Even customer agreement should abide laws and base on fairness. I totally agree with you that IB should use the margin to control the risk instead of charging risk fee. IB just to increase their revenue and use the risk as an excuse to charge its customers. IB charged me ~15k last year, and will be more than 20k this year according to the charges so far this year.
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IB is going to start charging a daily exposure fee
- Thread starter fbell50
- Start date
Even customer agreement should abide laws and base on fairness. I totally agree with you that IB should use the margin to control the risk instead of charging risk fee. IB just to increase their revenue and use the risk as an excuse to charge its customers. IB charged me ~15k last year, and will be more than 20k this year according to the charges so far this year.
Do you have a good broker to recommend? Thanks!Time to move to another broker.
Totally agree with you. IB is guilty. And if you know how its founder made his fortune.The sole reason IB does it this way (i.e., utilizing a made-up "exposure" fee) is to obfuscate their true cost structure. And that's bad; very bad.
Even customer agreement should abide laws and base on fairness. I totally agree with you that IB should use the margin to control the risk instead of charging risk fee. IB just to increase their revenue and use the risk as an excuse to charge its customers. IB charged me ~15k last year, and will be more than 20k this year according to the charges so far this year.
So why don't you spend the 15k and buy the insurance yourself? Or switch brokers who won't charge you?
Good point. That's also the question I asked IB but have no answer. If IB charged the risk fee, and bought the insurance to full cover the tail risk of my account, I am actually ok with the charge. The problem is that IB just wants to charge the fee but do nothing. Even IB says that it as an insurance business, it sells me the policy and cover the risk in my account, I am fine too.So why don't you spend the 15k and buy the insurance yourself? Or switch brokers who won't charge you?
Do you have a good broker to recommend? Thanks!
Good point. That's also the question I asked IB but have no answer. If IB charged the risk fee, and bought the insurance to full cover the tail risk of my account, I am actually ok with the charge. The problem is that IB just wants to charge the fee but do nothing. Even IB says that it as an insurance business, it sells me the policy and cover the risk in my account, I am fine too.
Do you have a good broker to recommend? Thanks!
IB is probably buying a form of credit insurance against you. It's not for you. It's for them.
Why not talk to Bob Morse on here?
Why does it matter to you if IB is using the extra exposure fee amount to either buy insurance against clients' risky bets going south, or taking it in and keeping it (effectively "self-insuring" against it)? In either case, IB is using it to cover their own ass.
In the end, the money you use on margin is IB's money, and according to the margin agreement, IB can do whatever they deem necessary to protect themselves from losses. This includes charging risky positions an extra fee, or liquidating positions.
In the end, the money you use on margin is IB's money, and according to the margin agreement, IB can do whatever they deem necessary to protect themselves from losses. This includes charging risky positions an extra fee, or liquidating positions.
Agree, Bob seems like a very reasonable broker and I've heard Lightspeed is top notch.IB is probably buying a form of credit insurance against you. It's not for you. It's for them.
Why not talk to Bob Morse on here?
20K exposure fee and it's only 3 months in? Or you project 20K for the whole year? Either way, wow. In spite of that you're still game, so I guess you're really rolling in the dough with the overall premium collected. Here I am thinking even $1 a day exposure fee is ridiculous as $30 a month is a steak dinner.Even customer agreement should abide laws and base on fairness. I totally agree with you that IB should use the margin to control the risk instead of charging risk fee. IB just to increase their revenue and use the risk as an excuse to charge its customers. IB charged me ~15k last year, and will be more than 20k this year according to the charges so far this year.
Actually you can buy that insurance for yourself. It's being long options and turning the naked short into a spread. Of course, that leads to slightly more trading commissions generated and debit costs of long option leg.
I mean, at 20K exposure fee as you claim, wouldn't you come out ahead just capping all positions off with an extra position to turn it into a spread? Or does trading cost and cost of long leg 'cost' more than the 20K?
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IB is probably buying a form of credit insurance against you. It's not for you. It's for them.
How can you buy so called "credit insurance" on a client? Who sells such insurance? Like a CDS? lol?
And isn't a 'perfect hedge' to the client pretty simple? Just go out and buy the tail end options of the client's position (the position the client refuses to buy themselves to juice up premium collection) and it becomes the 'perfect hedge' on the client's risky positions. And they shouldn't cost too much too going far out. I mean, if you're trying to 'hedge' a client's position that is.