Gross Position Value vs. NLV

Interactive Brokers apparently has a leverage cap based on a "Securities Gross Position Value" to net liquidation value ratio < 30, stated as follows:

Securities Gross Position Value <= 30 * (Net Liquidation Value - Futures Options Value)

https://www.interactivebrokers.eu/de/index.php?f=24862

I'm running an options arbitrage strategy that's not margin limited by standard stress tests, but has limited scalability due to this restriction.

Do other brokers, like Lightspeed, TDA, etc have similar rules?

 

Yes. Most of the concerns over pin risk, but some of it is the dollar value of the position. It can cause higher requirements at the OCC causing a capital cost. 30X is on the high side. BTW, this only applies to equity/option PMAs with us, not futures.

 

Thanks Robert. This is very informative. Does this rule generally apply to institutional investors too?

 

Yes, all PM Accounts. Wedbush calls it the leverage limit but it is calculated as GMV/Equity. I prefer to discuss these limits directly.

 

is your Equity pretty close to NLV? and how GMV is calculated?

 

GMV is the absolute value of all positions with no offsets.

 

Then that's the same as IB's GPV.

 

What's the maximum GMV/Equity allowed at Wedbush?

 

I prefer to discuss these limits directly.