Attaching an FX Order

Study Notes:

Interactive Brokers is your Gateway to the World’s markets and in this video, we will go over how to attach an FX hedge to an overseas order placed in a stock in your non base currency. This feature can be very useful if you want to only buy the exact amount of the foreign currency you need to complete the order and do not want to either pre-buy or borrow the currency to execute the trade. You may attach an FX order in either Classic TWS or Mosaic, we will walk through how to attach an FX hedge in Mosaic. Note that my account has a base currency of US dollars. I will demonstrate using a Canadian equity.

• In the order entry panel type in the symbol, you would like to trade.
• We will use Bank of Montreal, in the upper left hand corner type BMO, click enter and scroll down to Bank of Montreal – TSE and select Stock.
• Next select whether you want to Buy or Sell.
• I’ll choose Buy.
• Adjust the number of shares to buy, order type, price, and time in force to the desired settings.
• When ready click the plus sign next to the “advanced” tab to bring up the advanced window.In the bottom left-hand side click the plus sign next to Hedge. In the first drop-down box click on the arrow and scroll down to FX Order.
• Enter a check mark in the white box. The Trader Workstation or TWS will automatically determine the correct currency pair based on the currency of the stock and your base currency.
• You do not have to make any other selection here. Click on the red X next to advanced tab to close the window.

To the top left-hand side of the Order Entry panel the display now shows Order Entry and FX Order. TWS now recognizes that a currency pair trade will be attached to the stock order.

Changing the stock buy to a sell order would simply prompt TWS to flip the FX order at the same time. I will now change it back to buy prior to submitting the trade and the currency pair will be adjusted back to the original setting.

When you are ready click submit in the lower right-hand corner and the order confirmation window will appear. Notice underneath the stock description you see a sell USD.CAD pair. This means that you will sell the US Dollar and buy the Canadian dollar to pay for the trade. When ready click transmit and the order will populate the Order Entry window in the lower left-hand corner. Notice that there is a USD.CAD pair trade connected to the stock order in the window. When the order fills you will receive confirmation for both the stock execution and the currency pair trade. You can check the fill by clicking on the “Trades” tab in the Activity panel. Should only a partial stock execution occur, it will be matched with the appropriate partial FX execution at the same time.

When trading in overseas markets in non-base currency, attaching an FX order to the trade is a useful strategy that allows you to purchase the exact amount of foreign currency needed to settle the trade.