Risk of client like Bill Hwang blowing up IBKR

Discussion in 'Interactive Brokers' started by helpme_please, Mar 30, 2021.

  1. I know IBKR has strong risk management through auto-liquidation process of clients' portfolio who take on too much margin. However, auto-liquidation is not effective if the client positions are huge and concentrated. A good example today is Bill Hwang who is going to blow a big hole in a number of big banks.

    Many retail clients are using IBKR because they think IBKR can weather tail risks like Bill Hwang. Many of them will worry after seeing what happened to Bill Hwang's prime brokers.

    Does IBKR extend extra wide leverage to its bigger clients like family office and hedge fund?

    What's risk of same thing happening to IBKR?
     
    Last edited: Mar 30, 2021
  2. ZBZB

    ZBZB

    IB offer portfolio margin which is 15% or six times but it is less if you are just trading one stock. IB have $9 billion of capital and survived their customers buying oil at zero when it went to negative $39 and the Swiss lifting the limit on their currency.
     
    murray t turtle likes this.
  3. destriero

    destriero

    Dude, the analogy is poor. Hwang was in equity swaps (TRS). IBKR will auto liquidate unless it cannot do so due to overnight gaps. Reg-T is 50% overnight and PM increases haircut on concentrated positions... and you're already in SIPC. Archegos was putting up 10-20%.
     
    TrailerParkTed likes this.
  4. JSOP

    JSOP

    Just like my reply to your previous thread, those risk management policies are for us small retail traders. For us, a tiny small volatility positions, they do a 30% extreme scenario test and decides to charge us extra fees, force us to liquidate even though the positions are in profit. But with large traders like Bill Hwang, they can do f*** all and IB will cater to the end.

    IB is a pig!! If they blow up because of this Bill Hwang idiot, they deserve it.
     
  5. d08

    d08

    It's variable based on the instrument. PM calculations seem complex and it's extremely difficult to estimate what offsets something and what doesn't.
     
  6. ZBZB

    ZBZB

    He didn’t trade at Interactive brokers but at investment banks.
     
    murray t turtle likes this.
  7. IBKR doesn't have a swap desk
     
    zdreg likes this.
  8. ZBZB

    ZBZB

    They do have CFD total return swaps in the U.K. and probably other markets.
     
  9. CFDs are primarily a retail product. I have a prime broker account with IBKR and can tell you that the pickings are slim vs. full service prime brokers / investment banks.
     
    zdreg and Nobert like this.
  10. Doubt it. IB is conservative. Seems unlikely they would allow any investor with them to use such high leverage.
     
    #10     Mar 30, 2021
    ET180 likes this.