IB is going to start charging a daily exposure fee

Discussion in 'IB Technical Issues' started by fbell50, Sep 27, 2015.

  1. fbell50


    I just received an email that effective Oct 5 IB is going to start charging a daily exposure fee. Based on my current positions, I am subject to a fee even though I my excess liquidity is 58% of account value. My account sometimes reaches 0% excess liquidity. This is a significant charge. There are some new manual methods of checking the impact of new orders in the latest versions of TWS, but as far as I can tell no way in the API.

    Manual checking is not practical for me. I would prefer to have the option to have orders rejected that would trigger the fee. The fee is scaled geometrically. For the first time I have been with IB I am going to start looking for alternatives.

    Here's the email with my account info changed:

    Charges to Accounts with Very High Worst-Case Loss Exposure

    As part of its risk management policy, IB routinely stress tests client portfolios to evaluate their exposure to various market scenarios. These scenarios typically consider events such as price changes and option implied volatility shifts that are more extreme than those covered by regulatory margin requirements and may therefore project "worst-case" losses in excess of margin deposits.

    These stress tests not only serve as a monitoring tool but also form the basis for assessing a daily "Exposure Fee" to those accounts reporting worst-case loss exposure in excess of equity on hand. This is intended to protect IB and its other customers from accounts maintaining portfolios which, while currently margin compliant, would not have sufficient equity to satisfy losses were the worst-case loss to occur.

    While your account UXXXXXXX, is currently not subject to this fee, your exposure is now at a level that, were the fee to be charged, it would total 10.83 USD per day. Details regarding this fee are provided in the table below.


    Product "Worst Case" Account Uncovered Exposure Fee
    Class Loss Equity Loss1 Fee2 Implementation Date

    Equity 100,000 80,000 -20,000 10.83 October 05, 2015

    1 Equals "Worst Case" Loss less Account Equity.
    2 Determined through use of a proprietary algorithm whereby a fee of $1 is assessed against an Uncovered Loss of $76,000 with the fee scaling geometrically such that an account reporting an Uncovered Loss of $100 million would be assessed a fee of $20,000.

    Please note that while this fee is not being charged at this time, your account will become subject to it effective as of the date(s) noted above. Starting then and every day thereafter, your end-of-day portfolio will be subject to the aforementioned stress tests and should your worst-case projected loss exceed account equity, a fee will be assessed and reported on your daily activity statement.

    It's important to note that account holders have the ability to eliminate or reduce this fee through a combination of the following:
    • Increasing account equity.
    • Reducing the exposure by repurchasing short positions in options. We have found that short positions in cheap options generate the largest exposures relative to capital. You can use the Risk Navigator to simulate the effects of changes in your portfolio.

    Again, the amount above is not being charged at this time. To avoid charges for carrying positions that have a loss far greater in the worst case than the capital of your account, we urge you to examine ways to reduce your exposure prior to the implementation date(s) noted in the table above. Additional information regarding this fee along with a listing of products to which it applies is available on the website and tools for managing the fee in KB2275 and KB2276

    Interactive Brokers Professional Services
  2. Guile


    I do not get why traders use this firm. Most of you trade US and European exchanges. If you aren't scalping Zambian index futures, why the fuck are you letting IB diddle your bum? Software problems...draconian risk management...apathetic customer service...did I miss anything?
    IBRex&me user and gkishot like this.
  3. Guile


    ET should have a shelter for victims of IB abuse. Remember "It's not your fault and IB doesn't really love you."
    IBRex&me user likes this.
  4. Autodidact


    Well, only pikers worry about diminutive charges.
    zdreg likes this.
  5. fbell50


    For my account to go negative the amount IB projected as the maximum daily exposure, all my long positions (~50 + sp emini futures) would have to go to zero and all my short positions go up 67%. All on the same day. I have no option positions. It is all stock and etf (some leveraged etfs.)
    Last edited: Sep 27, 2015
  6. rmorse

    rmorse Sponsor

    How is this fee different from the fee the started charging before?
  7. fbell50


    Apparently IB has been charging this fee for well over a year and have just now decided it applies to me. How that can be is beyond me. Perhaps there is a bug in their algorithm. The Risk Navigator shows my emini position has an "expected shortfall" of 2,539,296 on a long position of 15 Dec ES which has a value of 1,439,250 (15 * 50 * 1919) as of Friday's close. I cannot figure out how an expected shortfall on a long position can be greater than it's total value.
    Last edited: Sep 27, 2015
  8. d08


    They're friendlier toward non-US customers as compared to most US brokers. For a random example, Lightspeed charges $50 (while free for ACH) for a wire while IB offers one for free per month.

    PS. I got the fee warning too today for the first time. I think they changed something in their algos.
    IBRex&me user likes this.
  9. Guile


    It is almost like they don't like active traders...
    IBRex&me user likes this.
  10. 1) no software issues at all...I run my tws and gateway and in addition submit FIX orders to IB (for additional accounts) for months now without the slightest hitch or disconnect. Their weakest link is their new api releases but certainly not their trading Frontends.

    2) fantastic risk management. I wish they boot all those crazy short option holders off the platform. Look at what the unpegging of euro and Swissie did to many brokerages. There is tail risk in this market and it's great there is a broker choice that makes my funds in my accounts safer and not exposed to more risk.

    3) not sure about US but IB'S customer service here in Hongkong is quite good. I met them face to face and spoke with them over the phone. The occasional issue got sorted out quickly and professionally.

    #10     Sep 27, 2015
    Hoi likes this.