IB Exposure Fee

[RichardRimes]

Thanks guys, I know your right FCM 's "should" know the ins and outs of futures therefore be better to deal with.

Its frustrating because you are not really rewarded for defined risk trades when trading futures. Because you can't roll a future option as one order (you are forced to leg in and out) there is the theoretical risk of a greater loss than your debit. To me this smacks of lack of willingness on the part of brokers to invest in the technology that allows traders to trade futures options as they would regular equity options.

In a way you are encouraged to be a seller rather than a buyer. I can't sell a 1970 SPX call/put without putting up insane margin, however I can sell a 1970 ES option for very small margin. So as traders if you want to define your risk via spreads the SPX is certainly better, but if you want to SELL strangles/straddles than I guess Futures options are the way, however if they go against you for any length of time you are SOL.

 

[1245]

Thanks guys, I know your right FCM 's "should" know the ins and outs of futures therefore be better to deal with.

Its frustrating because you are not really rewarded for defined risk trades when trading futures. Because you can't roll a future option as one order (you are forced to leg in and out) there is the theoretical risk of a greater loss than your debit. To me this smacks of lack of willingness on the part of brokers to invest in the technology that allows traders to trade futures options as they would regular equity options.

In a way you are encouraged to be a seller rather than a buyer. I can't sell a 1970 SPX call/put without putting up insane margin, however I can sell a 1970 ES option for very small margin. So as traders if you want to define your risk via spreads the SPX is certainly better, but if you want to SELL strangles/straddles than I guess Futures options are the way, however if they go against you for any length of time you are SOL.

The CME does not have a COB like the CBOE, but they do have a Request for Quote (RFQ) system that you can enter spread orders. I know CTS T4 has this function.

1245

 

[RichardRimes]

I can enter spreads...even complicated (only in the same series)...but its the way margin on them are calculated. What you can NOT do are calendars or diagonals because you can only do spreads on the same series...therefore if I WANT to roll as a single trade this weeks long call to next week I can't.

 

[1245]

I can enter spreads...even complicated (only in the same series)...but its the way margin on them are calculated. What you can NOT do are calendars or diagonals because you can only do spreads on the same series...therefore if I WANT to roll as a single trade this weeks long call to next week I can't.

You can at an FCM, but there are no offsets.

1245

 

[volpunter]

"sell or short items"? I sell or short "items" every single day and not once was I subject to this mentioned fee. Please correct me but are we talking about two different brokers here?

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.

 

[volpunter]

excuse me? It pertains to traders who "want to allocate their funds efficiently"? What does that exactly mean? Again I trade at times tens of millions (if not close to a hundred million" in USD notional equivalent currency positions, I trade options, futures, futures options, cash equity, single stock options. Could you please enlighten me why I have not been subject to this fee but others are?

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.

 

[volpunter]

and your alternative suggestion would be? Yes there commission are not the cheapest, however, I can attest you that you hardly get executed at lower total cost at least in currencies than here at IB. Where do you pay about 2 dollars for each 100k usd notional equivalent (more or less), close to zero market impact (for position size in line with offered liquidity) and average spreads in , for example, eurusd between 0.1-0.3 pips (up to around 5-6 million USD equiv. notional in one clip)? Which other broker offers solid APIs, a seasoned and well tested FIX interface, access to multiple asset classes, an interface that (for me at least ) has not crashed in almost a year, and I run my platform about 12-14 hours each day. Please enlighten all of us where you can trade stocks, options, currencies, futures, futures options, index options, single stock options, ETFs, CFDs, in US, Asian, European markets, and (not that I care much but many retailers do) pay 20-30 USD equivalent in real-time data fees without your broker marking up your data fees by sometimes up to 500%?

I'm not riding anyone here or slamming IB, BUT...
I really don't understand why you people continue to trade at IB.

Exposure fees, higher futures margins, margins on VIX verticals, auto-liquidate, poor support and I'm sure other things IB clients can speak of.

I just don't get it. With the exception of product selection, which you may not even need or use for your particular trading, IB does not offer much of anything awesome, and that includes commissions.

I'm just saying. There is enough BS traders need to deal with on a regular or daily basis. As a brokerage, IB is pretty much flying solo in adding new BS to your plate.

 

[volpunter]

because you what, trade 10 ES futures a week? I hope your FCM is large and reputable enough so your funding does not disappear overnight in Cyprus....

i switched after 15 yrs with them (to a FCM ) and OMG what a difference..wish i did it a few yrs back.

 

[GTS]

Loss amount appears to be based on an assumption of a 30% drop in the account. I am long 18 NQ from yesterday - details below:

As part of its risk management policy, IB continually simulates worst-case profit-loss scenarios for client portfolios. The scenarios examined may exceed the parameters used by various exchanges for determination of minimum margin requirements.

According to our analysis, it appears your account xxxxxx would have a maximum loss of 427,954.62 as compared to your margin requirement of 59,400.00 and your available capital xxx,xxx.xx (all balances in USD).

IB will charge for this excessive risk using an approach familiar to purchasers of insurance , i.e the charging of a premium to offset future event risk. More information is available here. We calculate this account would have a daily exposure premium of 3.03 USD per day

Please note that this premium is not being actually charged at this time. However, we are displaying the anticipated charge to alert you ahead of the expected implementation on August 14, 2014, whereupon the exposure charge will actually be debited from your available funds on a daily basis.

 

[J.P.]

Understand that with IB you are buying into this: "Interactive Brokers will calculate the Exposure Fee in its own discretion and using its own proprietary algorithms (which are subject to change without notice)"

volpunter (and others who do not have English as their native language) does not understand this. For them, I will translate. It means that everyone, including and most especially volpunter, would be subject to immediate liquidation of their account in its entirety, for any or no reason, regardless of position profit or loss. There is no minimum or maximum. There are no if ands or buts. IB can "adjust" their exposure fee algo to simply take any and all funds from your account. At any time, for any reason. Period.