Does IB take responsibility? An amazing story

[Profitaker]

Riskarb

I don't know what you mean by the "10 minute <u>rule"</u> ?

Just because one infringes margin requirements doesn't necessarily mean the NLV would put the account in debit, far from it. The whole point of margin is just that - it's a protection, a margin ! My point is that to liquidate real-time without any human input / thought is unreasonable.

But if that's the brokers policy and is clearly documented then fine - I won't be using them. As I said, the cheapest isn't always the cheapest - ask Option Trader.

Quote from riskarb:

We're all gamblers. You're not? Must be comforting to be playing with so much edge.

Agreed. Yes. Meaning ?

 

[zdreg]

Quote from IBj:

An interesting fact was uncovered as a byproduct of this thread.

IB's margin for box positions on american exercise options is too low. We are requiring only the strike differential, which is fine for european exercise options but lower than the cost to close the position which is the minimum that should have been charged.

The difference is not trivial. The estimated margins should be 5-10% higher depending on the contracts in question. We will fix.

This had no contribution on the event that is the source of this thread but it is a perfect example of why we have the GPV 50:1 limit. Without this limit, traders would be able to put on infinitely big positions since the cash generated by the box sale would be bigger than the margin required to hold it.

It seems like some people recognized this and leveraged their capital as far as we allowed. I am extremely happy we have a GPV algorithm as a safety net.

the law of unitended consequences is always the most powerful law in the universe.

so you see Option_Trader there are other traders out there who will now
have increased margin requirements as a result of your thread.
perhaps some of those" push the envelope" traders are on this board or they will hear about you.
i am sure they will be displeased but as they are undoubtly true professionals they will go on to the next game or adjust without a peep.

 

[Option Trader]

You think IB did that in spite?

 

[Option Trader]

Quote from Don87109:

IMHO any liquidation trades done by Timber Hill have no bearing on this issue.
Don

Although customer service would not provide ticker info of the trades, yet I believe what Don is saying, and take back the insinuation I made--corporate mentality I believe is THE issue.

 

[ssternlight]

Quote from riskarb:

My statement didn't require precognition. My point was to state that a lot can happen in 10 minutes. Leave enough on the table to account for variation margin. Problem is, 90% of the trader population are degenerate gamblers.

Well I don't know about the gambler part.

 

[luh3417]

Those of you who are still whining about IB: please inform us of the better broker you use. Tell us their policies and their rates. I'm waiting, but not holding my breath.

I'm also curious which of the other 50 direct access brokers listed on elitetader has the balls to come into a public forum to discuss with us. Maybe they don't because people use the forum to try them in public and essentially extort from them in the court of public opinion.

I don't want to end up subsidizing the risky behavior of other investors, and I look to my brokerage to establish policies to prevent this.

 

[ktm]

The title of this thread should be "Does IB CUSTOMER take responsibility? The amazing story of one guy who increased your margin requirements."

 

[Option Trader]

Quote from IBj:

You cannot program to reduce the ratio (as you suggest in your other post)....

I don't believe there is anything else I can add to clarify (although I will be happy to do so, if I missed something)...

I am hoping to be constructive, for IB's sake, for IB customers generally speaking, and for my partner's sake.

As per your posting, you would offer to clarify whatever is missing. You are a clear thinker, so please provide clear answers to the following:

1) I mentioned that my securities attorney said that when a broker has a right to liquidate, it must be done in a manner to not harm the client unnecessarily. Did IB's legal department disagree?

1b) In a situation that it can be shown that some of the assets that were liquidated fed instead of reduced the problem, would IB take responsibility for that much?

2) When it is obvious to a broker (no firm in specific) that a customer is oblivious to a particular point which puts his assets at risk (e.g. the customer is asking for permission to INCREASE the position size, while even the existing position are at real-time risk) does IB understand the broker is not obligated to inform the customer of the imminent danger to his account?

2b) If, additionally, the customer made a specific request from the broker for any information they may have regarding the topic (i.e. which here happened to be crucial information), did IB's legal department take the position that the broker is not obligated to forward any information which is anyway in the contract?

3) Does IB agree that from now on the auto-liquidate software should handle position size problems (i.e. relative to liquidation value) by finding the most expensive options, as they would reduce position size quickly, and would spare numerous smaller size options from being sold at below net liquidation value (which feeds the problem)?

3b) The account sets net liquidation value as at some happy medium between bid and ask; so the customer perceives he will get in the event of liquidation. Does this not suggest IB should be liquidating the positions as spreads--which will also keep the positions balanced (and reduce risk to the broker and client)?

Please, fellow Elite Traders, let us keep the issue focused.

 

[Option Trader]

Quote from ktm:

The title of this thread should be "Does IB CUSTOMER take responsibility? The amazing story of one guy who increased your margin requirements."

Don't worry, Luh347 will find you another broker.

 

[IBsoft]

Quote from Option Trader:

I am hoping to be constructive, for IB's sake, for IB customers generally speaking, and for my partner's sake.

As per your posting, you would offer to clarify whatever is missing. You are a clear thinker, so please provide clear answers to the following:

1) I mentioned that my securities attorney said that when a broker has a right to liquidate, it must be done in a manner to not harm the client unnecessarily. Did IB's legal department disagree?

1b) In a situation that it can be shown that some of the assets that were liquidated fed instead of reduced the problem, would IB take responsibility for that much?

2) When it is obvious to a broker (no firm in specific) that a customer is oblivious to a particular point which puts his assets at risk (e.g. the customer is asking for permission to INCREASE the position size, while even the existing position are at real-time risk) does IB understand the broker is not obligated to inform the customer of the imminent danger to his account?

2b) If, additionally, the customer made a specific request from the broker for any information they may have regarding the topic (i.e. which here happened to be crucial information), did IB's legal department take the position that the broker is not obligated to forward any information which is anyway in the contract?

3) Does IB agree that from now on the auto-liquidate software should handle position size problems (i.e. relative to liquidation value) by finding the most expensive options, as they would reduce position size quickly, and would spare numerous smaller size options from being sold at below net liquidation value (which feeds the problem)?

3b) The account sets net liquidation value as at some happy medium between bid and ask; so the customer perceives he will get in the event of liquidation. Does this not suggest IB should be liquidating the positions as spreads--which will also keep the positions balanced (and reduce risk to the broker and client)?

Please, fellow Elite Traders, let us keep the issue focused.

I, for one (and I hope some ET users feel the same way), would much prefer if IBj spent his valuable time on more fruitful pursuits than continuing this discussion with you in a public anonymous forum for the sake of yours and your partners.

If you think (and from the contents of this thread it seems that you do) that IB harmed you or did not live up to its agreement with you, there are proper ways to deal with that. I don't believe what you are doing in this thread qualifies as such.

Finally, if you believe that you have constructive suggestions as to how the liquidation software should be improved, I invite you to make them. While we can't promise to implement everything our customers ask for, we always carefully consider their suggestions in the hope that they may lead to improvements for all our clients.