..Overview
IB calculates initial and maintenance margin requirements on a real-time basis, and overnight and Reg T margin at the end of each day, and will liquidate positions on a real-time basis if there is a margin deficiency. To help customers avoid reaching this deficiency, TWS now supports Soft Edge margining, which includes color-coding on the Account Screen and pop-up warning messages to notify customers that they are approaching their margin limits. This features allows you to take action, such as entering margin-reducing trades, to avoid having IB liquidate your positions. Soft Edge margining colors on the Account screen convey the following information at a glance:
  • Yellow - You have only a 5% cushion above the margin requirement.
  • Orange - Your margin cushion is depleted and you have a short time to enter into margin-reducing trades before IB begins to liquidate your positions. At this point you will not be able to enter into any trades that might increase your margin.
  • Red - IB will shortly start to liquidate positions as necessary to bring your account back within the margin limits.

Soft Edge and real-time margining allow you to understand your trading risk at any moment of the day, and help you maintain low commissions, since we do not have to spread the cost of credit losses to customers like other non-automated brokers.

All of the calculations below as well as other real-time account statistics can be found in the TWS account window. For a detailed description of the account window and its underlying calculations, see the TWS User's Guide.

It should be noted that all liquidations are subject to the normal commission schedule. Advisor clients will not be subject to advisor fees for any liquidating transaction.

T-Bills may be deposited as collateral, but we require a minimum of $1,000,000 in US T-Bills for a transfer. To initiate a US T-Bill transfer, contact Customer Service.
 
..New Position Margin Calculation
Upon submission of an order request, a check is made against real-time available funds. If available funds including the order request >=0 the order is submitted, if it is negative the order is rejected. The following calculations are used to determine available funds:
Securities available funds = Securities equity with loan value - Securities initial margin requirement.

Commodities available funds = Commodities net liquidation value - Commodities initial margin requirement
In addition, you are required to have a minimum of $2,000 or USD equivalent of securities equity with loan value or commodities net liquidation value to open a new position.
 
..Maintenance Margin Calculations
On a real-time basis, excess liquidity is checked to ensure that it's >=0, if it is negative the account is subject to liquidation on a real-time basis. The following calculations are used to determine excess liquidity:

Securities excess liquidity = Securities equity with loan value - Securities maintenance margin requirements

Commodities excess liquidity = Commodities net liquidation value - Commodities maintenance margin requirements
 
..Reg T End of Day Margin Calculations
At the end of each US trading day (15:50-16:00 ET), a Special Memorandum Account (SMA) is checked to ensure that it's > =0, if it is negative the account is subject to liquidation. In addition, no cash withdrawal will be allowed that causes SMA to go negative on a real-time basis. SMA is calculated for all securities (stocks and options) regardless of country of trading as follows:

Special Memorandum Account=Maximum ((Equity with Loan Value - initial margin requirements*), (Prior Day SMA +/- change in day's cash +/- initial margin requirements**))
*Calculated at the end of the day under US margin rules.
**Calculated at the time of the trade under US margin rules.
 
..Margin Models
Margin requirements are calculated either on a rules basis or a risk basis.

For rule based margin systems, predefined, static calculations are applied to each position or predefined groups of positions (“strategies”). The following instruments are margined using rule based margins:
  • US stocks, index options, and stock options
  • Canadian stocks, index options, and stock options

For risk based margin systems, exchanges consider the maximum one day risk on all the positions in a complete portfolio, or subportfolio together (for example, a future and all the options delivering that future). The general calculation method is as follows:

  • Exchange assigns scanning ranges for price movements, volatility shifts, and other risk directions. The ranges are based on observations of historical performance of the underlying instrument.
  • Every instrument (stock/option/future) is valued over the ranges of price, volatility, etc. The resultant value matrix is distributed to Interactive Brokers on a daily basis.
  • IB values the (sub)portfolio over the matrix and determines the worst case scenario loss using standard models approved by the exchange.
  • The margin is calculated as the difference between the current portfolio value and the worst case value.

Margin requirements for each underlying are listed on the appropriate exchange site for the contract.
 
..Restriction on Leverage
There is a real-time check on overall position leverage, as follows: The Gross Position Value cannot be more than 50 times the Adjusted Net Liquidation Value. Alternatively, this can be expressed as:

2% securities gross position value > Net liquidation value - Futures option value
Liquidations may occur if the Gross Position Value exceeds more than 50 times the liquidation value.
 
..Universal Account
Although the Universal Account should be viewed as a single account for trading and account monitoring purposes, for regulatory and segregation purposes, there exists a separate securities and commodities account. If there is a margin deficit in either your securities or commodities account, cash will be immediately transferred to protect the margin deficit. At the end of each day, any excess cash in your commodities account will be swept to your securities account.
 
..Margin What Ifs
Margin "What Ifs" may be tested through the TWS Demo or by creating an order and choosing Check Margin under the Orders menu before you transmit an order.
 
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