IB "the sum of the risk of the outstanding orders likely to execute is greater than"

F

fbell50

On Nov 27 I started receiving order rejections with this message "the sum of the risk of the outstanding orders likely to execute is greater than the current allowable multiple of excess equity."

Presumably, IB has just started implementing a new account limit check. It is not very accurate. I enter a large number of LOC orders 1 minute before the LOC submission deadline. Perhaps 1 in 500 will execute. None of my open orders executed and my margin usage remained around 25%. Two of the rejected orders would have executed for about .1% of the account.

I understand the limit and always wondered why there wasn't one, but the algorithm is extraordinarily conservative. If they want to protect against a catastrophic event then just implement a hard limit based on legal margin usage. Even so most of the rejections were for shorts and I cannot imagine a catastrophic event that would force the market high enough to trigger all the orders necessary to drive my margin usage greater than 2x of my account in the last 15 minutes of the day.
 
interesting. i would understand tightening during high volatility,but now? :confused:

PS-i've seen it before with same poor judgement-one side of large basket was rejected with same message. which actually DID lead to a complete mess. rather than have balanced portfolio of shorts and longs i've ended up filled on one side only and have to quickly hedge this trade. not sure,if such 'precautionary' setting is helping anyone. not the customer not IB.
 
If there was an --unlikely I know -- ill-timed overall market meltdown right at your LOC orders time, wouldn't it be possible for a large amount of your orders to get executed? Then again, my understanding of LOC orders is "limited" as are the details on yours.

No offense, but having funds parked over at IB myself, anything they do to err on the conservative side makes me more comfortable about their overall financial status, especially during market angst. As it is, I get nervous thinking about all of the people/entities at IB leveraged up 4X at that 1.x% rate.
 
Quote from Bob111:

interesting. i would understand tightening during high volatility,but now? :confused:

PS-i've seen it before with same poor judgement-one side of large basket was rejected with same message. which actually DID lead to a complete mess. rather than have balanced portfolio of shorts and longs i've ended up filled on one side only and have to quickly hedge this trade. not sure,if such 'precautionary' setting is helping anyone. not the customer not IB.
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As you told me before Bob, "IB is a private company and can do whatever they want".

OP, it's because IB does not know how many of your LOCs will execute. If you exceed your margin by a large amount, the aftermarket might not have enough liquidity to properly liquidate your positions. Or if they did, you'd most likely get disastrous fills. I'm not saying they're right or that I agree with it.
 
Quote from heywally:

If there was an --unlikely I know -- ill-timed overall market meltdown right at your LOC orders time, wouldn't it be possible for a large amount of your orders to get executed? Then again, my understanding of LOC orders is "limited" as are the details on yours.

No offense, but having funds parked over at IB myself, anything they do to err on the conservative side makes me more comfortable about their overall financial status, especially during market angst. As it is, I get nervous thinking about all of the people/entities at IB leveraged up 4X at that 1.x% rate.
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I also like IB's strict account controls and I don't object to this particular limit when it is well implemented. As I pointed out in my original post, IB limited me on shorts as well as longs. For many of my shorts to trigger would take a general market up move of perhaps 10% in the last 15 minutes. I'm not sure that has ever happened, a 10% up move in 15 minutes, and certainly not from low volatility. For longs, sure I can imagine scenarios which might cause such a move, but the last time there was such an event, 9/11, the exchanges wound up canceling orders that happened on that day prior to the open. I remember because I put on what would have been a very profitable trade in bonds or the SP futures (can't remember which) prior to the actual strike only to have it canceled later that day.

As it turns out, I can probably just limit my order to those within 3% of my price and meet their criteria. This will probably only cost me a trade every few years. I'll have to try things out and see how IB responds since they probably aren't going to publicize their algorithm. I have my own algorithm designed to do exactly the same thing and based on this one experience it's much more accurate.
 
IB doesn't want to go into the business of guessing things about Black Swan events. I can't say I blame them on that. To me, the way IB changes their ways of doing things without much fanfare, borders on the unconscionable. I have a little money parked with them, I trust them with it, but were I interfacing with their servers. I'd be using them for placing orders and for parking bracket orders. Anything more complicated than that would have to be handled by my own software just so I could relax a little better. Who can relax when the people they are doing business with change things without notice?
 
Quote from Fractals 'R Us:

IB doesn't want to go into the business of guessing things about Black Swan events. I can't say I blame them on that. To me, the way IB changes their ways of doing things without much fanfare, borders on the unconscionable. I have a little money parked with them, I trust them with it, but were I interfacing with their servers. I'd be using them for placing orders and for parking bracket orders. Anything more complicated than that would have to be handled by my own software just so I could relax a little better. Who can relax when the people they are doing business with change things without notice?
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This is all I use them for, too, I realize.
 
Quote from Fractals 'R Us:

Who can relax when the people they are doing business with change things without notice?
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You've got that right. On Nov 15 IB started rejecting good after orders with times within 60 seconds of the close (emini sp and presumably other markets). It cost me a trade entry. I cannot fathom their reasoning for doing this.

Now I'll need to set my own timer to submit the order at the proper time. It's not a huge effort, but why do I have to spend the hour it will take to code & test, not to mention adding unnecessary complexity?

BTW, to whoever sent me a private message on this thread I accidentally deleted it before reading.
 
I also submit a bunch of LOC orders that rarely get filled. Have you found a workaround for this? Did you ever try contacting IB Customer Service?
 
I stopped submitting orders more than 3% away from the last just before the exchange's MOC deadline. If that hadn't worked I would have sorted them and entered based on distance until the IB limit hit.

I didn't call IB. It wasn't worth the effort.
 
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