IB Day Trade Buying Power

[Deenius]

Hello

I need your help in understanding purchasing power.

I would like to know how it is possible for Interactive Brokers to calculate day trade buying power differently than FINRA requires?

FINRA states the following on its website:

"You can trade up to four times your maintenance margin excess as of the close of business of the previous day."

https://www.finra.org/investors/lea...ng/day-trading-margin-requirements-know-rules

In contrast, IB calculates day trade buying power as follows:

DTBP = Minimum (Equity with Loan Value, Previous Day Equity with Loan Value) - Initial Margin *4

When I tried the TWS demo account, I was quite surprised that my DTBP was NOT reduced when I sold my overnight long position. Immediately after the sale, my buying power was worth four times its equity with loan value! Not four times my maintenance margin excess from yesterday.

It's a real mystery to me.

I informed of this fact IB support, but even after two weeks I received no reply. So I hope that someone here will be able to explain to me why there is a difference in the DTBP calculation between FINRA and IB.

Thank you in advance for any knowledge.

 

[cruisecontrol]

Maybe IB takes on any risk associated with settlement fails or whatever antiquated reasons there originally were for not immediately freeing BP when liquidating an overnight position. I don't really know the answer, but why question it? Are you seriously worried that IB is violating regulations? Just enjoy having more buying power.

 

[zdreg]

A brokerage firm can make their own rules as long as exceeds the minimum requirements.

+ you were talking about a demo account. maybe there is a bug there but you can be sure it does not exist in a live trading account.

 

[Deenius]

@cruisecontrol I'm not afraid IB is breaking the rules. I'm just wondering why they calculate DTBP this way.

@zdreg I'm aware that brokers can set their own conditions as long as they do not violate the applicable regulatory rules. That is quite clear to me.

I also thought the same way you did. This means that this can only be a demo account issue. In fact, this is the most likely explanation. Maybe someone who day trades with IB could shed some light on it.

 

[cruisecontrol]

I'm not afraid IB is breaking the rules. I'm just wondering why they calculate DTBP this way.

Because more buying power is better. The other way sucks.

I also thought the same way you did. This means that this can only be a demo account issue. In fact, this is the most likely explanation. Maybe someone who day trades with IB could shed some light on it.

Nope. Works this way in live accounts too.