Does IB take responsibility? An amazing story

[luh3417]

Quote from Option Trader:

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

That's luh3417. My partner, thx1138 is also waiting to hear from the whiners about the other brokers that 1. charge less 2. impose less margin requirements 3. are active on this forum. My point is that there probably are none. Which to me indicates that that is the reality of the market and that the trader is to blame.

As ktm has noted, the one result of this thread has been that the one broker that comes closest, IB, has increased their margin requirements. Let's keep airing our laundry out here and maybe we can get them to stop participating in this forum and increase their fees...

 

[ellokn]

Quote from Option Trader:



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

Why would a trader would put themselves in the position where there is even a chance of your broker having to liquidate you. If you go that far out on a limb, you will likely fall and it is not up to anyone to make sure your landing is as soft as possible. You will be liquidated. Period.

It is a basic rule of risk management. You broke it and now you are complaining that you do not like how the rules were carried out.

Not only do you not understand the basic rules of risk management, and how to work constructively with a brokerage service or platform, you even seemed to believe that you were in some kind of "risk free" trade.

On this absurd assumption you then broke all the rules and now it is someone else's fault.


Rule 1. Understand what you are trading.

Rule 2. Know the house rules.

Rule 3. Do not blame others if you broke rule 1 and 2.

 

[Option Trader]

Quote from IBsoft:

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 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 an improvements for all our clients.

It takes a lot more time to not handle the issues, as it is with a lot of things in life.
The points concern fellow Elite Traders, or there would not be over 6,000 views in just a few days. Answers were not yet provided in private or public forum.
If IB can have the benefit of automating and protecting the customer, everyone will be happy.

If someone else in IB can and does handle the suggestions and handle the complaint, great! If it deserves attention from your top corporate man, IB will do so because they felt it was a good business decision; when things are handled, the matter is closed.

 

[Option Trader]

Reply to ellokn,

You are trying to intuite what occurred without spending the time to review what happened.

 

[Option Trader]

To Ellokn:
...If I may add, you were not the only one, who tried to join in the middle. Those who understand how it affects THEMSELVES, and those who understand the issues, have given support.

 

[Option Trader]

Quote from luh3417:

...also waiting to hear from the whiners

That's "winners"
whiners is a goal in itself,
winners is the result of being proactive.

 

[El OchoCinco]

Why don't you or your "securities lawyer" cite the law, regulation or NASD provision that states that when a broker has a right to liquidate it mus tbe done in a manner to not harm the client unnecessarily.

IB is not under any obligation to liquidate you in any specific manner unless you can cite something specific. Otherwise your "attorney" is just speaking his mind. If you have a legal precedent than share with us.

Otherwise, the auto liquidate feature is valid and if it costs you some money, that is just a downside to using IB. Their goal is to protect themselves from people who go over the margin limit and I see no regulation statute or policy that say they have to liquidate in the way that causes you the least harm. Automatic liquidiation is not arbitrary or capricious because it is applied across the board to all accounts.

Where is the legal support? I doubt your lawyer will find it. Also, "not harm the client unnecessarily" is a subjective term and auto liquidation at market is an unbiased, straightforward policy and you were harmed due to the spreads of the positions. If the options to close had spreads of $0.05 your loss would have been much much less. So a market order caused you the same harm we all face when we place market orders.

I am not unsympathetic to your loss, but find no legal precedent to support the claim that IB's policy violates any law, SEC regulation or NASD policy, unless you can provide one. IB's policy is tough but it is applied equally to all clients and disclosed in their account information.

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?

 

[ellokn]

Options Trader, I have been reading this from the start.

To keep the focus, let us go back to your own presentation:

Quote from Option Trader:


IB had encouraged to file a complaint to enable them to review it.

Sounds like the responsible and professional standard handling any dispute.

Quote from Option Trader:



Although some people have thought IB could be unreasonable, we will see here what they will do in this case, where seemingly the fault is quite clear.

Well, you have already made up your mind here to blame IB before a review.

Quote from Option Trader:



background: Box spreads are hypothetically risk-free....

That is a new one in the world of Markets. There is neither a free lunch nor a risk free trade in the world.

Quote from Option Trader:



Yet, after opening the positions, my partner found out that IB had some type of restriction to not allow the Gross Position Value (GPV) to be exceed a certain size relative to net liquidation value. We had no idea that existing positions had to keep the right ratios in real time, otherwise there would be liquidation.

After the trade was initiated you "found out" about "some type of restriction." So you did not even know the rules of your trade BEFORE you entered it.

Quote from Option Trader:



After the liquidation occurred (which we believe was handled improperly by the auto-liquidate), someone in corporate IB pointed to somewhere in writing that mentions this can happen, while my partner's claim is that this information should have been shared by IB, because they were in constant communication, and IB was aware of the positions, and was aware my partner did not know of the liquidation concern.

The responsibility is for YOU to know all this and you clearly did not as you write above.

To believe and expect to deal with someone on the phone at IB who knows exactly what is going on in your account and also be aware of the encroaching liquidation, and still pay pennies for your trading there, is a naive assumption.

If you need that kind of support and guidance, IB is not your broker.

It is not mine.

 

[zdreg]

one thing we know Option _Trader is that you and your secret partner have raised margin requirements in boxed trades which happens to be good for the vast majority of traders. secondl
some errant but smaller trader may take it upon himself to learn the rules so as to not get himself into your situation. third a thread of this size always brings out those posters who think they know how to run a BD better than the current principals. fourth- it brings out the conspiracy crowd that your loss is the broker's gain. 5th this kind of thread brings out the hand holding deprived individuals who want hand holding +the lowest commissions..
6th are the individuals who come out of the woodwork who think that if they violate the monetary requirements in the account they should have the same amount of time to meet their obligations as a broker with substantially more capital and lines of credit.

 

[mskl]

Quote from Option Trader:

Backround: Box spreads are hypothetically risk-free, and therefore do not require any margin.

Hypothetically risk-free if you have the capital to handle all possible assignments that might take place - which was NOT the case for your situation. If you understood the real risk of these positions, you would understand why IB has a 50 times equity GPV limit and you probably would not be complaining about your liquidation.

As for how they liquidated your positions - that should be an issue you deal with them directly, not in a public forum.


good luck.