FCMs that went bankrupt years ago did not have segregated accts, this is now regulated. The CME margin requirements are the golden standard. With IBs dynamic margin formulas - you never know how much it is fluctuating, at times it has been close to 3 fold of the CME. Making it easier to get shaken out of your position. The current CME maint margin for ES is $12,000, at IB its $22,456. I am not in the business of paying extra margin to help insure a FCM when there are other brokers that are financially strong, have margins in line with the CME, & have more stable margins that are not fluctuating wildly. I have several large accts with IB - which I trade futures on when the margins are not so absurdly high. Some of the overseas index margins at IB have remained fair.
No, CME margins are not golden standard. Are you kidding? CME clearing does not care much about member's losses. Stable margin requirement at this time is not a plus.
Very good point. It is inferior decision making to encourage static risk taking in times of heightened risk. A dynamic approach is reflected everywhere in our everyday life, starting from credit scores which reflect the credit risk of individuals and dynamically adjust to risk choices and preferences of individuals. So should margin levels reflect dynamic market risk levels.
ES margin was as high as ~37k a few days ago, this means that it was only offering a 3.4x leverage on ~125k notional, its pretty retarded if we consider the fact that they have continued to offer 4x leverage on SPY all this while. None of IB's margin algorithms make any sense and they are completely unpredictable, its so easy to get force liquidated if you have a futures position with IB. I don't use anywhere near that kind of leverage (4x) but God knows what IB will do in the future, they might decide to make their customers straight pony up the notional value of a futures contract the next time we get another volatility spike, this is just unacceptable risk and its why I've decided to move to another broker for good. Good luck to existing IB customers, you will all need it.
FCM regulation is generally strong and few FCMs ever went under, including: Refco LLC in 2005 Sentinel Management Group in 2007 Lehman Brothers in 2008 MF Global in 2011 Peregrine Financial Group in 2012 There are reasons for these failures that are all public, and setting insufficient client margin is none. This includes all the shops with $500 daytrade. I certainly don't advocate trading a futures contract for every $500 in capital, yet one has to wonder why we never hear about brokers getting into trouble for that reason. To hold overnight exchange margins are required, and these are generally very reasonable.
Here's a specific example of IB's absurd margin requirements on options. I wanna buy $1k of deep OTM strangles and the margin requirement is over 16x that.