Interactive Brokers is setting the pace again, as it recently launched a lending-enabling account for clients in Australia.
In a newsletter released concerning the development, Interactive Brokers said its Australian platform will only be available to individual clients in Australia. As Interactive Brokers Australia enables margin lending, users will now be able to get a margin-based account with its Australian platform, IBKR.
IBKR is the leading brokerage firm in Australia
The company has an Australian Financial Service License and is the leading exchange company n the country. With the launch of this platform, IBKR is providing individual client-based services where single persons can open an IBKR account subject to the eligibility criteria of IBKR Australia.
Also, IBKR is allowing retail corporate clients (non-natural person’s clients) to open margin-based accounts as well.
For the individual clients, only marketable securities or cash may be used as collateral or the margin lending asset. Also, the deposited collateral must not be borrowed or have any lien or mortgage, or other encumbrance.
Also, the all-natural clients are only allowed to withdraw funds from the margined asset, but they shall be limited to only the repayment of another margined facility used in acquiring financial products.
Financial thresholds set for individual clients
Interactive Brokers said there are specific financial thresholds set for all retail natural person clients before they are granted a margin account. The company said the Individual’s liquid net worth must be more than AUD100, 000 or their income must be more than $40,000. Additionally, before the company gives ay margin lending facility, it will have the reserved rights to check the specific information about the client’s financial position.
However, the additional measure on the client’s financial status will not be necessary if the client can collect a recent and valid Statement of Advice (SOA) from their financial planner or financial advisor. The document recommending IBKR to issue a margin lending facility should be made available to the company in Australia.
Also, INKR said retail natural person client who is a student, unemployed, or retired would not be given a margin account.
Margin limits will be placed on individual and corporate clients
Again, the company will cap margin loans on both individual and corporate clients at a specified amount. Once the client reaches that capped limit, they will not be allowed to open any more positions that increase their margin. But IBKR said it will allow clients to close or reduce their margin trades.
With the disciplinary history of Interactive Brokers, the establishment of lending-enabled accounts is interesting.
In 2013 when ASIC stated that the company’s license authorization didn’t provide margin lending facilities, Interactive Brokers stopped offering margin loans to its Australian clients. Observers are closely monitoring how this new margin lending system will play out this time.