declared income > AUD $40,000 or Liquid net worth > AUD $100,000 and IBKR Australia must verify the client’s financial situation4 and Occupation must not be either retired or unemployed or student

  4. Additional Cash Withdrawal Requirements/Restrictions

    • can only withdraw funds from the margin facility to repay another margin lending facility which was used to acquire financial products.

    • not permitted to withdraw from the margin facility if you are already borrowing funds or the withdrawal would place your account in cash deficit.

  5. Additional Collateral Deposit Requirements/Restrictions

    • collateral deposited5 must be unborrowed6

  1. No surcharge over standard interest rates3

  2. No loan Cap

  3. No Additional Onboarding Criteria

  4. Additional Cash Withdrawal Requirements/Restrictions

    • can only withdraw funds from the margin facility to repay another margin lending facility which was used to acquire financial products.

  5. Additional Collateral Deposit Requirements/Restrictions

    • collateral deposited 5 must be unborrowed 6
Non-Natural Person Clients

  1. Surcharge over standard interest rates (currently set at 1% AUD, 2% other currencies)

  2. Loan Cap default to AUD $50,000

  3. No Additional Onboarding Criteria

  4. No Additional Cash Withdrawal Requirements/Restrictions

  1. No surcharge over standard interest rates

  2. No loan Cap

  3. No Additional Onboarding Criteria

  4. No Additional Cash Withdrawal Requirements/Restrictions


1Please note that under the Corporations Act 2001, there are a various regulations governing the protection of retail clients who deal with providers of financial products and financial services

2Including Professional Investor Status

3 The surcharge over interest rates will apply for wholesale or professional investor natural person clients of IBKR Australia who have chosen a Standard Margin Lending Facility

4Unless a valid and recent Statement of Advice (SOA) from the client’s registered financial advisor which recommends that the client can be issued a margin lending facility is supplied

5Cash or marketable securities

6Meaning free of any mortgage or lien or other encumbrance

 

Other

  • For a full list of the disclosure documents and legal terms which govern the services IBKR Australia will make available please refer to our website.

  • Please note this information is general in nature, meaning it does not take into account your objectives, financial situation or needs. Consider consulting an independent financial and/or tax advisor before making an investment decision.