IB Margin Changes
- Thread starter gtcharlie
- Start date
- Status
From IB: "This change is intended to recognize the well-known risks of micro and small cap stock which, relative to larger cap stocks, tend to be more volatile and less liquid, particularly in periods of elevated volatility."
Two words that disprove that assumption: "Flash Crash". As we saw on May 6 2010, when the HFT machines, which by their nature target high volume (i.e. frequency) stocks, get turned off, bad things happen to big cap stocks. That's not to say smallcaps don't move during a crash, just that they're all about equally vunerable from what I saw last year and during 2008/2009. Now in a normal day-to-day environment, penny stocks and thinly-traded, low-volume stocks, those are quite volatile and risky to hold a large position in. But IB already had a list of those stocks as being non-margined I thought. Extending that list a little further I can understand but the rationale for just filtering by cap size, not trade volume, and only because of current volatility conditions seems odd to me.
Two words that disprove that assumption: "Flash Crash". As we saw on May 6 2010, when the HFT machines, which by their nature target high volume (i.e. frequency) stocks, get turned off, bad things happen to big cap stocks. That's not to say smallcaps don't move during a crash, just that they're all about equally vunerable from what I saw last year and during 2008/2009. Now in a normal day-to-day environment, penny stocks and thinly-traded, low-volume stocks, those are quite volatile and risky to hold a large position in. But IB already had a list of those stocks as being non-margined I thought. Extending that list a little further I can understand but the rationale for just filtering by cap size, not trade volume, and only because of current volatility conditions seems odd to me.
Excellent. When own your own clearing firm, you can use your (presumably better-grounded than Mr Peterffy's) assumptions as to how and where to extend credit.
Latest Email From IB
i got this one a few min ago.
Margin Increase on Low Cap Securities
As a follow-up to a communication issued last Friday, please note that we will be implementing a change to our margin policy whereby stocks which report a market capitalization below USD 250 million, or equivalent, will no longer be considered marginable and therefore will have no loan value. This change is intended to recognize the well-known risks of micro and small cap stock which, relative to larger cap stocks, tend to be more volatile and less liquid, particularly in periods of elevated volatility. At this point, the policy will exclude certain classes of securities such as preferred stocks, ETFs and closed end funds, although individual issues within those classes may already be subject to house margin requirements for other cause and those margin rates will not change.
The table below includes a list of securities which you hold that will be subject to this change. Please note, that in an effort to provide sufficient time for you to take the actions necessary to ensure margin compliance, we have extended the time line for implementation of these margin changes as follows:
Close of Business
Effective Date Margin Rate
2011/09/21 35%
2011/09/23 50%
2011/09/28 75%
2011/09/30 100%
i got this one a few min ago.
Margin Increase on Low Cap Securities
As a follow-up to a communication issued last Friday, please note that we will be implementing a change to our margin policy whereby stocks which report a market capitalization below USD 250 million, or equivalent, will no longer be considered marginable and therefore will have no loan value. This change is intended to recognize the well-known risks of micro and small cap stock which, relative to larger cap stocks, tend to be more volatile and less liquid, particularly in periods of elevated volatility. At this point, the policy will exclude certain classes of securities such as preferred stocks, ETFs and closed end funds, although individual issues within those classes may already be subject to house margin requirements for other cause and those margin rates will not change.
The table below includes a list of securities which you hold that will be subject to this change. Please note, that in an effort to provide sufficient time for you to take the actions necessary to ensure margin compliance, we have extended the time line for implementation of these margin changes as follows:
Close of Business
Effective Date Margin Rate
2011/09/21 35%
2011/09/23 50%
2011/09/28 75%
2011/09/30 100%
Ah, so I'm not supposed to disagree with any policy changes IB decides to make because they always know better than me? I sure hope you don't work in customer service.
I actually agree with the approach of reducing margin allowed during volatile markets and I've always felt that IB was too lenient on which thinly traded stocks could be margined. I just feel this simple approach is too arbitrary and includes many relatively safe stocks (not that any stock is all that safe) that are now much less appealing for me to trade. Anyway, hopefully they can refine the list a little bit more -- I'm glad to see they've already made some changes like others have suggested.
Kind of expected with a volatile market at this... margin changes are the thing of the day in 2011 
"At this point, the policy will exclude certain classes of securities such as preferred stocks, ETFs and closed end funds"
This is much more reasonable and less hysterical than the original program.
As for you imbeciles and idiots, not to mention miscreants, that insist you should be able to borrow someone elses money without their consent, well, gfy. And what's the fetish with margin? If you were such a good trader , and you couldn't wait to max out every possible position, you wouldn't be here polluting the stream, now would ya?
This is much more reasonable and less hysterical than the original program.
As for you imbeciles and idiots, not to mention miscreants, that insist you should be able to borrow someone elses money without their consent, well, gfy. And what's the fetish with margin? If you were such a good trader , and you couldn't wait to max out every possible position, you wouldn't be here polluting the stream, now would ya?
- Status