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IB Margin Changes
- Thread starter gtcharlie
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Quote from jayre:
What are you talking about? We are not taking about overflow, we are talking about having the ability to consistently buy option contracts (thatâs the most profitable part of TH) at distresses prices. The seller is FORCED to sell for what ever bid is available. And TH only has to match the highest bid, thatâs a huge advantage.
Customers are getting the same price they would have at any other firm. The question is does IB blow out accounts specifically for the profit of Timberhill?
You are right about the buying of options; but I bet you most of the customers who are getting blown out are short options.
Only you could get margin called being long options - and you got called because you were short an option and bid offer caused a problem.
Of course, we're still not sure what exactly happend. So you may be right, but the cageyness implies you are just bitter.
Agree with you 100%Quote from sprstpd:
I agree with this statement. However, I don't view that as a bad thing. If you view this as a bad thing, then maybe have two accounts, one at IB where you force yourself never to go on margin, and another at a place that will give you more slack in that regard.
Quote from Options12:
To DEF or IDS or any other employees of Interactive Brokers who scan these boards in an attempt to clarify, defend, or just simply comment on their company's policies, would you please Answer FSU's well articulated couple of questions concerning (and I'm just trying to summarize here)
(1) IB's auto liquidation software capability as it relates to making intelligent margin reducing trades within the context of spreads, strangles or other inter-dependent positions.
(2) whether or not there is any human review to make sure that a margin deficiency is not related to a mis-mark or system error before the auto liquidation trades trigger is pulled
And then would you answer the remaining questions posed under this thread and speculated on by many including
(3) When TH takes the opposite side of a liquidated trade and profits accordingly, are these profits tracked and available via disclosure to the liquidated customer?
To DEF, IDS or any other Interactive Brokers employees who post on these forums will you answer these questions for us?
I guess we could start with something less sensitive.
How about do you still run those cartoon commercials showing the central bank burping cheap dollars for you to loan out nearly free at 10:1 leverage for an arbitrage trade using high-yield stocks?
It seems you finnally starting to get the point here about the huge edge that TH has by being able to consistently buy option contracts (thatâs the most profitable part of TH) at distresses prices when the seller is FORCED to sell for what ever bid is available, and TH only has to match the highest bid.Quote from newwurldmn:
Customers are getting the same price they would have at any other firm. The question is does IB blow out accounts specifically for the profit of Timberhill?
You are right about the buying of options; but I bet you most of the customers who are getting blown out are short options.
But now you are saying that edge which TH has, only relate when the acount owner is long options.
However the exect same sitiution would be when the accunt holder is "short options". In that case the owner would be forced to buy for "what ever ask is availeble" , the MM would get a much better price then normal because here we have a disttresed buy back. There is not another MM that has the same flow of "distressed option buyers" & "distressed option sellers" as TH has. That's creating a HUGE CONFLICT OF INTEREST.
Quote from jayre:
You hit the nail on the head.
I donât think they do anything they are not allowed to do under the agreement; the agreement gives them the max possible rights on the world, but I think they are probably taking advantage of their ignorant costumers, and as you can see they refuse to come clean on that.
We are not taking advantage of our customers. We are aiming to provide the best possible service we can. We are building a good, reputable business; we are in this for the long haul.
The auto-liquidation is not designed to produce profits for the market-making affiliate as you state/imply. It exists to safeguard the funds of our clients, and protect our capital. Further, the auto-liquidations allow us to maintain our low commissions because we do not have to spread the cost of credit losses to customers in the form of higher costs.
IB does not manipulate or abuse the auto-liquidation process to benefit itself or its affiliates.
Quote from jayre:
It seems you finnally starting to get the point here about the huge edge that TH has by being able to consistently buy option contracts (thatâs the most profitable part of TH) at distresses prices when the seller is FORCED to sell for what ever bid is available, and TH only has to match the highest bid.
But now you are saying that edge which TH has, only relate when the acount owner is long options.
However the exect same sitiution would be when the accunt holder is "short options". In that case the owner would be forced to buy for "what ever ask is availeble" , the MM would get a much better price then normal because here we have a disttresed buy back. There is not another MM that has the same flow of "distressed option buyers" & "distressed option sellers" as TH has. That's creating a HUGE CONFLICT OF INTEREST.
TH does not have the edge and does not seek to have the edge you describe. The option auto-liquidation orders are sent to the exchange with the best price. If TH was on the actionable side of the NBBO BEFORE IB sent the liquidation order there, it may get a portion of the fill. If TH was not there BEFORE the liquidation order was issued, it can only participate on filling the auto-liq order, if it is willing to improve the NBBO. The mechanics of improving the NBBO are such that a price-improvement auction is started. All market-makers can participate in the auction; the one with the best price gets to trade the broker's order.
IB Soft, thanks for joining in. Can you also cover these points while you are visiting this thread?
(1) Does IB's auto liquidation software have the capability to make intelligent margin reducing trades within the context of spreads, strangles or other inter-dependent positions?
(2) Is there any human review to make sure that a margin deficiency is not related to a mis-mark or system error or other unusual activity before the auto liquidation trades trigger is pulled?
(3) When TH takes the opposite side of a liquidated trade and profits accordingly, are these profits tracked and available via disclosure to the liquidated customer?
(1) Does IB's auto liquidation software have the capability to make intelligent margin reducing trades within the context of spreads, strangles or other inter-dependent positions?
(2) Is there any human review to make sure that a margin deficiency is not related to a mis-mark or system error or other unusual activity before the auto liquidation trades trigger is pulled?
(3) When TH takes the opposite side of a liquidated trade and profits accordingly, are these profits tracked and available via disclosure to the liquidated customer?
Quote from Options12:
IB Soft, thanks for joining in. Can you also cover these points while you are visiting this thread?
(1) Does IB's auto liquidation software have the capability to make intelligent margin reducing trades within the context of spreads, strangles or other inter-dependent positions?
(2) Is there any human review to make sure that a margin deficiency is not related to a mis-mark or system error or other unusual activity before the auto liquidation trades trigger is pulled?
(3) When TH takes the opposite side of a liquidated trade and profits accordingly, are these profits tracked and available via disclosure to the liquidated customer?
1) Yes, the auto-liq software has the capability to use combinations/strategies.
2) We have various circuit-breakers that monitor (i) portfolio value and margin value jumps on the individual accounts level and system-wide level, as well as (ii) number of recent auto-liquidation trades, attempts, account deficits and similar. These breakers can suspend the auto-liquidation process. When that occurs, human review takes place.
3) We do not track the instances when TH takes the opposite side of a liquidated order. We do not know whether they amount to a profit, or a loss. The auto-liquidation trades represent a tiny fraction of the total number of trades IB executes a day.
When you see IBsoft on the forum, you know you are getting some answers. But why does IB have a problem with truth?Quote from IBsoft:
We are not taking advantage of our customers. We are aiming to provide the best possible service we can. We are building a good, reputable business; we are in this for the long haul.
The auto-liquidation is not designed to produce profits for the market-making affiliate as you state/imply.
You say that it "designed" to produce profits, but would go on the record saying that timber hill is not profiting from this autoliquidation by buying options for distressed prices? Its a simple question and I have no doubt what the answer is, to me that creates a huge confict of interst.
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