IB's margin requirements for futures are higher than those of the exchanges. For example, right now the Globex initial margin for ES is $4,758 while IB's is $5,406.25. However, this is a quote from IB's Web site: "Margin Calculations for Commodities "Your Universal Account has two account segments: one for securities and one for commodities (futures, single-stock futures and futures options). Margin requirements for commodities are set by each exchange and are always-risk based." And on another page: "The table below depicts the exchange margin requirements." Then that table goes on to list margin requirements that are higher. And on another page: "The Time of Trade Initial Margin calculation for commodities is pictured below. The initial margin used in this calculation is set by the individual exchanges and listed on the Futures & FOPs Margin page." And there are other, similar statements on other pages of the site. I'm guessing that at some point in the past IB required only exchange margins and thus the legacy wording. There are two obvious problems here. First, there's the less-than-accurate site information. Then there's the issue of the exchange routinely raising margin levels during higher volatility periods, combined with the potential (likelihood?) of IB also raising their margins at the same time by an indeterminate amount. I am accustomed to the CME's longstanding policies on margin increases and can maintain sufficient funds in my account to allow for that and avoid forced liquidation. (And the exchange has a long history of changes in margin requirements.) But if something happens how do I plan for IB's additional margin which can go up by an unstated amount above that? In my experience, the CME provides at least 24 hoursâ notice before implementing margin changes in order to give market participants time to assess the impact on their position and make arrangements for funding. But with IB, would there be any prior notice at all, giving people at least a chance to wire in additional funds, or would the margin requirements suddenly just jump up to who-knows-what level and your positions instantly liquidated? So right now we have two separate entities using proprietary formulae dynamically changing margin requirements. One is enough. Now don't get me wrong; if IB were to simply state outright that they are going to routinely charge, say, 15 percent higher margins than the exchanges with prior notice, then I would know what to do and I would have no problem with that. But they need to state that explicitly. And they definitely do not do that. Better yet, why not just use the exchange margins as other brokers do? And anyone was bold enough to not have their stops in and who then falls below the exchange maintenance margin level can, and should, be liquidated. Everyone is familiar with and can plan for that; and isn't that a better way? Surely IB's systems can handle that with aplomb, no?
Yes, margin requirements for futures options are WAY higher at IB, it looks like I will have to have another acct. somewhere else if I want to trade these products
Oh they can handle it with aplomb, IBs systems have developed a strong sense of confidence through learning algorithms, and handle auto-liquidations with unparalleled algo-poise. Seriously though, there aren't many brokers using exchange margins and if you feel their margins are unnecessary then you can go elsewhere and you can short their stock.
Can some one more knowledgable confirm on this topic? I can't figure this shit out. It looked like selling a put in /CL was tying up more capital in my IB account than a similar trade in my TD account, but now I'm not sure, anyone have experience with this?
Actually it's the other way around. There aren't many brokers who impose extra margin on top of exchange margins to their customers like IB does. Also, their auto liquidating algo is a complete joke that benefits no one other than timberhill. And all this is coming from someone who has been with IB for close to 15 years.
Yea, I wasn't at all serious about their auto-liq...I was more poking fun at the idea of an algo liquidating with poise under pressure. I used tradestation and TOS in the past and thought they also imposed addtl margin on futures, but just checked and looks like I was wrong. Since you've been there for 15yrs, out of curiosity, has their policy always been that way? What is it that's made you stay given the auto-liq and addtl margin reqs?