IB Margin requirements rising as VIX falls, reaching nonsense levels

Discussion in 'Interactive Brokers' started by cruisecontrol, Apr 9, 2020.

  1. VIX peaked three weeks ago at ~85 and has since dropped by 50%.

    Yet IB is continuously increasing their margin requirements as VIX is dropping. Every day is higher than the last. As I check it this morning, Portfolio Margin is barely better than reg T. I'm scared that it can just keep going higher and higher, because why not? Their system appears to have no sense to it. I might actually end up downgrading to a reg T account at some point if that gives more margin :vomit:

    I always believed IB's risk aversion was a good thing that protected customers like me, and people who complained about margin were just whiners who were taking too much risk anyways (naked option selling, etc). Seeing how their system behaves now, I no longer believe this.

    This is, by far, the most profitable trading environment I've ever seen in my career. It might be once in a lifetime. And IB is hamstringing us with this goofy margin system. I am making a week worth of profits every day, but I could be making more than 2x that with a proper 15% PM account. (This is straight up equity trading by the way, cash neutral portfolios, no options.)

    I hope IB gets their act together, but I am actively looking into switching brokers at this point.
    MoreLeverage, traider and d08 like this.
  2. maxinger


    My goodness!!! margin keeps on increasing.
    I think IB is trying to break the record.

    It might also mean many big boys use IB.

    I haven't use IB for weeks.
    Luckily I have other brokers which offer much more attractive margin requirement.
    I like high leverage. the higher the better.
    GregorySG9 likes this.
  3. d08


    I agree.

    It's reaching absurd levels. There's barely any margin left on equities. I'll be lucky to get 1.5x today. This is by far my largest problem with IB. You cannot build any models when the margin is almost randomly all over the place.

    Soon the remaining "I'm glad IB is protecting investors" crowd will join in because as we all know, the WHOLE market can just go to zero within seconds, as if that is realistic in any universe. Few of those people have actually looked into on what IB is raising margins on and why.

    I don't know what models they are using but it has nothing to do with protecting investors or the company. They have the worst risk management team, completely out of touch. I can imagine the meetings..."volatility was up weeks ago, what should we do?" -- "well, let's just quadruple the margin requirements on everything" -- "great job everyone". Never mind that they've hiked margins on equities before that had barely any volatility.

    If I wasn't tied to their API, I would've switched yesterday.
  4. ZBZB


    It is not stopping anybody trading. Look at the data.

    Interactive Brokers Group Reports Brokerage Metrics and Other Financial Information for March 2020, includes Reg.-NMS Execution Statistics
    GREENWICH, CT, April 1, 2020 — Interactive Brokers Group, Inc. (Nasdaq: IBKR) an automated global electronic broker, today reported its Electronic Brokerage monthly performance metrics for March.
    Brokerage highlights for the month included:
    • 1,964 thousand Daily Average Revenue Trades (DARTs)1, 127% higher than prior year and 46% higher than prior month.
    • Ending client equity of $160.7 billion, 9% higher than prior year and 6% lower than prior month.
    • Ending client margin loan balances of $19.8 billion, 22% lower than prior year and 31% lower than prior month.
    • Ending client credit balances of $65.0 billion, including $2.9 billion in insured bank deposit sweeps2, 25%
    higher than prior year and 9% higher than prior month.
    • 760 thousand client accounts, 22% higher than prior year and 6% higher than prior month.
    • 602 annualized average cleared DARTs1 per client account.
    • Average commission per cleared Commissionable Order3 of $2.97 including exchange, clearing and regulatory
    fees. Key products:
    Futures include options on futures. We estimate exchange, clearing and regulatory fees to be 57% of the futures commissions.
    Other financial information for Interactive Brokers Group:
    • GLOBAL4: The value of the GLOBAL, reported in U.S. dollars, decreased by 0.47% in March. Year to date, the value of the GLOBAL decreased 0.97%.
    • Mark to market on U.S. government securities portfolio5 was a gain of $11 million year to date.
    In the interest of transparency, we quantify our IBKR PRO clients’ all-in cost of trade execution below.
    • In March, IBKR PRO clients’ total cost of executing and clearing U.S. Reg.-NMS stocks through IB was a net rebate, 0.6 basis points of trade money6, as measured against a daily VWAP7 benchmark (1.5 basis points net cost for the rolling twelve months).
    Mar 2020
    Equity Options Futures
    Average Commission per Cleared Commissionable Order
    $2.19 $4.38 $4.27
    Average Order Size 1,106 shares 7.7 contracts 2.7 contracts
    IBKR PRO Clients' Reg.-NMS Stock Trading Expense Detail All amounts are in millions, except %
    Previous 12 Months
    40.93 34.39 75.32
    19,492 18,882 38,375
    $89.6 $162.0 $251.6
    #1a - Number of orders
    Buys Sells Total
    #1b - Number of shares purchased or sold
    Shares bought Shares sold Total
    1,308 1,322 1,663
    Apr '19 May '19
    2.73 3.09 2.42 2.73 5.15 5.82
    1,341 1,479 1,284 1,450 2,625 2,929
    Jun '19
    2.50 2.26 4.76
    1,242 1,220 2,462
    $54,315 $109,230
    $54,322 $109,210
    Jul '19
    2.81 2.46 5.27
    1,317 1,256 2,573
    $53,681 $108,832
    $53,691 $108,840
    Aug '19
    3.19 2.74 5.93
    1,499 1,480 2,979
    $63,682 $127,301
    $63,687 $127,288
    $17.9 $4.9 $22.8
    $13.4 $9.4
    0.011% 0.007% 0.018%
    Sep '19 Oct '19
    2.58 2.82 2.25 2.45 4.83 5.27
    1,263 1,368 1,256 1,278 2,519 2,646
    Nov '19
    2.61 2.26 4.87
    Dec '19 Jan '20
    2.56 3.53 2.18 2.84 4.74 6.37
    4.36 3.43 7.79
    1,856 1,824 3,679
    $94,073 $188,654
    $94,117 $188,669
    $28.2 $43.8 $72.0
    $16.7 $55.3
    0.009% 0.029% 0.038%
    6.37 14.52
    3,835 3,698 7,533
    $146,660 $149,232 $295,892
    $146,684 $149,238 $295,921
    1,257 2,565
    $47,905 $47,117 $95,022
    $47,907 $47,131 $95,039
    $14.5 $12.3
    $11.1 $1.2
    0.012% 0.001% 0.013%
    1,299 1,581 2,620 3,244
    #2 - Trade money including price, commissions and fees
    2a Buy money 2b Sell money 2c Total
    #3 - Trade value at Daily VWAP
    3a Buy value 3b Sell value 3c Total
    $57,082 $114,186
    $57,089 $114,191
    $69,502 $137,354
    $69,515 $137,345
    $50,469 $101,400
    $50,470 $101,386
    $15.8 $1.6 $17.4
    $54,572 $110,246
    $54,585 $110,271
    $12.9 $0.4
    $51,350 $103,444
    $51,373 $103,457
    $9.0 $22.8 $31.8
    $69,685 $141,171
    $69,705 $141,186
    $6.2 $20.7 $27.0
    #4 - Total trade expense, including commissions and fees, relative to Daily VWAP
    4a Buys (2a-3a)
    4b Sells (3b-2b)
    4c Total trade expense
    $1.3 $20.3 $6.7 $12.3 $7.9 $32.6
    $26.5 $6.7 $33.2
    $2.5 $10.0 $12.5
    Trade expense as percentage of trade money
    #5 - Trade expense categories
    5a Total commissions & fees
    5b Execution cost (4c-5a)
    #6 - Trade expense categories as percentage of trade money
    -0.006% 0.015% $31.9 $169.1
    ($50.2) $82.4 0.011% 0.010%
    -0.017% 0.005% -0.006% 0.015%
    Total commissions & fees (5a/2c) Execution cost (5b/2c)
    Net Expense to IB Clients
    0.010% 0.010% -0.003% 0.014% 0.007% 0.024%
    0.007% 0.024% 0.030% 0.011%
    0.017% 0.000% $11.1 $11.7
    $6.3 ($11.3) 0.011% 0.010%
    0.006% -0.010% 0.017% 0.000%
    0.031% 0.019%
    $11.6 $13.4 ($3.7) $19.2
    $11.1 $22.1
    0.010% 0.020% 0.030%
    $11.5 $1.0
    0.010% 0.001% 0.011%
    $11.3 $20.4
    0.011% 0.020% 0.031%
    $14.3 $12.7
    0.010% 0.009% 0.019%
    The above illustrates that the rolling twelve months’ average all-in cost of an IBKR PRO client U.S. Reg.-NMS stock
    trade was 1.5 basis points.
    Note 1: Daily Average Revenue Trades (DARTs) – customer orders divided by the number of trading days in the period.
    Note 2: FDIC insured client bank deposit sweep program balances with participating banks. These deposits are not reported in the Company’s statement of
    financial condition.
    Note 3: Commissionable Order – a customer order that generates commissions.
    Note 4: In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 14 major currencies in which we hold our equity. The total effect of the currency diversification strategy is reported in Comprehensive Income; the components are reported in (1) Other Income in the corporate segment and (2) Other Comprehensive Income (“OCI”) on the balance sheet. The effect of the GLOBAL on our comprehensive income can be estimated by multiplying the total equity for the period by the change in the U.S. dollar value of the GLOBAL during the same period.
    Note 5: Mark to market gains and losses on investments in U.S. government securities and associated hedges are included in Other Income. In the general course of business, we hold these investments to maturity. As a result, accumulated mark to market gains or losses should converge to zero at maturity. Accounting conventions require broker-dealers, unlike banks, to mark all investments to market.
    Note 6: Trade money is the total amount of money clients spent or received, including all commissions and fees.
    Note 7: Consistent with the clients’ trading activity, the computed VWAP benchmark includes extended trading hours.
    More information, including historical results for each of the above metrics, can be found on the investor relations page of the Company’s corporate web site, www.interactivebrokers.com/ir.

    About Interactive Brokers Group, Inc.: Interactive Brokers Group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 125 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to clients worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments. Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its February 24, 2020, Best Online Broker Review.
    Cautionary Note Regarding Forward-Looking Statements:
    The foregoing information contains certain forward-looking statements that reflect the company's current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the company's operations and business environment which may cause the company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the company on the date of this release. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the company's financial results may be found in the company's filings with the Securities and Exchange Commission.
    For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, 203-618-4070 or Media: Kalen Holliday, 203-913- 1369.
    tommcginnis likes this.
  5. d08


    Why are you posting this spam that has nothing to do with the topic?
  6. newwurldmn


    The index in question rallied 400percent in a month and then fell 50percent. You are surprised that margins are rising?

    I’m surprised they are not requiring 100percent cash funded.
    clockwork71 likes this.
  7. maxinger


    Are they trying to

    protect the customers or

    protect themselves?

    Honestly don't need to protect the customers.
    Customers are liable for their own foolishness & lousy money management.
  8. d08


    That implies all holdings going to zero because in the end it's about protecting the company not the customer's funds.
    I've yet to see any mid to large cap equities drop even 50% overnight, never mind 100%.
  9. hafez50


    I'd say 75% of futures traders are intraday clients only using intraday margin. No question $1200 intraday margin on an es is crazy like some co's charge but $25 k is insanity. Overnight maybe but intraday thats ridiculous. I'd say very few people are using $25k to trae futures
  10. Picaso


    I'm glad they removed intraday margins and I think raising margins in this environment (not just because of the VIX, but because of the pandemic we're in uncharted territory), but at some point this just becomes absurd.

    That said, lately they've been lowering margins on futures, ES was up to 35000, now it's down to 25,000. Yes, still high, but I guess they must have some method to their madness.
    #10     Apr 9, 2020
    darwin666 likes this.