I agree that this is mainly due to IB being competitive. They may not be able to compete in some areas, but are very attractive where they can, like the interest rates. While my previous answer wasn’t related to reasons why they require higher margin. Sure it’s for their own and everyone’s safety, and so be it. Still, other brokers may charge more for margin but you don’t have to use as much, so comparatively I may not even notice a large difference in interest rate on margin at IB vs another broker. Not sure about this, just suspecting so. May also depend on how to trade, and whether you may be able to utilize extra margin at other brokers to profit from it.
***But interest is NOT margin requirement. Interest is just interest. Side note (unrelated to topic): Their margin requirement is pretty decent. And probably using more than 50% of excess liquidity (the cash available) is a very risky thing anyway. What I am saying is it's not for everyone to tap out their full margin and those who do may have a plan. So for that reason as well, margin requirement becomes unimportant in the whole interest situation.
Ok, but aren’t we paying interest on the margin that IB reserves? Or what’s the interest on? Are you paying interest if you don’t use the margin?
No. I don't think any provider asks for interest on "reserve" margin. I don't think there is such a thing as "reserve" margin. Unless there is with some crappy broker. That sounds like a loan rather than a margin. Margin is ONLY charged interest if it is kept over night past 11:59:59 PM. If it's not kept but only used for 23 hours and 59 minutes and 59 seconds you pay ZERO interest. This may be different from broker to broker as to when they administer the interest but more or less that is what it is. So margin interest nothing to do with anything else but the interest rate itself.
So that’s what I was referring to in my previous responses. Other brokers don’t use up as much margin overnight, so you pay interest on less margin at other brokers. IB reserves/uses a lot of my margin overnight. I’m using margin every day, overnight. I don’t hold anything for less than 24 hours, so I’m being charged small interest on a lot of margin at IB. I believe that I may pay around the same for margin interest at other brokers since they don’t require so much margin overnight.
By “reserved” I mean that they use/take more margin than other brokers. They “reserve” it since they don’t spend it. It’s not really used, just reserved/taken by IB for their safety. I pay interest on margin that IB shows as used/reserved overnight or over a month or over a year. It’s more margin than I need at other brokers, so it’s reserved only by IB for safety, not really used and not reserved by other brokers. Don’t we pay interest on margin shown as used/reserved overnight by IB? (it’s reserved since it’s not utilized, only kept by IB for safety, overnight)
All you said is incorrect. Please go and do a proper calculation of night over night. You are richer than you think and IB interest charging system is much better than you give them credit.
Again, all you said is incorrect. If I may make a suggestion, please call them to clarify this for you. Another side point: how they run their business is their business not ours. All we care about is they provide good rates and do NOT charge margin like a loan like you mentioned.
I don’t need to call them because I don’t care. I just meant that this may play some role and therefore it may be difficult to compare margin rates between IB and other brokers. If you think that’s incorrect then indeed there is nothing else to add, and IB margin rates are what they are, highly competitive.
Yeah, I have kept tabs for day to day interest many times and they charge $0 for no margin used overnight and if used they only charge interest for the portion used and not for all margin qualified. For example, they provide 43:1 USD.CAD margin which I understand is $4.3 million for every $100k cash in account. If they did charge it will be $99+ for 24 hours for just having a margin account opened and not even using the margin; but that doesn't happen. P.S. the 43:1 calculation is I think not as simple as $4.3 million for every $100k as I think it's a higher ratio provided. It's like a compound 43:1 ratio...so don't take my calculation as set in stone there.