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I have a CHF-based account in Interactive Brokers. I wanted to buy VEUR in LSE, which trades in GBP. I entered an order, I was told I didn't have enough GBP. Fair enough.

I asked the live chat how to do this, and I was told to do a Forex trade. So I bought some GBP with the CHF (let's say 1000 GBP), bought VEUR in GBP, and so I was left with some GBP in the account (let's say 10 GBP). In the Home/Positions tab I can see the VEUR, the CHF, and the leftover 10 GBP. So far so good.

What I don't understand is when I go to Trade/Quicktrade, the Positions section shows an open position for the GBP (GBP, Cash, IDEALPRO, CHF) but for the original amount of 1000 GBP, not for the leftover 10. If I click the Close button, it creates an order to sell 1000 GBP, which I don't have!

What's going on? I thought I was selling CHF, buying GBP, and then buying stock, as if I went to a (physical) exchange and bought some currency. This open position makes me thing something else may be going on (am I somehow borrowing currency from IB?). I'm really afraid of doing this wrong and ending up losing a lot of money or paying interest or whatever.

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    Has the trade to buy the VEUR settled yet? That might be why the money (currency) is still in your account.
    – dcaswell
    Commented Oct 6, 2013 at 14:33
  • I'm not 100% sure what "settled" implies, but I assume yes, since this was ~2 weeks ago.
    – ggambetta
    Commented Oct 6, 2013 at 14:54

1 Answer 1

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You're confusing open positions and account balance.

Your position in GBP is 1000, that's what you've bought. You then used some of it to buy something else, but to the broker you still have an open position of 1000 GBP. They will only close it when you give them the 1000GBP back. What you do with it until then is none of their business.

Your account balance (available funds) in GBP is 10.

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    I guess that's what I don't understand. Why do I have to give "them" 1000 GBP "back"? Didn't I buy 1000 GBP?
    – ggambetta
    Commented Oct 6, 2013 at 18:52
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    @ggambett your main currency is CHF, so you did buy GBP, just as if you bought any other security - opened a position.
    – littleadv
    Commented Oct 6, 2013 at 18:53
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    OK. Maybe it's just a semantic issue. I just want to be sure I'm not borrowing anything and therefore owing interest.
    – ggambetta
    Commented Oct 6, 2013 at 18:55
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    @ggambett not interest, but exchange rate difference. You'll have eventually sell the GBP back after you close your stock position, and it may either add to earnings in CHF or reduce them.
    – littleadv
    Commented Oct 6, 2013 at 19:00
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    So it looks like all the confusion comes from what IB calls "virtual FX positions", which specifically don't reflect the real balances. I'm not sure yet what they actually are, but at least it looks like I'm not doing anything wrong nor losing my mind. Thanks for your reply :)
    – ggambetta
    Commented Oct 7, 2013 at 19:18

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