IB Margin requirements rising as VIX falls, reaching nonsense levels

[narafa]

It's understandable to have higher margins but they were hiked even before during no volatility. When we barely have 2 to 1 leverage in midcap equities with many at 1.5 to 1, that is beyond careful.

I understand your point, but you have to keep in mind that earnings season for Q1 is kicking in and with the current situation, there is always a high chance that companies not only largely miss Q1 already downward revised forecasts but also to guide much lower. A down gap of 30% (Conservatively speaking) for a mid-cap stock might not seem like a rare event happening.

Unfortunately you won't be able to convince IB to look at your portfolio basket as a whole (Both Longs and Shorts) and honor the multiple statistical correlations they might have, so having a near neutral portfolio of stocks at this time is not expected to help your margin with IB. Even those statistical correlations might not be honored or respected by the market at times of high volatility & chaotic trading.

 

[d08]

I understand your point, but you have to keep in mind that earnings season for Q1 is kicking in and with the current situation, there is always a high chance that companies not only largely miss Q1 already downward revised forecasts but also to guide much lower. A down gap of 30% (Conservatively speaking) for a mid-cap stock might not seem like a rare event happening.

Sure but most of my positions are intraday thus earnings being largely irrelevant (not that PM differentiates between overnight and intraday). It's very clear that this same set of margin rules for everyone is a terrible idea as customers are vastly different in risk profile. Either deal with everyone individually or create a better model. I don't see this happening and the only solution is waiting for competition to come along.
The API code could be translated to any other API a competitor would create, making the transfer painless and quick. There's definitely space for more tech focused brokers to come along, for myself, I don't mind paying higher commissions if I can trade with some consistency and don't feel my broker is working against me.

 

[Sig]

Sure but most of my positions are intraday thus earnings being largely irrelevant (not that PM differentiates between overnight and intraday). It's very clear that this same set of margin rules for everyone is a terrible idea as customers are vastly different in risk profile. Either deal with everyone individually or create a better model. I don't see this happening and the only solution is waiting for competition to come along.
The API code could be translated to any other API a competitor would create, making the transfer painless and quick. There's definitely space for more tech focused brokers to come along, for myself, I don't mind paying higher commissions if I can trade with some consistency and don't feel my broker is working against me.

The high cost to exit from writing code to their API trapped me as well, but thank goodness I ripped that bandaid off. If you do want a more gradual transition, IB does have a FIX based API which is relatively standard across brokers. So you could refactor into FIX while still at API, and then make an easy transition to someone (anyone!) else once you're done.

 

[cruisecontrol]

Margin levels have dropped about 20% since I wrote the OP. Still at absurd levels, but at least not going up anymore (for now..). We are almost exactly 1 month after some of the biggest days in March, so I am guessing there is some kind of 1 month window and those days are dropping out now. Curiously, the way that margin changes on days of decrease appears to be a uniform scaling across all stocks, 0.9x per day (I queried the margin for all stocks using the what-if flag in the API). It is a VERY weird system.

 

[cruisecontrol]

The API code could be translated to any other API a competitor would create, making the transfer painless and quick. There's definitely space for more tech focused brokers to come along, for myself, I don't mind paying higher commissions if I can trade with some consistency and don't feel my broker is working against me.

By API code translated, I assume you mean they could provide an API server that speaks in the IB protocol? That would be difficult but possible upto a certain level of compatibility. Without the source code to IB's systems, there will almost certainly be small differences that break some clients. It is akin to a game system emulator. While most games work, there are usually some games that don't run properly because they rely on esoteric features/behavior. If you mean a tool that actually translates your app's source code, that is near-to-impossible, technically.

By the way have you spent much time researching what broker(s) you would go to if you weren't tied to IB? Curious if you would tell me what you found, and I definitely value your opinion on this. (PM me if it shouldn't be posted publicly for whatever reason)

 

[cruisecontrol]

By API code translated, I assume you mean they could provide an API server that speaks in the IB protocol?

BTW one reason why this may not have been done yet is that API copyright is currently a legal grey area. People will be rightly afraid of being sued by IB if they did this. There is a case between google and oracle that is going to the supreme court soon that may set a precedent for API copyrightability.

 

[d08]

By API code translated, I assume you mean they could provide an API server that speaks in the IB protocol? That would be difficult but possible upto a certain level of compatibility. Without the source code to IB's systems, there will almost certainly be small differences that break some clients. It is akin to a game system emulator. While most games work, there are usually some games that don't run properly because they rely on esoteric features/behavior. If you mean a tool that actually translates your app's source code, that is near-to-impossible, technically.

By the way have you spent much time researching what broker(s) you would go to if you weren't tied to IB? Curious if you would tell me what you found, and I definitely value your opinion on this. (PM me if it shouldn't be posted publicly for whatever reason)

Nothing that complicated. I mean something that takes IB API code and converts it to X brokers API code. It's not easy but doable. Effectively an extra layer. The user wouldn't notice any differences.

I've yet to find a broker for myself. With futures there's plenty of options but equities are difficult. It seems many have APIs that are incredibly basic and others are still stuck in the 1990s ("look at our pretty charts"). I'll likely end up with a hybrid where I only use IB for certain data and execute elsewhere.

BTW one reason why this may not have been done yet is that API copyright is currently a legal grey area. People will be rightly afraid of being sued by IB if they did this. There is a case between google and oracle that is going to the supreme court soon that may set a precedent for API copyrightability.

I've thought of this. I'm not a lawyer but if the code itself does not copy or generate IB API code (can be user supplied), there should be no issues. Otherwise ib_insync and others are liable as well. If nothing else, release it by a third party, stay in the gray area.

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I'm down over 100k because of IB's nonsense. Effectively turning what should be the best period to trade to the worst.

This is what it looks like when a broker is working against you.

 

[Overnight]

...

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I'm down over 100k because of IB's nonsense. Effectively turning what should be the best period to trade to the worst.

This is what it looks like when a broker is working against you.

*mourn*

 

[dakr]

The high cost to exit from writing code to their API trapped me as well, but thank goodness I ripped that bandaid off. If you do want a more gradual transition, IB does have a FIX based API which is relatively standard across brokers. So you could refactor into FIX while still at API, and then make an easy transition to someone (anyone!) else once you're done.

Curious as to which broker you went with, or if you/anyone here has done some research. For retail trader like me, hard to beat the data feed I can get from IB. Cheaper than elsewhere and so many asset classes available giving me the option if needed later. I ended up using IB for live data feed. IBs limitation for what instruments I can trade in my country and lower leverage made me trade through another broker. The other broker has high trading volume for use of API. I had previous code to enter trades essentially by clicking and entering orders through the broker platform. Not ideal but order entry was less than 0.3 seconds anyway.

 

[Sig]

Curious as to which broker you went with, or if you/anyone here has done some research. For retail trader like me, hard to beat the data feed I can get from IB. Cheaper than elsewhere and so many asset classes available giving me the option if needed later. I ended up using IB for live data feed. IBs limitation for what instruments I can trade in my country and lower leverage made me trade through another broker. The other broker has high trading volume for use of API. I had previous code to enter trades essentially by clicking and entering orders through the broker platform. Not ideal but order entry was less than 0.3 seconds anyway.

Dash, clearing with Apex, using CBOE Silexx platform and API.