IB Exposure Fee

[risknav]

Hi Risknav,
To your question, there is no minimum level for teh exposure fee. It will be charged based on the amount thet the calculated risk for the exposure fee exceeds your equity value (cash value).

Yes, it was not clear from my post but when I say “exposure” I do mean “excess exposure” based on my Net Liquation Value.

Exposures for different categories are agregated as far as I know for risk in teh 'same direction' (+30% or -30%).

Thanks. The fee however, at least for equity and there indexes are based on a -30/+20 theoretical move. Do you or anyone else know how commodities, interest rates, and FX for that matter are treated? I’m referring to the futures and FOPs of these, not the ETF shares (if applicable) which are included in the equity (-30/+20) calculation.

 

[Ghost_of_Blotto]

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.

Extraordinarily surprised that this language appears to have passed review by legal.
Perhaps the situation is different in the US, but in the EU this language comes far too close to creating a contract of insurance indemnifying the account holder from losses in excess of either the available capital or 427,954.62 in return for consideration of $3.03 daily.

Any account holder with a non professional MiFID classification / dealing as a consumer would be in a stronger position re these terms. It is certainly not made clear enough to the account holder that they are being charged a fee to fund protection for the broker not their account (unless IB is going to the market for insurance for the customer which doesn't seem to be the case). Very misleading language for non securities lawyers.

I don't clear IB any more - has anyone based in EU received similar messages? Probably will never be an issue for futures e.g. NQ, but could see a margined stock carried overnight causing a debit balance and this language may affect ability of IB to recover the debit. Astonishing. This language ought to be reviewed to make it clear to the account holder that these new conditions do not give them any additional protection and that losses may exceed their deposit.

(yes, there are all sorts of technicalities about whether this email supersedes the existing contract, which terms take precedence, etc. but in my view it creates an undesirable grey area. A court may side with the person who has paid consideration. If the clause was found to be void IB could be liable to repay customers the total it has charged in that member state for the prior 6 years.)

 

[Gldr]

The whole exposure fee issue is a mess. You cannot calculate the impact in account mngt most of the time and there is no realtime impact available aither. The amounts are charged in a random way. If IB really wants customers to manage risk, they should make a tool that helps them, not something that no one understands and only cost money.

 

[darwin666]

The whole exposure fee issue is a mess. You cannot calculate the impact in account mngt most of the time and there is no realtime impact available aither. The amounts are charged in a random way. If IB really wants customers to manage risk, they should make a tool that helps them, not something that no one understands and only cost money.

ALSO.. HAS ANYONE FIGURED OUT HOW THE HELL WILL YOU DO YOUR TAXES. .WHERE R U GOING TO ALLOCATE THIS AMOUNT . .IT IS GOING TO BE A FREAKING ACCOUNTING NIGHTMARE.

 

[GTS]

My solution was to simply reduce my trading with IB so that I am never charged the fee.

 

[sprstpd]

ALSO.. HAS ANYONE FIGURED OUT HOW THE HELL WILL YOU DO YOUR TAXES. .WHERE R U GOING TO ALLOCATE THIS AMOUNT . .IT IS GOING TO BE A FREAKING ACCOUNTING NIGHTMARE.

If you are classified as a trader, it is just a business expense.

 

[lassic]

IB losses $120 million, we pay for it...

NOTICE OF EXPOSURE FEE INCREASE


As an account holder currently or previously subject to Interactive Brokers High Risk Account Exposure Fee, you are receiving this communication to inform you of a scheduled increase in the fee.


This increase is scheduled to be implemented in a series of daily increments over the two week period beginning as of the close of business January 26, 2015 and concluding February 6, 2015 and when complete, will result in a doubling of the fee. Note that this change will have no impact upon the manner in which exposure is calculated, only the fee associated with that exposure. As example, an account reporting $100 million of uncollateralized exposure and subject to a daily activity fee of $10,000 today, would be subject to a daily fee of $20,000 were that same exposure to be reported effective February 6th.


Clients seeking to minimize or avoid this fee in its entirety may do so by adding additional funds and/or adjusting their portfolio to reduce its projected exposure. We recommend the use of the Risk Navigator application with TWS as a tool for calculating and managing exposure as it allows for “what-if” position changes to simulate the resultant impact upon exposure.


Interactive Brokers Risk Management

 

[roblon]

Yes, I also just got this message. I am getting a little disgusted at this. There are better ways to manage client risk then a blanket "exposure fee". Why should I pay for IB's mistakes in letting CHF forex traders overleverage. I am actively looking to move all or a portion of my funds at IB to another broker.

 

[Gldr]

Another example of unacceptable behavior. They basically inform you of the fee increase close to the closing of the market, the day before the increase will be implemented. Totally unacceptable behavior. Time to change, because this makes me worry about the financial situation of IB. If you get very user unfriendly, and only focused on increased income, there are probably close to the financial edge...... Better leave them alone and bring mu money to a more secure broker.

 

[jtrader33]

Have they still not published the methodology for the fee?