IB not offering 4-1 margin!!!

Discussion in 'Trading' started by IRAF, Aug 23, 2001.

  1. IRAF


    I have just re-read the IB FAQ and they do state it clearly that they will not provide the 4-1 margin. This is ridiculous, 4-1 margin was the only good thing that came out of the new SEC rule and IB will not even grant that.

    I am outraged!!!

    I thought that 4-1 margin was part of the rule. How can IB choose tom comply with the 25K minimum portion of the rule and at the same time choose to ignore the 4-1 margin portion???

  2. def

    def Sponsor

    IB does not choose to comply witht the 25K rule. It is a rule and must be followed.

    As for the degree firms choose to extend margin it is up to each individual firm. if you desire, you can voice your opionion via an e-mail to mgmt on the IB web site.
  3. IRAF


    Thanks for the reply. My confusion is with the fact that in the rule it explicitly states that the margin will increase to 4-1. If this is part of the regulation, how can it be open to interpretation?

  4. Htrader

    Htrader Guest

    I'm not surprised that IB chose not to offer the 4-1 margin. I think many online brokerages will follow their example. With 4-1, it is simply too easy to lose all your capital, leaving the brokerage holding the bag.

    Besides, having more money to trade doesn't mean you'll be more successful. I have found that too high share size is actually detrimental to trading. Each person has their own comfort level with regards to trade size. If you exceed this level, it will affect your trading.

  5. Babak


    It would have been nice to have 4-1 margin although I don't lament that they won't be there for me. I imagine I would have only used it sparingly in any case.

    Perhaps as the new rules are enacted and some time passes by giving the brokers a good feel of their effects, they will extend 4-1 margin. Perhaps.
  6. What did you guys think ? 4 to 1 margin will be at broker's discretion of course, brokers have always had their own margin rules in addition to SEC regulations. I doubt many will offer 4 to 1 margin to all their customers. We got screwed from the beginning.
  7. Individual firms can apply a higher standard to the rule. A NASD firm could say we do
    not want to give 4 to 1 margin for daytraders because the firm feels this is too much leverage to allow. If your
    firm feels this way , you can leave and trade at another
    firm. The NYSE rule 431 allows up to 4 to 1 and $25,000
    minimum equity. If Interactive Brokers or any other firm
    does not want to give 4 to 1 margin, I believe that is the
    firms right to do so. See NYSE Memo 01-9 at:

    http://www.nyse.com/pdfs/im01-9Microsoft Word - Document in 01-9.pdf

    Gene Weissman
    Lieber & Weissman Sec., L.L.C.

  8. huby


    Looks like everyone gets the shaft on this deal. WHAT A JOKE!!!
  9. i cant really blame IB for not wanting to be exposed to 4:1.. as i understand it, most pro firms that offer higher leverage have risk management parameters that prevent excessive margin in any one position.. since IB doesnt have that type of control on their customers it makes sense to only extend 2:1.. i can see at least 2 positives though..

    1.) If the software screws up and we over buy a position by a couple hundred shares, we wont be subject to a margin call unless it somehow exceeds 4:1..

    2.) We still get the elimination of the overnight rule..

    so, not worth the tradeoff for booting all "small potatoes" out of our business but thats what we get out of it - less hastle..

    good trading

  10. I'm sure IB is just careful at this point. Given that IB makes money off of margin interest, I'm convinced that they at some point will allow traders with acceptable risk parameters higher leverage. If not, you can always move your account somewhere else.

    #10     Aug 23, 2001