You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
IB Exposure Fee
- Thread starter mastacoli71
- Start date
You moved your futures account to RJO' Brien already or doing it now?
1245
I have already moved my futures account over. They are great and do not charge the Exposure Fee, Overnight Fee, and have lower margins. Everybody should move to teach IB a lesson.
I have already moved my futures account over. They are great and do not charge the Exposure Fee, Overnight Fee, and have lower margins. Everybody should move to teach IB a lesson.
I will do the same. RJ O'Brien looks good.
To be more transparent, maybe IB should openly use the proceeds to create a portfolio that directly bets against those same positions that traders are overexposing themselves on, to show that if those accounts go down, IB will directly hold the counteracting market positions that will directly benefit from the customer's losses to protect the firm, hence a true hedge against their customer's positions. Sort of like what Goldman did with CDSs.
So if some guy is shorting a tonne of tail risk premium as part of their strategy on the S&P via a bunch of ES puts, then maybe the fees collected by IB from the pool of funds from over leveragers, should be used by IB to buy puts or put spreads (cheaper) directly betting against the S&P so the firm remains delta neutral against those customer's positions. They should enter the trades well after a customer enters theirs, to show they are not trading against their client's order flow but merely as a true hedge against tail risk.
Of course, customers positions are fluid so customers can close a position, IB has to close a hedge and execution costs can make this untenable. But sure, clearly IB won't do this and it is likely just something that goes into their top and bottom line, but seriously some people are way too brazen. E.g. the attitudes about 30% moves being 'impossible' just because historically nothing exceeded 30% on an index. I would think 'anything is possible' is usually the way to go here.
I think gap risk is the real fear. Some people here say 30% moves are 'not possible', but they are. For futures there are circuit breakers, so accounts not in compliance will be liquidated long before a 30% move. But their risk measure is based on the portfolio through a family of instruments including equities and equity options. Equity can sustain 30% gap moves easily and it can occur at random, not even during earnings. E.g. POT gap down after the uralkali news last year. So with a PM account and someone short the options too, they can probably get creamed in those cases from a gap move in the underlying of 30%.
So if some guy is shorting a tonne of tail risk premium as part of their strategy on the S&P via a bunch of ES puts, then maybe the fees collected by IB from the pool of funds from over leveragers, should be used by IB to buy puts or put spreads (cheaper) directly betting against the S&P so the firm remains delta neutral against those customer's positions. They should enter the trades well after a customer enters theirs, to show they are not trading against their client's order flow but merely as a true hedge against tail risk.
Of course, customers positions are fluid so customers can close a position, IB has to close a hedge and execution costs can make this untenable. But sure, clearly IB won't do this and it is likely just something that goes into their top and bottom line, but seriously some people are way too brazen. E.g. the attitudes about 30% moves being 'impossible' just because historically nothing exceeded 30% on an index. I would think 'anything is possible' is usually the way to go here.
I think gap risk is the real fear. Some people here say 30% moves are 'not possible', but they are. For futures there are circuit breakers, so accounts not in compliance will be liquidated long before a 30% move. But their risk measure is based on the portfolio through a family of instruments including equities and equity options. Equity can sustain 30% gap moves easily and it can occur at random, not even during earnings. E.g. POT gap down after the uralkali news last year. So with a PM account and someone short the options too, they can probably get creamed in those cases from a gap move in the underlying of 30%.
This is total bollocks. You will find that IB's US futures margins are very much in line with exchange mandated initial and variation margin levels. And I totally am in favor to penalize those who leverage thus high that they are at risk of not only blowing up but having to chip in additional funding, should an adverse intraday or overnight move occur. I am an IB customer and I most likely in aggregate across all my IB accounts tie up more funding than many that are moaning about this "over-leverage disincentive fee" and I would not want to have my broker be subject to increased risk because certain clients do not know how to trade at prudent risk levels. Enough said.
P.S. I have not been charged such exposure fee a single time...speaks for itself...
P.S. I have not been charged such exposure fee a single time...speaks for itself...
Avoidance of these daily exposure fees essentially makes IB's margin requirement for trading ES futures over 500% higher than the exchange margin most other firms charge. It is almost as if they don't know why people trade futures. This is a shame; it's just a shame.
This is total bollocks. You will find that IB's US futures margins are very much in line with exchange mandated initial and variation margin levels. And I totally am in favor to penalize those who leverage thus high that they are at risk of not only blowing up but having to chip in additional funding, should an adverse intraday or overnight move occur. I am an IB customer and I most likely in aggregate across all my IB accounts tie up more funding than many that are moaning about this "over-leverage disincentive fee" and I would not want to have my broker be subject to increased risk because certain clients do not know how to trade at prudent risk levels. Enough said.
P.S. I have not been charged such exposure fee a single time...speaks for itself...
J.P. is actually fully correct. (and you are too but you refer to a different posiyion).
The issue is that the fee only appears when people sell or short items. Even if they stay well within the IB margin requirements the fee is requested. This is why several people suggest to increase the margin instead if the objective is to reduce risk. I think that is fine to most and will make things clear and transparent at the moment of trade.
The current exposure fee is not and IB only likes it because they will make more money (current commission levels are relatively low) and changing the margin would make them look uncompetitive in different comparisons, The exposure fee is not taken into account in the comparisons.
The statement, if you would read it again, pertained to the combined effect of the exchange margin which is all that is charged by most brokers, IB's additional margin which IB adds to the exchange margin, and the IB exposure fee which is yet an additional cost that was invented by and is unique to IB. These facts and costs may not affect you, as they only pertain to traders who want to want to allocate their funds efficiently.This is total bollocks. You will find that IB's US futures margins are very much in line with exchange mandated initial and variation margin levels. And I totally am in favor to penalize those who leverage thus high that they are at risk of not only blowing up but having to chip in additional funding, should an adverse intraday or overnight move occur. I am an IB customer and I most likely in aggregate across all my IB accounts tie up more funding than many that are moaning about this "over-leverage disincentive fee" and I would not want to have my broker be subject to increased risk because certain clients do not know how to trade at prudent risk levels. Enough said.
P.S. I have not been charged such exposure fee a single time...speaks for itself...
Can someone clairfy how the calculation is made or how they think its made?
IB's website describes it in none other than words, and makes no qualms about it being a 'black box' that they define at their own discretion and can change at any time without warning kinda thing.
So, how does one determine whether their portfolio will be charged this fee or be close to getting there? I don't think I've been charged this fee ever but I'd like to make sure. In the activity statement, under which category should one find the fee (if charged)?
Is this interpretation correct: Goto risk navigator. Find out maximum of either -30% or +20% loss exposure. Take this number and subtract from net liquidation. If negative, then this amount is charged a fee per day? What rate is this?
IB's website describes it in none other than words, and makes no qualms about it being a 'black box' that they define at their own discretion and can change at any time without warning kinda thing.
So, how does one determine whether their portfolio will be charged this fee or be close to getting there? I don't think I've been charged this fee ever but I'd like to make sure. In the activity statement, under which category should one find the fee (if charged)?
Is this interpretation correct: Goto risk navigator. Find out maximum of either -30% or +20% loss exposure. Take this number and subtract from net liquidation. If negative, then this amount is charged a fee per day? What rate is this?