IB Margin Changes

Status
Not open for further replies.
Quote from gtcharlie:

Anyone else get the e-mail about IB no longer granting any margins on stocks with a market cap less than 250 million. Seems like a pretty big change to me and will cause some pretty good liquidations by the time it is implemented this Friday. Can someone suggest a simliar retail firm cost wise without such restrictions? I trade pretty frequently and don't want a per trade commissiion but a per share one.
More...
Making such a major change out of the blue & only giving time till Friday??
Again IB "picking up nickels in frunt of a bulldozer" if you use margin overnighth. ONLY USE IB IF YOU TRADE ON CASH OR IF YOU ARE DAY TRADING, if not get yourself another broker and yes, pay double the nickels you have been paying at IB, but you know what you would not get hit by the bulldozer (liquidation).
This is not the first time that IB has changed the rules in middle of the game (remember 2008?) under the notion of protecting their clients.
 
Not a big deal IMO. Small cap stocks are risky. They are protecting themselves. I don't think you will see a max exodus from IB because of that.
 
Quote from mastacoli71:

Not a big deal IMO. Small cap stocks are risky. They are protecting themselves. I don't think you will see a max exodus from IB because of that.
More...
No big deal if that's the rule to begin with, its quite big of a deal if its getting changed in middle of the game. Hey, you never know when the the margin rules on "your" positions will change..
 
Quote from given2trade:

I think this is a game changer. If they don't reverse the rule, I will be transferring my account to a prime broker. I have a material account with them and can't operate without margin. I'm not a day trader but focus on micro caps and hedge accordingly with ETFs.

I'm not sure we will see big moves in stocks as a result of this, however. I could be wrong but I'd think this only effects a small minority of their customer base.

It's a terrible business decision. They are assuming a $150 million market cap is inherently risky (or more risky) due to it's size. This is simply wrong. They might as well limit margin on all stocks with the letter "A" in the ticker. I truly believe that the people in risk management at IB and most large brokers have never managed money before and have no real idea what they are doing. For them, they'd rather save $50,000 on losses if it means costing them $20,000,000 in revenues.

I don't have a name of a retail brokerage firm that is anywhere nearly as good as IB but if your account is large enough there are many small prime brokers that would take you. If you are not big enough you might be shit out of luck.

The whole situation is awful. I just registered to post here.
More...

I am fortunate enough to have an account with another broker with whom I can hold this type of position. Unfortunately IB comes in very handy in certain trading situations where I trade large quantities of inexpensive stocks albeit not in single trades.

And I agree with other posters who say it will cost IB a fair amount of business. I don't think some people realize how many stocks this encompasses. As I mentioned earlier lumping in closed funds and preferred stocks along with everything just makes no sense. Makes me questions IB's future decisions in other areas.
 
This just wasn't thought out. They figured that they make so little on financing that the risk isn't worth it but they failed to realize they will lose whole customers (and their trading commissions) as a result.

Every prime broker allows margin on sub $250m market caps.
 
Quote from mastacoli71:

Not a big deal IMO. Small cap stocks are risky. They are protecting themselves. I don't think you will see a max exodus from IB because of that.
More...

That's by far my biggest gripe. They assume everyone can just liquidate or add money w/in 2 trading days because on a whim they decided small cap stocks are too risky to margin. What about taxes? Some of us hold our positions for a year for long term capital gains. Having to suddenly liquidate would be disastrous for me.

There is simply no urgency to implement this in 2 trading days, which is what they did. The rules start on Wed at open and go in full by Fri at open. What would the harm have been to let this happen a month from now? Give people time to transfer accounts or add funds or sell or whatever? I have been a customer for years using margin on micro cap stocks and have never posed a problem.

It's very short sighted and extremely poor customer service. Small customers will be screwed but large ones (like me) will just go to a small prime broker. TP is a billionaire but I know he cares about his company as it's his baby and I can't imagine he is happy with how poorly this has been handled.
 
woops meant to quote this when i responded with the above:

"No big deal if that's the rule to begin with, its quite big of a deal if its getting changed in middle of the game. Hey, you never know when the the margin rules on "your" positions will change.."

Still getting the hang of this place, sorry.
 
Quote from given2trade:

That's by far my biggest gripe. They assume everyone can just liquidate or add money w/in 2 trading days because on a whim they decided small cap stocks are too risky to margin. What about taxes? Some of us hold our positions for a year for long term capital gains. Having to suddenly liquidate would be disastrous for me.

There is simply no urgency to implement this in 2 trading days, which is what they did. The rules start on Wed at open and go in full by Fri at open. What would the harm have been to let this happen a month from now? Give people time to transfer accounts or add funds or sell or whatever? I have been a customer for years using margin on micro cap stocks and have never posed a problem.

It's very short sighted and extremely poor customer service. Small customers will be screwed but large ones (like me) will just go to a small prime broker. TP is a billionaire but I know he cares about his company as it's his baby and I can't imagine he is happy with how poorly this has been handled.
More...
Its the approach that's really troubling, I'm sure Friday will be a very busy day for the autoliquidation system for people that didn't had a chance to close positions or haven't realized there is a major change. While other brokerges go the extre mile to try avoiding liquidtation IB is almost encouraging autoliquidations (very quick in offering you max leverage, while pulling the leverage even quicker).
 
Quote from jayre:

Its the approach that's really troubling, I'm sure Friday will be a very busy day for the autoliquidation system for people that didn't had a chance to close positions or haven't realized there is a major change. While other brokerges go the extre mile to try avoiding liquidtation IB is almost encouraging autoliquidations (very quick in offering you max leverage, while pulling the leverage even quicker).
More...

Exactly. What if I was in on vacation abroad this week? I'm actually going on a cruise in a few months where I will have very limited access to email. My IB email goes to a special "junk" account. I could very well have not gotten it. Further, I'd never been able to get the funds available in such short time to stop an auto-liquidation. It's reprehensible for them to do this - actually immoral. I believe if they do autoliquidate certain people's accounts they will be forced into arbitration and could very well lose. I won't be that person because I'm fortunate enough to have friends & family that can provide me a bridge loan but this is arrogance at it's worst.

What would the harm be for them to have allowed 30 days to implement this? I mean, the market is 7-8% off it's lows. If someone wasn't wiped out at S&P 1100 why would they now urgently be wiped out at S&P 1200? IB's equity is not at risk. This is a decision that was made by risk and was probably ok'd by the CFO given their thought that it would have minimal impact on revenues. What they neglected to see is that it will have a very real impact on many people who are THEIR CUSTOMERS. We only played by their rules! They advertised their low margin rates in national publications! Now all of a sudden they are going to pull them with 48 hour notice? It's reprehensible.

I know you guys read these forums. Shame on you.
 
i was always curious how their auto liquidation mechanism will work on long term portfolio of not really liquid corp bonds,that about to be liquidated? at what prices they will liquidate position,if there is no bid and ask(totally possible and very common situation on bonds)?
tell you more disturbing news-i've been in this situation once and know for sure that IB's CS have no ability to stop or override the auto liquidation process. i feel lucky today,sitting in cash mostly,but this is one of the reasons that i'm not buying any bonds anymore. i had enough of this margin sickness back in 2008. not sure who wins what in that game..also curious,if charging IB's customers $1 per month for BONDS CUSIP's will make for Mr Petterfly a lot of money..btw-IB is saying that it's a new exchange rule..not sure about new rule,but every other broker i have account with not charging anything for damn CUSIP info(which is available for free anyway on FINRA website)..to me it's looks like ultra cheap pathetic play...
 
Status
Not open for further replies.
Back
Top