IB Exposure Fee

[ofthomas]

I'm not going to leave, but I am going to sell less options so I don't have to pay any fee.

Therefore, this fee is costing them money (less commissions) instead of making them money.

it is not costing them money if it is accomplishing the objective: to reduce their credit risk exposure to you...

I dont get why everyone is complaining so much about the exposure fee... this is simple... if you get hit with it then you are over leveraged, period... and all they are doing is insuring themselves against your failure and nothing more... don't want to pay the fee? then trade within your means...

 

[risknav]

it is not costing them money if it is accomplishing the objective: to reduce their credit risk exposure to you...

I dont get why everyone is complaining so much about the exposure fee... this is simple... if you get hit with it then you are over leveraged, period... and all they are doing is insuring themselves against your failure and nothing more... don't want to pay the fee? then trade within your means...

A trader being “over leveraged” is subjective – very much so actually.

A trader being (or not being) margin compliant is not, this can be determined in less than one second. In addition, and in IBs case, your position(s) will be liquidated in real-time should your excess liquidity go negative.

The complaints about the exposure fee are justified.

 

[tiddlywinks]

A trader being “over leveraged” is subjective – very much so actually.

A trader being (or not being) margin compliant is not, this can be determined in less than one second. In addition, and in IBs case, your position(s) will be liquidated in real-time should your excess liquidity go negative.

The complaints about the exposure fee are justified.

Sooo many other ways IB could handle this. They chose a fee. Being a public company is a bitch!

An example of another way was initiated this month at a futures-only firm I deal with. It's an Equity-to-Margin ratio... in order to place a trade -or- hold open positions equity to margin ratio must be at least 5% (or greater than $500, whichever comes first) else face liquidation, where a liquidation fee is imposed only if not handled timely and properly by the client (meaning the risk department performed the liquidation). Equity to Margin ratio is net_liquidation_value/initial_margin. It's applied against all open and initiating positions combined.

A simple, easy to compute, and effective way to prevent all-in trading with no cushion whatsoever. Applies to overnight and intraday margin requirements.

 

[darwin666]

that will be the DAILY fee (assuming risk stays the same)? ouch

they did not charge me for SAT /SUN.. so they charged for FRIDAY. and then MONDAY.
.. so assuming u hold such positions all year.. u will be hit ~240 days a year..
so ballpark . 0.7% APR. . not 1% APR. which we assumed earlier.

 

[1245]

they did not charge me for SAT /SUN.. so they charged for FRIDAY. and then MONDAY.
.. so assuming u hold such positions all year.. u will be hit ~240 days a year..
so ballpark . 0.7% APR. . not 1% APR. which we assumed earlier.

It's not a percentage. It's a fee per/$M exposure. It gets higher per $M as the risk increases.

1245

 

[NeutronJuan]

it is not costing them money if it is accomplishing the objective: to reduce their credit risk exposure to you...

Funny, that.

I'm increasing IB's credit risk exposure to me in terms of probability in order to generate additional revenue to cover the cost of the exposure fee.

 

[Gldr]

Most people will do that to compensate for the additional cost. So the only winner is IB, while for all traders the risk incraeses

 

[NeutronJuan]

So I get charged an exposure fee for the 16th & 17th, but I don't get charged (yet?) an exposure fee for the 18th even though my position and risk profile remain unchanged.

I'm not sure how to interpret this exposure fee nonsense.

 

[Gldr]

So I get charged an exposure fee for the 16th & 17th, but I don't get charged (yet?) an exposure fee for the 18th even though my position and risk profile remain unchanged.

I'm not sure how to interpret this exposure fee nonsense.

You will get charged, only on the stress test, you can only see it one day later..... It's a simple calculation, that's why it takes so long to calculate.

 

[darwin666]

Most people will do that to compensate for the additional cost. So the only winner is IB, while for all traders the risk incraeses

gee.. i wish . i cud increase my exposure.. but .. i have ALWAYS maxed my exposure and leverage to the HILT.. ha ha.. no room for even a marginal increase. ha ha. as they say. leverage to your eye balls..

shouldnt IB give us a bit more leverage so we can take on more risk and make more and be able to pay them this special shylock fee?