euro/yen commission calculation

[Adamus]

I'm looking at trading the euro against the yen. I want to make sure I've got the commission calculation correct by running through my own example which I hope will be a lot more explanatory than the example that IB give on their website.

IB policy is:

Commissions for forex trades are calculated off the trade value and then converted and charged to the base currency of the account.

1 basis point=0.0001.

Order minimums are quoted in USD with USD equivalent being utilized for other currencies.

and they give a basic example for trading EUR/USD:

0.2 basis point *Trade Value USD 2.50 USD 50,000 daily volume for EUR = USD 2.50

So I wanted to run my example by anyone reading hopefully to catch any stupid mistakes I'm making:

The EUR/JPY is currently quoted at 128.335

I buy 1,000,000

0.00002 (0.2 basis point) * 1,000,000 = 20 EUR (right? or is it USD?)

my account base currency is GBP

Convert that to GBP with EUR/GBP at 0.8881 gives GBP 17.76

Or am I using the wrong basis point number or the wrong currency?

Thanks

 

[gc1]

Sounds about right, when they convert the commission back to your base currency they use their previous day's closing price for the conversion, so sometimes the commission is slightly more and sometimes slightly less than you expect.

 

[Adamus]

Rats! I was hoping I was wrong. That means that the commission is quoted in a different currency from the profit or loss - which is quoted in yen.

I've set up my software for futures to use the same currency for profits and commissions, so to use it for doing forex I should program in some changes to account for that.

I guess I could do the commission in the underlying currency using a rough approximation of the exchange rate, keeping the commission up to date manually every month or so.

 

[Rhody Trader]

Rats! I was hoping I was wrong. That means that the commission is quoted in a different currency from the profit or loss - which is quoted in yen.

You do realize, right, that you've got the EUR/JPY rate right there with which to convert the Yen P&L into Euro P&L?

 

[Adamus]

Sure, but my program won't know to do that unless i tell it to do that for all forex instruments - currently it thinks everything is a futures contract.

 

[Adamus]

plus amusingly if I buy "1" EUR/JPY forex - I really get 1 Euro, and not a contract worth EUR125,000 !

 

[gc1]

Rats! I was hoping I was wrong. That means that the commission is quoted in a different currency from the profit or loss - which is quoted in yen.

If you're mainly trading currencies against the JPY:

Nothing to stop you setting your base currency to JPY - even if your main deposit(s) are in other currencies. Then the commission will always be converted to JPY.