IBKR Offering About 2.90% - 3.40% On Large Balances

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Lightning

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Interactive Brokers have increased their EUR deposit rates on the back of the ECB rate increase.

Their product is complex to say the least.
  • 0% on the first 10,000 EUR.
  • Gradual increase in the rate up to 100,000 EUR.
  • For example, a balance of 50,000 earns 1.178% (2.356%/2) because you are half way to 100,000 but the 1.178% only applies to the balance from 10,000-50,000.
  • Balances over 100,000 earn 2.356%.
  • The rate applies to IBRK Pro accounts. There seems to be no fees for this product (other than trading fees).
  • Protection is provided via 90% of the first 20k via the Irish Investor Protection Scheme.
  • Their website also mentions protection via SIPC up to 250,000 USD or equivalent. Is this only for USD cash ????
Might be of interest to someone with a large balance.
 
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Long time lurker, first time poster :cool:

I'm struggling to wrap my head around the SIPC protection. The SIPC website does say: A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a SIPC member brokerage firm.

But like the OP said, I don't understand if the amount needs to actually be held in dollars. And frankly, I don't understand a lot of the financial lingo on the SIPC website. It doesn't look like this is equivalent to the Deposit Guarantee Scheme in terms of security.

I wish I could have more confidence in this. I just received a big lump sum and it would be ideal for my needs right now
 
Noodler said:
Long time lurker, first time poster :cool:

I'm struggling to wrap my head around the SIPC protection. The SIPC website does say: A non-U.S. citizen with an account at a brokerage firm that is a member of SIPC is treated the same as a resident or citizen of the United States with an account at a SIPC member brokerage firm.

But like the OP said, I don't understand if the amount needs to actually be held in dollars. And frankly, I don't understand a lot of the financial lingo on the SIPC website. It doesn't look like this is equivalent to the Deposit Guarantee Scheme in terms of security.

I wish I could have more confidence in this. I just received a big lump sum and it would be ideal for my needs right now
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The website that you linked too says "SIPC protects cash held by the broker for customers in connection with the customers’ purchase or sale of securities whether the cash is in U.S. dollars or denominated in non-U.S. dollar currency".
 
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Lightning said:
IBRK should make the protection clearer on their website.
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Client money is segregated in special bank or custody accounts, which are designated for the exclusive benefit of clients of IBIE. Statutory Instrument. No. 604/2017 - Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Investment Firms) Regulations 2017 is the governing legislation in Ireland for Client Assets.
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By properly segregating the client's assets, if no money or stock is borrowed and no futures positions are held by the client, then the client's assets are available to be returned to the client in the event of a default by or bankruptcy of the broker.
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Financial Strength - Strength and Security | Interactive Brokers Ireland

Make sure your broker is secure and can endure market changes. Read more about Interactive Brokers Group’s strength and security facts.
www.interactivebrokers.ie www.interactivebrokers.ie
 
I've set this up. It's a bit of an unusual experience because it's not really designed as a savings account. From what I can see, I just load the cash onto the Pro account I've created and that's it. There's no "product" to select or anything.
 
Noodler, how do you know your pro account is accruing interest. I set up an account last year, logged €100- and never touched it. The balance has just sat there, no interest accrued.
 
So to double check: a balance of between €100k & up to €230k (i.e. $250k equivalent, by today's FX rate) earns 2.356% interest except the first €10k & all of that balance is protected, correct?
 
James5 said:
So to double check: a balance of between €100k & up to €230k (i.e. $250k equivalent, by today's FX rate) earns 2.356% interest except the first €10k & all of that balance is protected, correct?
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This is my interpretation of it, with the threshold being determined by the USD/EUR exchange rate at any given moment.
 
James5 said:
So to double check: a balance of between €100k & up to €230k (i.e. $250k equivalent, by today's FX rate) earns 2.356% interest except the first €10k & all of that balance is protected, correct?
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Possibly correct. But I don't think it is crystal clear that the SPIC protection definitely applies in this way to euro balances if the euro balance is held with a different custodian/bank. Could the euro balances be held in sub-custody outside of a US broker and therefore not subject to SPIC protection?
 

Interest Rates | Interactive Brokers Ireland

With an Interactive Brokers account you'll earn market rate interest on your uninvested cash balances.
www.interactivebrokers.ie www.interactivebrokers.ie

There's an interest rate calculator on the website where it will tell you how much you will be paid!
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Lightning said:
Possibly correct. But I don't think it is crystal clear that the SPIC protection definitely applies in this way to euro balances if the euro balance is held with a different custodian/bank. Could the euro balances be held in sub-custody outside of a US broker and therefore not subject to SPIC protection?
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Conservative and Prudent Risk Management​


Interactive Brokers' conservative and prudent risk management helps keep your assets safe.

We invest your cash in very short-term government securities maturing in a few months.

  • As they mature, we continuously roll them forward into freshly issued securities.
  • As their interest rate sensitivity is very low, the realized loss would be minimal if they ever needed to be sold.
We are required to mark ALL investments to market and report their value to the regulators and investors, so that any issues are immediately recognized.

Compare our risk management policies with other banks and brokers that are not required to immediately recognize losses on their investments and invest in longer-term assets to maximize their current profits. Our prudent risk management allows us to pay the highest rates on deposits and charge the lowest rates on margin loans because we are always invested in the current short-term benchmark rate.
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Risk Management - Strength and Security | Interactive Brokers Ireland

Conservative and prudent risk management ensures the safety of your assets at Interactive Brokers.
www.interactivebrokers.ie www.interactivebrokers.ie
 
Oh great…I’m delighted that “Conservative and Prudent Risk Management” are on my side.

I think I met their cousins once, “Sensible and Cautious Downside Protection”.
 
After much searching, I have found the following article with disappointing news:

Whether foreign currency held in a customer account at a SIPC-member brokerage firm is eligible for SIPC protection depends on the account-holder’s intent concerning that currency. If the foreign currency is held in the account as an investment, then SIPC protection is not available with respect to that currency because foreign currency does not qualify as a “security” under the Securities Investor Protection Act (SIPA). If, however, the purpose of the foreign currency is to pay for investments that qualify as “securities” under SIPA, then the currency is viewed as “cash” and the customer is protected against its loss up to $250,000. The liquidation trustee will evaluate account-holder intent with respect to foreign currency based upon all of the facts and circumstances, including the pattern of activity, if any, in the account containing that currency.
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In other words, euro deposits are not protected if you are are adding them to the account to avail of this interest rate and do not intend to trade. The extent to which you need to be trading is not defined. I'm out!
 
Is it because of rules on capital requirements that banks aren't able to do this, but the brokerage firms, which are not bound by the same regulations, are? Or is it just that the rise in interest rates has been so fast, and that there is uncertainty about how long the high rates will last, that causes the cautious banks (and State Savings) to not substantially increase their rates?
 
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