IB's margin call liquidation policy on illiquid securities?

Discussion in 'Retail Brokers' started by Daal, Sep 19, 2008.

  1. Daal

    Daal

    I'm long a deferred fed funds contract that normally has a wide bid ask spread. I'm worried that at some points it could widen dramatically. if someone hits a market order and the only bid is at some ridiculous 50% below the value this could mark down my position and I would be bankrupt overnight. What is IB policies regarding this type of situation?
     
  2. m22au

    m22au

    In theory, yes, you could liquidated.

    In practice they may choose to refrain from liquidating you.



     
  3. Daal

    Daal

    def is saying they wont liquidate on just one tick. I think I figured how IB mark the illiquid assets. they market it to most liquid side of the bid ask spread, a smart way imo. interesntly if the US banking system did the same it would be the end of the financial world
     
  4. IB is nuts when it comes to liquidating positions...
    You should not be trading this type of security thru IB...
    You are entirely at their mercy, minion.
     
  5. moo

    moo

    How about being short financial stocks at the crazy opening prices Friday?
    Did IB liquidate anyone because of that spike?

    I am worried IB auto-liquidation policy could destroy even those who are speculating in normally very liquid stocks.

    Combine SEC stupidity with IB auto-liquidation, and what do we get??? :confused:
     
  6. Note the 799 List is 100% common stock...
    I trade illiquid securities related to the financial sector...
    Stuff that trades < 100,000 shares/day...
    And it was ALL available to short as usual via IB...
    I had no buy-ins or liquidations out of 100 short positions...
    Though Island busted a 9:50 trade at 16:03...
    And STOLE $5,000 from me...
    But it was still a very profitable day.

    Volatility is your friend.

    It's still possible that IB next week...
    Will start to randomly auto-liquidate positions...
    For random people for random reasons...
    Just to show who's in charge...
    The only solution is to minimize overnight holdings.
     
  7. The opening reminded me of the Russel rebalance closes we used to get.

    DeeDee, what was the stock, or if you dont want to say, what was the reason for the bust. 9:50 seems awfully long after the open to have been in one of the crazy prints.