IB changes margin rules abruptly without informing

Discussion in 'Retail Brokers' started by gmst, Aug 28, 2012.

  1. gmst


    I have been a long time IB customer and I trade fairly actively.

    I have observed that IB changes its margin policy from time to time, and without any communication to its clients. Maybe the algos change with new TWS release, whatever it is, the way TWS behaves regarding checking margin changes from time to time. I will write my experience of today:

    1) Earlier, TWS didn't use to execute an order if after execution, it will result into a margin call. Today I was fully margined, I was long NQ fully margined, and had a limit order to execute long ES which would have clealy resulted into margin liquidation upon execution. As soon as ES price moved to my limit price, my order executed instead of being cancelled and shortly afterwards IB auto-liquidated it. It resulted into a loss, I had not cared to cancel my standing long ES limit order since I believed it would have been rejected by IB. How can IB change its policy without informing clients?

    Has anyone else experienced this? This would be a big problem if you are trading hundreds of stocks simultaneously. You will keep getting hit and then auto-liquidated.
  2. LeeD


    From my experience, when margin rules changed, IB had always given at least a few hours notice via notification in TWS and in account management and E-mail suggesting to log in and check the message.

    However, note that IB has different "day" and "overnight" margins for most futures. "Day" margin changes automatically to "overninght" every day in the afternoon at a certain time and changes back to "day" next morning.

    What you probably experienced is the following. Your desired position size had sufficient margin according to "day" rules but didn't have enough margin according to "overnight" rules. So, the order was executed just before the margin changed from "day" to "overnight" and as soon the margin changed you position didn't have enough margin and got liquidated.
  3. gmst


    Thanks for the explanation. But in this case, IB really screwed up. Infact, they screwed me, a long time customer of theirs :(

    So, these are the timestamps.

    bought ES using limit order when it should have been rejected @ 15:19:37
    Auto-Liquidated by IB NQ @ 15:20:37

    Overnight margin changes happen for index futures at 15:50:00. All times in EST. So, your theory is incorrect and there is obviously something wrong with IB margin rules.

    Edit: This issue would affect all the stock traders who throw in hundreds of orders every day. Its a very serious issue.
  4. No such thing as a free lunch.
  5. gmst


    what does that mean???? Please elaborate.
  6. LeeD


    gmst, I think you should contact IB support and ask why you position was liquidated. IT is likely that there is difference in you and them reading the rules... there is also a possibility it was genuine mistake on IB side. If you patient enough you will get directed to someone who can comprehensively explain.
  7. It looks like they screwed you because the intraday margin rules were still in effect. You might want to move your account to a smaller futures broker where you can have a more personal relationship with because IB doesn't really give a shit about their customers. They only want your commission money as risk-free as possible...you can't really blame them for that

    however, overnight margin is overnight margin wherever you go and you will still need to have enough in the account to cover it where ever you go.
  8. gmst


    I know it is a software glitch. I have decided that I will move a portion of my account to Advantage, once my account reaches 6 figures or more. I here they are much better than IB as far as futures trading is concerned. Right now my account is too small and I will let it remain with IB. My long ES order should never have gone through and should have been rejected because there was like 900$ free margin in the account and initial margin for an ES contract is 2187$.

    So, its clear that their margin-risk check before allowing an order didn't work. THIS IS SERIOUS. This potentially means that someone can potentially buy 100,000 ES contracts with maybe 5000$ in margin. Even though he will be auto-liquidated within a minute. This is such a fundamental level failure that this glitch can allow one rogue customer to potentially cause IB to become insolvent tomorrow or extending the logic even further can cause a flash crash in US markets! IB - ARE YOU READING THIS?

    In my case, I lost around 200$ related to this software glitch. Even if I fight with IB, I don't think they will refund me more than 50$ (equal to price movement between order going through and auto-liquidation). I lost 150$ in other positions at that time because I did not know what to do because of this unexpected position and I basically freezed. I don't think IB is going to refund me 150$ because I freezed in horror once I witnessed that you can buy a contract without having sufficient initial margin.
  9. sprstpd


    I don't want to be a dick, but it seems like if you have an active order and you don't cancel and it is eligible to be filled, then you are taking a risk there of an actual fill regardless of how IB has performed in the past. I would never rely on that "strategy."

    I don't see how you can say you were screwed over with a straight face in this situation.
  10. gmst


    That is my point. If IB is changing its margin rules, they should communicate it to clients. Don't you think so?

    If they are changing their initial margin rules, they should let the clients know. My order executed when I didn't have enough money in my account to complete initial margin.
    #10     Aug 28, 2012