I just received an email that effective Oct 5 IB is going to start charging a daily exposure fee. Based on my current positions, I am subject to a fee even though I my excess liquidity is 58% of account value. My account sometimes reaches 0% excess liquidity. This is a significant charge. There are some new manual methods of checking the impact of new orders in the latest versions of TWS, but as far as I can tell no way in the API.
Manual checking is not practical for me. I would prefer to have the option to have orders rejected that would trigger the fee. The fee is scaled geometrically. For the first time I have been with IB I am going to start looking for alternatives.
Here's the email with my account info changed:
Charges to Accounts with Very High Worst-Case Loss Exposure
As part of its risk management policy, IB routinely stress tests client portfolios to evaluate their exposure to various market scenarios. These scenarios typically consider events such as price changes and option implied volatility shifts that are more extreme than those covered by regulatory margin requirements and may therefore project "worst-case" losses in excess of margin deposits.
These stress tests not only serve as a monitoring tool but also form the basis for assessing a daily "Exposure Fee" to those accounts reporting worst-case loss exposure in excess of equity on hand. This is intended to protect IB and its other customers from accounts maintaining portfolios which, while currently margin compliant, would not have sufficient equity to satisfy losses were the worst-case loss to occur.
While your account UXXXXXXX, is currently not subject to this fee, your exposure is now at a level that, were the fee to be charged, it would total 10.83 USD per day. Details regarding this fee are provided in the table below.
DAILY EXPOSURE FEE SUMMARY
Product "Worst Case" Account Uncovered Exposure Fee
Class Loss Equity Loss1 Fee2 Implementation Date
Equity 100,000 80,000 -20,000 10.83 October 05, 2015
1 Equals "Worst Case" Loss less Account Equity.
2 Determined through use of a proprietary algorithm whereby a fee of $1 is assessed against an Uncovered Loss of $76,000 with the fee scaling geometrically such that an account reporting an Uncovered Loss of $100 million would be assessed a fee of $20,000.
Please note that while this fee is not being charged at this time, your account will become subject to it effective as of the date(s) noted above. Starting then and every day thereafter, your end-of-day portfolio will be subject to the aforementioned stress tests and should your worst-case projected loss exceed account equity, a fee will be assessed and reported on your daily activity statement.
It's important to note that account holders have the ability to eliminate or reduce this fee through a combination of the following:
• Increasing account equity.
• Reducing the exposure by repurchasing short positions in options. We have found that short positions in cheap options generate the largest exposures relative to capital. You can use the Risk Navigator to simulate the effects of changes in your portfolio.
Again, the amount above is not being charged at this time. To avoid charges for carrying positions that have a loss far greater in the worst case than the capital of your account, we urge you to examine ways to reduce your exposure prior to the implementation date(s) noted in the table above. Additional information regarding this fee along with a listing of products to which it applies is available on the website and tools for managing the fee in KB2275 and KB2276
Interactive Brokers Professional Services
Manual checking is not practical for me. I would prefer to have the option to have orders rejected that would trigger the fee. The fee is scaled geometrically. For the first time I have been with IB I am going to start looking for alternatives.
Here's the email with my account info changed:
Charges to Accounts with Very High Worst-Case Loss Exposure
As part of its risk management policy, IB routinely stress tests client portfolios to evaluate their exposure to various market scenarios. These scenarios typically consider events such as price changes and option implied volatility shifts that are more extreme than those covered by regulatory margin requirements and may therefore project "worst-case" losses in excess of margin deposits.
These stress tests not only serve as a monitoring tool but also form the basis for assessing a daily "Exposure Fee" to those accounts reporting worst-case loss exposure in excess of equity on hand. This is intended to protect IB and its other customers from accounts maintaining portfolios which, while currently margin compliant, would not have sufficient equity to satisfy losses were the worst-case loss to occur.
While your account UXXXXXXX, is currently not subject to this fee, your exposure is now at a level that, were the fee to be charged, it would total 10.83 USD per day. Details regarding this fee are provided in the table below.
DAILY EXPOSURE FEE SUMMARY
Product "Worst Case" Account Uncovered Exposure Fee
Class Loss Equity Loss1 Fee2 Implementation Date
Equity 100,000 80,000 -20,000 10.83 October 05, 2015
1 Equals "Worst Case" Loss less Account Equity.
2 Determined through use of a proprietary algorithm whereby a fee of $1 is assessed against an Uncovered Loss of $76,000 with the fee scaling geometrically such that an account reporting an Uncovered Loss of $100 million would be assessed a fee of $20,000.
Please note that while this fee is not being charged at this time, your account will become subject to it effective as of the date(s) noted above. Starting then and every day thereafter, your end-of-day portfolio will be subject to the aforementioned stress tests and should your worst-case projected loss exceed account equity, a fee will be assessed and reported on your daily activity statement.
It's important to note that account holders have the ability to eliminate or reduce this fee through a combination of the following:
• Increasing account equity.
• Reducing the exposure by repurchasing short positions in options. We have found that short positions in cheap options generate the largest exposures relative to capital. You can use the Risk Navigator to simulate the effects of changes in your portfolio.
Again, the amount above is not being charged at this time. To avoid charges for carrying positions that have a loss far greater in the worst case than the capital of your account, we urge you to examine ways to reduce your exposure prior to the implementation date(s) noted in the table above. Additional information regarding this fee along with a listing of products to which it applies is available on the website and tools for managing the fee in KB2275 and KB2276
Interactive Brokers Professional Services
