IB Exposure Fee

[risknav]

I agree that this is IB trying to protect themselves, but the way it’s being done is not transparent at all. Let us see the calculation, apply it in real-time, and let the traders adjust positions as needed (or not) based on it. This can be implemented just like real-time margins; I would appreciate if one of the IB representatives on this forum would publicly comment.

I don’t think this fee is market, asset class or strategy specific – though short options play a big (biggest perhaps) part. I think it’s coming down to the -30/+30 underlying move maximum loss per day, and the amount you would be equity negative should this occur before you can exit positions. This “can” be monitored in real-time using the Risk Navigator.

Again, I personally find that IB has clearly defined rules for most things (especially margin/equity related) so for a fee to be based on margin/equity over-risk and not be detailed and/or presented in real-time is disappointing.

 

[1245]

This fee provides income not protection from loss. You can make the argument that rather than increase house rules so that these trader can't play at all, this is much better, but the position still sit on their books, so there is no protection.

1245

 

[RedDuke]

$4mil acct. He checked, $125 daily and that goes up and down depending on risk exposure.

That's a lot. We got an email with a much smaller amount. He must be leveraged a lot more than us.

 

[actionzip54]

This fee provides income not protection from loss. You can make the argument that rather than increase house rules so that these trader can't play at all, this is much better, but the position still sit on their books, so there is no protection.

1245

Not if people take the position off which I presume has happened in lots of instances. Hell, IB may be trying to run off some of their more speculative customers. This fee isn't exactly an incentive to keep a bunch of short nickel option positions on.

 

[1245]

Not if people take the position off which I presume has happened in lots of instances. Hell, IB may be trying to run off some of their more speculative customers. This fee isn't exactly an incentive to keep a bunch of short nickel option positions on.

That is possible, but IB has never been that subtle. If they don't like your position, they liquidate.

 

[NeutronJuan]

IB boasts on it's Risk Management page that "Real-time margining continuously enforces limits for each account, automatically liquidating positions if any individual account violates its limits at any time." I think positions of high risk would be liquidated well before reaching a 30% loss. So WTF?

Has their risk management software failed? Should we be concerned that IB no can longer manage the overall risk of it's customers positions? I'm very concerned about this turn of policy.

Also, while they reference insurance they don't explicitly say that it's actually an insurance policy in the event of maximum exposure.

My overall impression is that IB has a technical problem and they're not coming clean with their customers as to the exact nature of the problem.

 

[risknav]

I believe IB has been updating its website with regards to the exposure fee. Please see this link for details on the fee itself, the table is at the bottom; https://gdcdyn.interactivebrokers.com/Universal/jsp/Reference/masterReference.jsp?jump=7151

This makes it more clear (though I still don’t agree with it) but based on your -30/+30 maximum underlying/account loss per day, which can be seen in real-time using the Risk Navigator, these fees would be applied at the end of the day, debited the next day.

I would like IB to make one addition to this table – the maximum allowable exposure before the fee kicks in – so again, give us the traders (your customers) the ability to adjust our positions/portfolios.

 

[1245]

I believe IB has been updating its website with regards to the exposure fee. Please see this link for details on the fee itself, the table is at the bottom; https://gdcdyn.interactivebrokers.com/Universal/jsp/Reference/masterReference.jsp?jump=7151

This makes it more clear (though I still don’t agree with it) but based on your -30/+30 maximum underlying/account loss per day, which can be seen in real-time using the Risk Navigator, these fees would be applied at the end of the day, debited the next day.

I would like IB to make one addition to this table – the maximum allowable exposure before the fee kicks in – so again, give us the traders (your customers) the ability to adjust our positions/portfolios.

I was not able to use your link and see the same information on this one as a few days ago: https://www.interactivebrokers.com/en/index.php?f=otherFees&p=exposure

When I spoke to them they told me the stress test would show information for the previous day's risk, not real time.

 

[risknav]

Sorry, that’s the link however when I switch browsers I can see the issue you’re having. This link contains the same information as your link, however with the added table.

I have attached the webpage, in text format saved from my browser. It did not save the text part we both see (go figure) but shows the table at the bottom – I have not modified anything.

You can see your real-time risk using the Risk Navigator, just enable the vertical crosshair (and scroll over to +30/-30%) or add the 30% plot data column under Metrics.

 

[1245]

Sorry, that’s the link however when I switch browsers I can see the issue you’re having. This link contains the same information as your link, however with the added table.

I have attached the webpage, in text format saved from my browser. It did not save the text part we both see (go figure) but shows the table at the bottom – I have not modified anything.

You can see your real-time risk using the Risk Navigator, just enable the vertical crosshair (and scroll over to +30/-30%) or add the 30% plot data column under Metrics.

Cool, now I can have a goal of an exposure risk of $300M so they can charge me $45K /day. Their explanation to me does not match this, which I assume will be more accurate than their support team. It looks like as your risk increases, the fees per risk $ increases.