hajimow, I can see you are VERY happy with IB, and that's great. However if you are a hedge fund, auto-liquidation, that can occur from wide markets in options during times of stress or exchange system issues, and can cause losses, even though the fund was not losing money. They would like the opportunity to hedge or take a look at the market and react themselves. Online Brokers can't do business that way because they have too many accounts to follow. Bob
stop spreading incorrect information to benefit your business. Auto liquidation NEVER EVER occurs in options positions as long as someone is long the options contract. The premium is paid in full. Next, auto liquidation should never occur when someone is properly capitalized even when selling premium. First of all exchanges mandate margin levels, then brokerages can actually be more conservative and require lower leverage levels from customers. Next, a prudent customer will be well capitalized and even wide markets will not kick the customer out of a position because of changes in required margin. So, I am not sure what you are talking about. It surely sounds you are pretty desperate for new business.
Exactly. In recent years HFs have become more careful about leaving cash with brokers, preferring to custodian most of their cash elsewhere, then rearranging as necessary among broker accounts in light of day-to-day market developments. Auto-liquidation interferes with this sensible strategy.
The funds I'm referring to are not HF. Option PM margin is a moving target. House rules can be too. They would like the opportunity to adjust to market conditions on their own. Remember, we are talking about margin, not losing money.
volpunter, I have to add a clarification to your statement here. IB will liquidate long options positions in order to attempt to raise cash to cover a deficiency that may have been created by margin use in any other product, including non-securities such as futures and forex. Perhaps you meant that you would not get liquidated if your account only held long options positions and you held no other products for which margin is required. Obviously in that case you would never face an auto-liquidation, because there would never be a margin deficiency. neotrader, the PFOF disclosures by IB which you cite only seem contradictory if not read in their entirety. IB states: "IB does not sell its order flow to another broker to handle and route." “To handle and route” are the operative words here. This means that IB is less like brokers such as TDA and Raymond James that sell order flow to brokers like Citi and KCG, and more like brokers such as Citi and KCG who retain captive order flow, operate dark pools, make markets, and actually buy order flow from others. def alleges that broker-dealers who buy order flow do so because “They get first look and many of them will lift the better offer that came up and flip it to you at the price you provided or perhaps even with time price improvement but that still doesn't mean you got the best possible fill.” Left unanswered is the question of why IB also buys order flow from brokers who do not make markets or operate dark pools. To def, would you mind stating whether or not IB will accept an order and route it to an exchange or dark pool if the customer does not have enough margin to cover that order if it were executed before IB could cancel it? Sounds like a dubious claim on the part of hajimow, particularly since the advent of Rule 15c3-5.
You are absolutely correct about your point regarding autoliquidation if account equity is underwater due to other positions. Thanks for the clarification. Though this is mostly an issue for someone who is careless and does not deserve better imho. I still believe that autoliquidation should never be an issue whatsoever for a prudent trader which includes being well capitalized. Any broker who would not autoliquidate an account in deficiency is reckless on the broker's part and puts others' valuable capital at risk of loss. What really interests me is IB's retail client order routing and relationship particularly to IB'S dark pool. That is something where there is hardly any transparency provided.
I'm with you on this. After researching this topic more, I'm now starting to wonder if IB's statements on PFOF might be even worse than non-transparent. Take a look at this shocking statement by an IB employee who granted an interview to discuss PFOF in an article titled (ironically enough), "Shedding Light on Payment for Order Flow." "We are the only broker to my knowledge that does not try to profit off of its customer order flow in any other way than commission." -Emmet C. Peppers, Interactive Brokers, CRD #4651658 http://blog.alphaarchitect.com/2015...t-for-order-flow-insights-from-emmet-peppers/ No wonder neotrader found IB's statements on this issue to be contradictory. IB Compliance should order a take-down of that interview. It's filled with misleading comments on this subject, including statements regarding the use of dark pools with respect to PFOF.
"Shocking!" Man, you seem so unbiased in this thread! What is your motivation here? Did IB ban your account and now your pissed and need some revenge? Do you work for an alternative brokerage?
No, but I can see how IB's claims on PFOF would anger a competitor. I'll tell you the same thing I told you a few pages back, when you first tried to run me off of this thread: Good luck to you. I sincerely mean that (again).
I also suppose IB's monthly metrics and Reg NMS Stock Trading Expense detail along with the audited price improvement stats anger competitors as well. You stated you are not a client, and either work at a competitor or have some axe to grind. Show me another broker offering the level of transparency that IB does and we can continue the conversation. In the meantime, if you're looking for a compliance job, send me a PM. We're hiring globally. You could then see for yourself first hand how seriously we strive to achieve best execution for our clients.