An account will be subject to interest charges despite maintaining an overall net long or credit cash balance under the following circumstances:
The account maintains a short or debit balance in a given currency.
For example, an account maintaining a net cash credit balance equivalent to USD 5,000 comprised of a long USD balance of 8,000 and a short EUR balance equivalent to USD 3,000 would be subject to an interest debit based upon the short EUR balance. There would be no offsetting credit on the long USD balance as it is less than the USD 10,000 Tier I level above which interest is earned.
Account holders should note that in the event they purchase a security which is denominated in a currency that they do not hold in their account, we will create a loan in that currency in order to settle the trade with the clearinghouse. If one wishes to avoid such loans and their associated interest charges, they would need to either deposit funds denominated in that particular currency or convert existing cash balances via the Ideal Pro (for balances of USD 25,000 or above) or odd lot (for balances less than USD 25,000) venue prior to entering into your trade.
The credit balance is comprised principally of proceeds from the short sale of securities.
For example, an account maintaining a net cash credit balance of USD 12,000 which is comprised of a USD debit of 6,000 in the security sub-account (less the market value of any short stock positions) and a short stock market value credit of USD 18,000 would be charged interest on the Tier 1 debit of USD 6,000 and would earn no interest on the short stock credit as it falls below the USD 100,000 Tier I level.
The credit balance includes unsettled funds.
We determine interest debits and credits solely based upon settled funds. Just as an account holder is not assessed interest charges on funds borrowed to purchase a security until such time that purchase transaction settles, the account holder will not receive an interest credit, or offset against a debit balance, on funds originating from the sale of a security until such time the transaction has settled (and we have been credited funds by the clearinghouse).